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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON April 17, 2000
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------
FORM S-4
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
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NORTH GEORGIA COMMUNITY FINANCIAL PARTNERS, INC.
(Exact Name of Registrant as Specified in its Charter)
Georgia 6022 Applied For
(State or other (Primary Standard Industrial (I.R.S. Employer
Jurisdiction of Classification Code Number) Identification No.)
Incorporation or
Organization)
350 West Belmont Drive
Calhoun, Georgia 30701
(706) 629-6499
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
David J. Lance
President and Chief Executive Officer
350 West Belmont Drive
Calhoun, Georgia 30701
(706) 629-6499
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
with copies to:
Kathryn L. Knudson
Powell, Goldstein, Frazer & Murphy LLP
191 Peachtree Street, N.E., Suite 1600
Atlanta, Georgia 30303
(404) 572-6600
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Approximate date of commencement of proposed exchange of securities: As
soon as practicable after this registration statement becomes effective.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. |_|
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. |_|
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|
CALCULATION OF REGISTRATION FEE
================================================================================
Title of Each Class Proposed Proposed
of Securities Amount to Maximum Maximum Amount of
to be Registered be Offering Aggregate Registration
Registered Price Offering Fee
(1) Per Unit Price (2)
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Common stock, 1,013,917 N/A $8,303,981 $2,193
no par value
================================================================================
(1) This Registration Statement covers the 902,917 shares of the common stock
of the Registrant which is expected to be issued in connection with the
share exchange, plus the 111,000 shares that underlie existing stock
options.
(2) Pursuant to Rule 457(f)(2), the registration fee was computed on the basis
of the aggregate book value of the common stock of North Georgia National
to be exchanged in the share exchange.
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the commission, acting pursuant to said section 8(a),
may determine.
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NORTH GEORGIA NATIONAL BANK
350 West Belmont Drive
Calhoun, Georgia 30701
To the Shareholders of __________ __, 2000
North Georgia National Bank
We are pleased to invite you to attend the annual meeting of shareholders
of North Georgia National Bank. We will hold the meeting at the main office of
North Georgia National, located at 350 West Belmont Drive, Calhoun, Georgia, on
_________, ___________ __, 2000, at _____a.m./p.m.
At the annual meeting, we will ask you to approve the Agreement and Plan
of Share Exchange (the "Agreement") between North Georgia National and North
Georgia Community Financial Partners, Inc. The Agreement provides for the
reorganization of North Georgia National Bank into a one-bank holding company
structure, with North Georgia Community becoming the holding company for and the
sole shareholder of North Georgia National Bank. We recently formed North
Georgia Community to serve as our holding company.
The reorganization will occur through an exchange of the outstanding
shares of our common stock for shares of North Georgia Community common stock.
Each outstanding share of our common stock, except for shares held by our
shareholders who exercise their dissenters' rights, will be exchanged for one
share of North Georgia Community common stock.
Completion of the reorganization is subject to approval of the Agreement
by the affirmative vote of the holders of two-thirds of our outstanding shares
of common stock, approval of the transaction by state and federal regulators,
and satisfaction of other conditions set out in the Agreement.
We believe that the reorganization will give us greater financial strength
and more opportunities to expand and diversify. Your board of directors
unanimously approved the Agreement and recommends that you approve the
Agreement.
At the annual meeting, we will also ask you to approve North Georgia
National's 1999 Stock Incentive Plan, and to elect as North Georgia National
Bank directors the persons listed in the attached proxy statement/prospectus.
The proxy statement/prospectus provides detailed information about the proposed
reorganization, our 1999 Stock Incentive Plan, and the election of directors.
Please read the entire document carefully.
Whether or not you plan to attend the annual meeting, we urge you to
complete, sign, and promptly return the enclosed proxy. If you attend the annual
meeting, you may vote in person, even if you previously have returned your
proxy. The proposed reorganization is a significant step for North Georgia
National and your vote on this, and the other matters before the annual meeting,
is of great importance to us.
On behalf of the board of directors, I strongly urge you to vote FOR
approval of the Agreement, FOR approval of our 1999 Stock Incentive Plan, and
FOR election of the director nominees.
We look forward to seeing you at the annual meeting.
Sincerely,
David J. Lance
President and Chief Executive Officer
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Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of the securities to be issued under this
proxy statement/prospectus or determined if this proxy statement/prospectus is
accurate or adequate. Any representation to the contrary is a criminal offense.
The securities offered hereby are not savings accounts or deposit accounts or
other obligations of any bank or savings association and they are not insured by
the Federal Deposit Insurance Corporation or any other government agency.
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This proxy statement/prospectus is dated ______ __, 2000 and was first mailed to
shareholders on _______ __, 2000.
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON __________ ___, 2000
North Georgia National Bank will hold its annual meeting of shareholders
at the main office of North Georgia National, located at 350 West Belmont Drive,
Calhoun, Georgia, on _________, __, 2000, at _____ a.m./p.m. local time, to vote
on:
1. Approving the Agreement and Plan of Share Exchange dated March 3, 2000
(the "Agreement"), which provides for the reorganization of North Georgia
National into a one-bank holding company structure. The reorganization will
occur when the shareholders of North Georgia National exchange their shares of
North Georgia National common stock for shares of the common stock of North
Georgia Community Financial Partners, Inc. North Georgia Community was organized
at the direction of North Georgia National. After the proposed reorganization,
North Georgia Community will be the holding company for and the sole shareholder
of North Georgia National. A copy of the Agreement is attached as Appendix A to
the proxy statement/prospectus that accompanies this notice;
2. Approving the North Georgia National Bank 1999 Stock Incentive Plan, a
copy of which is attached as Appendix C to the proxy statement/prospectus;
3. Electing as North Georgia National directors the persons nominated in
the proxy statement/prospectus; and
4. Any other business that may come properly before the annual meeting, or
any adjournment or postponement of the meeting.
Only shareholders who hold their stock at the close of business on
[________ __], 2000, will be entitled to notice of and to vote at the annual
meeting or at any adjournment or postponement of the meeting. Approval of the
Agreement requires the affirmative vote of two-thirds of the issued and
outstanding shares of North Georgia National common stock. Approval of the 1999
Stock Incentive Plan requires the affirmative vote of a majority of the shares
of North Georgia National common stock represented in person or by proxy at the
annual meeting. To be elected, a director nominee must receive more affirmative
votes, represented in person or by proxy at the annual meeting, than any other
nominee for the same seat on the board of directors.
The board of directors of North Georgia National unanimously recommends
that shareholders vote FOR approval of the Agreement, FOR approval of the 1999
Stock Incentive Plan, and FOR each of the director nominees.
BY ORDER OF THE BOARD OF DIRECTORS
Calhoun, Georgia
__________ __, 2000
David J. Lance
President and Chief Executive Officer
Whether or not you plan to attend the annual meeting, please complete,
date, and sign the enclosed form of proxy and promptly return it in the enclosed
postage paid return envelope so that your shares will be represented at the
annual meeting.
Each North Georgia National shareholder has the right to dissent from the
Agreement and demand payment of the fair value of his or her shares in cash if
the reorganization is consummated. The right of any shareholder to receive such
payment is contingent upon strict compliance with the requirements of Title 14,
Chapter 2, Article 13 of the Georgia Business Corporations Code. We have
included the full text of Article 13, which describes the right to dissent, as
Appendix B to the accompanying proxy statement/prospectus. We also discuss the
right to dissent on pages ___ and ____ of the accompanying proxy
statement/prospectus.
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TABLE OF CONTENTS
Page
SUMMARY......................................................................1
ANNUAL SHAREHOLDER MEETING................................................1
PROPOSAL 1 - APPROVAL OF THE AGREEMENT AND PLAN OF SHARE EXCHANGE.........1
PROPOSAL 2 - APPROVAL OF 1999 STOCK INCENTIVE PLAN........................5
PROPOSAL 3 - ELECTION OF DIRECTORS........................................5
RISK FACTORS.................................................................6
A WARNING ABOUT FORWARD-LOOKING STATEMENTS...................................7
MEETING OF NORTH GEORGIA NATIONAL SHAREHOLDERS...............................8
Date, Place, Time, and Purpose...........................................8
Record Date..............................................................8
Voting...................................................................8
Proxies..................................................................8
PROPOSAL 1 - APPROVAL OF THE AGREEEMENT AND PLAN OF SHARE EXCHANGE..........10
DESCRIPTION OF THE REORGANIZATION........................................10
The Agreement...........................................................10
Parties to the Agreement................................................10
Terms of the Reorganization.............................................10
Conversion of Stock.....................................................11
Exchange of Stock Certificates..........................................11
Failure to Surrender Stock Certificates.................................11
Reasons for the Reorganization..........................................12
Conditions to Completion of the Reorganization..........................12
Effective Date of the Reorganization....................................12
Regulatory Approvals....................................................13
Amendment and Termination of the Agreement..............................13
Federal Income Tax Consequences.........................................13
Accounting Treatment....................................................14
Dissenters' Rights......................................................14
Resales of North Georgia Community Common Stock.........................15
EFFECT OF THE REORGANIZATION ON RIGHTS OF NORTH GEORGIA NATIONAL
SHAREHOLDERS.............................................................15
General.................................................................15
Authorized Capital Stock................................................15
Amendment of Articles of Incorporation, Articles of Association
and Bylaws.............................................................16
Classified Board of Directors and Absence of Cumulative Voting..........17
Removal of Directors....................................................17
Indemnification.........................................................18
Limitation on Director Liability........................................18
Special Meetings of Shareholders........................................19
Actions by Shareholders Without a Meeting...............................19
Mergers, Consolidations, and Sales of Assets............................20
Shareholders' Rights to Examine Books and Records.......................20
Dividends...............................................................21
Preemptive and Other Rights.............................................21
COMPARATIVE MARKET PRICES AND DIVIDENDS..................................22
BUSINESS OF NORTH GEORGIA NATIONAL.......................................22
General.................................................................22
Recent Developments.....................................................22
Management Stock Ownership..............................................23
Related Party Transactions..............................................25
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS OF NORTH GEORGIA NATIONAL..................................25
Financial Condition.....................................................25
Liquidity...............................................................26
Capital.................................................................26
Results of Operations...................................................26
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Capability of Data Processing Systems to Accommodate the Year 2000......26
Trends..................................................................27
Asset/Liability Management..............................................27
SELECTED FINANCIAL INFORMATION AND STATISTICAL DATA......................30
BUSINESS OF NORTH GEORGIA COMMUNITY......................................37
General.................................................................37
Proposed Activities.....................................................37
Competition.............................................................37
Employees...............................................................37
Legal Proceedings.......................................................38
Directors and Executive Officers........................................38
Interests of Management in the Reorganization...........................38
Management Stock Ownership..............................................38
Pro Forma Capitalization................................................39
Supervision and Regulation..............................................39
Privacy.................................................................46
Proposed Legislation and Regulatory Action..............................46
Effect of Governmental Monetary Policies................................46
Vote Required...........................................................47
Recommendation..........................................................47
PROPOSAL 2 - APPROVAL OF THE NORTH GEORGIA NATIONAL 1999 STOCK
INCENTIVE PLAN.............................................................48
TERMS OF THE STOCK INCENTIVE PLAN........................................48
Administration..........................................................48
Stock Options...........................................................48
Tax Reimbursement Payments..............................................49
Termination of Stock Options............................................50
Reorganizations.........................................................50
Amendments or Termination...............................................50
FEDERAL INCOME TAX CONSEQUENCES.............................................51
Incentive Stock Options.................................................51
Nonqualified Options....................................................51
Shareholder Approval....................................................51
Recommendation..........................................................52
PROPOSAL 3 - ELECTION OF THE DIRECTOR NOMINEES..............................53
Director Nominees.......................................................53
Vote Required...........................................................54
Recommendation..........................................................54
SHAREHOLDER PROPOSALS.......................................................55
EXPERTS.....................................................................55
LEGAL MATTERS...............................................................55
OTHER MATTERS...............................................................55
WHERE YOU CAN FIND MORE INFORMATION.........................................55
FINANCIAL STATEMENTS.......................................................F-1
APPENDIX A-- AGREEMENT AND PLAN OF SHARE EXCHANGE BY AND BETWEEN NORTH
GEORGIA NATIONAL BANK AND NORTH GEORGIA COMMUNITY FINANCIAL
PARTNERS, INC...............................................A-1
APPENDIX B-- DISSENTERS' RIGHTS..........................................B-1
APPENDIX C-- NORTH GEORGIA NATIONAL BANK 1999 STOCK INCENTIVE PLAN.......C-1
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SUMMARY
This summary highlights selected information from this proxy
statement/prospectus. Because this is a summary, it does not contain all of the
information that may be important to you. You should read the entire proxy
statement/prospectus and its appendices before you decide how to vote on the
proposals.
ANNUAL SHAREHOLDER MEETING
Annual Shareholder Meeting (Page ___)
North Georgia National will hold its annual meeting at its main office,
located at 350 West Belmont Drive, Calhoun, Georgia, on ________, _______ __,
2000, at ____ a.m./p.m., local time. The board of directors is soliciting
proxies for use at the annual meeting and will ask North Georgia National
shareholders to approve the Agreement and Plan of Share Exchange, the 1999 Stock
Incentive Plan, and the director nominees.
Record Date (Page ___)
The board of North Georgia National has set the record date for the annual
meeting as the close of business on [_________ __], 2000. If you owned shares of
North Georgia National common stock on the record date, you may vote by proxy or
in person at the annual meeting. You may cast one vote for each share of North
Georgia National common stock that you owned on the record date.
PROPOSAL 1 - APPROVAL OF THE AGREEMENT AND PLAN OF SHARE EXCHANGE
The Agreement (Page ___)
The Agreement and Plan of Share Exchange (the "Agreement") provides for
the reorganization of North Georgia National into a one-bank holding company
structure by an exchange of all of the outstanding shares of North Georgia
National common stock for shares of North Georgia Community common stock. A copy
of the Agreement is included as Appendix A to this proxy statement/prospectus.
Parties to the Agreement (Pages __ and __)
North Georgia National is a national bank organized under the laws of the
United States. North Georgia Community is a Georgia corporation that was
organized by North Georgia National. North Georgia Community will not engage in
any business operations prior to completion of the reorganization. If the
proposed reorganization occurs, North Georgia Community will become the holding
company for and the sole shareholder of North Georgia National Bank
The principal executive offices of North Georgia National and North
Georgia Community are located at:
350 West Belmont Drive
Calhoun, Georgia 30701
(706) 629-6499
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Terms of the Reorganization (Page ___)
Under the terms of the reorganization, each North Georgia National
shareholder will receive one share of North Georgia Community common stock in
exchange for each share of North Georgia National common stock that he or she
owns. We do not expect the reorganization to change your relative equity
ownership interest in the underlying bank shares, except for redemption of no
more than a nominal number of shares held by persons who perfect their
dissenters' rights.
Exchange of Stock Certificates (Page ___)
Once the reorganization is complete, North Georgia National will mail you
materials and instructions on how to exchange the certificates representing your
ownership of North Georgia National stock for certificates representing your
ownership of North Georgia Community stock. North Georgia National shareholders
should not send in their stock certificates until North Georgia National
instructs them to do so.
Reasons for the Reorganization (Page ___)
The boards of directors of North Georgia National and North Georgia
Community have unanimously approved the Agreement. In deciding to approve the
Agreement, the boards considered the following factors:
o As a bank holding company, North Georgia Community will have greater
corporate flexibility than North Georgia National to issue stock,
borrow money, and redeem stock under various circumstances;
o North Georgia Community may engage in a broader range of non-banking
and financial activities than North Georgia National, either
directly or through non-bank subsidiaries and affiliates; and
o North Georgia Community will be able to acquire interests in and
operate banks throughout Georgia and elsewhere in the Southeast.
We believe that reorganization into a one-bank holding company structure will
give North Georgia National more opportunities for profitable growth and a
greater ability to compete with both the large banking institutions and the
other community-based financial institutions operating in our market area.
Conditions to Completion of the Reorganization (Page ___)
The completion of the reorganization depends upon satisfaction of the
following conditions:
o The holders of two-thirds of the outstanding shares of North Georgia
National common stock must approve the Agreement;
o The number of shares held by shareholders who have perfected
dissenters' rights of appraisal may not make completion of the
reorganization inadvisable;
o North Georgia Community must receive the regulatory approvals below,
and any waiting periods required by law must have passed; and
o North Georgia National must receive a legal opinion confirming the
tax-free nature of the reorganization.
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Regulatory Approvals (Page ___)
Prior to completion of the reorganization, North Georgia Community must
receive approval of the transaction from the Board of Governors of the Federal
Reserve System and the Georgia Department of Banking and Finance. North Georgia
Community is in the process of filing applications for approval from these
regulators.
Termination of the Agreement (Page ___)
Either North Georgia National or North Georgia Community may terminate the
Agreement without completing the proposed reorganization if any of the following
occurs:
o The number of shares voted against the Agreement makes the
reorganization inadvisable in the opinion of the boards of directors
of North Georgia National or of North Georgia Community;
o Any legal action is instituted or threatened relating to the
reorganization, which in the opinion of the boards of directors of
North Georgia National or of North Georgia Community makes
completion of the reorganization inadvisable;
o Any of the conditions to the reorganization are not satisfied; or
o Any other event occurs which, in the opinion of the boards of
directors of North Georgia National or North Georgia Community,
makes the reorganization inadvisable.
If the Agreement is terminated, it will be void and of no further effect,
and North Georgia National will continue to operate as a national bank under its
present management and corporate structure.
Federal Income Tax Consequences (Page ___)
We do not expect North Georgia Community, North Georgia National, nor our
shareholders to recognize any gain or loss for U.S. federal income tax purposes
as a result of the reorganization. However, the Internal Revenue Service may
take a different view. Also, any tax-free treatment of the reorganization will
not apply to a North Georgia National shareholder who exercises dissenters'
rights and receives cash in exchange for his or her shares of North Georgia
National common stock. Determining the actual tax consequences of the
reorganization to you as an individual taxpayer can be complicated. Therefore,
you should consult your own tax advisor for a full understanding of the
reorganization's tax consequences.
Accounting Treatment (Page ____)
The reorganization, if completed as proposed, will be accounted for as a
pooling of interests. This means that for accounting and financial reporting
purposes, we will treat North Georgia National and North Georgia Community as if
they had always been one company. At the effective date of the reorganization,
North Georgia National's assets and liabilities will be recorded on the books of
North Georgia Community at their respective values on that date.
Dissenters' Rights (Page ___ and Appendix B)
The Georgia Business Corporations Code provides that a shareholder in a
share exchange transaction may receive cash for the "fair value" of his or her
shares if the shareholder does not vote in
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favor of the transaction and complies with the notice requirements and other
procedures for dissenting shareholders contained in the Code. If you wish to
dissent from the reorganization, you must follow the specific procedures
contained in the Code or your right to dissent may be lost. These procedures are
described later in this proxy statement/prospectus and are set out in the
provisions of the Georgia Business Corporations Code attached as Appendix B.
Differences in Shareholders' Rights (Page ___)
The rights of North Georgia Community shareholders will differ from the
rights of North Georgia National shareholders in a number of important respects.
For example, North Georgia Community's governing documents contain anti-takeover
provisions which limit the ability of others to acquire it.
Comparative Per Share Data (Page ____)
Prior to the reorganization, North Georgia Community will not conduct any
business operations. Under the Agreement, each outstanding share of North
Georgia National common stock will be converted into one share of North Georgia
Community common stock. Therefore, upon completion of the reorganization, the
pro forma combined book value per share, net income per share and market value
per share of North Georgia Community common stock will be equal to the
respective historical per share amounts for North Georgia National.
Dividends (Page ____)
North Georgia National has not paid dividends to its shareholders in the
past. After the reorganization, North Georgia Community does not expect, at
least initially, to pay dividends to its shareholders.
Recent Developments (Page ____)
In November, 1999, North Georgia National hired David J. Lance as
President and Chief Executive Officer, and in December, 1999, M. Lauch McKinnon
resigned his positions as director and Chief Executive Officer. On March 3,
2000, Rita B. Gray resigned her position as Chief Financial Officer, and on
March 22, 2000, North Georgia National hired Rhonda C. Massengill as Chief
Financial Officer.
Vote Required (Page ___)
To approve the Agreement, shareholders holding two-thirds of the
outstanding shares of North Georgia National common stock must vote in favor of
it. As of the record date, all directors and executive officers of North Georgia
National as a group (12 persons) could vote approximately ________ shares of
North Georgia National common stock, constituting approximately ____% of the
total number of shares of North Georgia National common stock outstanding. North
Georgia National's directors and executive officers have committed to vote their
shares of common stock in favor of the Agreement.
Recommendation (Page ___)
We believe that the proposed reorganization is in the best interests of
North Georgia National and its shareholders, and we unanimously recommend that
you vote FOR the Agreement.
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PROPOSAL 2 - APPROVAL OF 1999 STOCK INCENTIVE PLAN
The 1999 Stock Incentive Plan (Page ____)
The North Georgia National board of directors proposes that shareholders
approve its adoption of the North Georgia National Bank 1999 Stock Incentive
Plan. The 1999 Stock Incentive Plan permits the issuance of incentive and
nonqualified stock options to directors, officers and employees of North Georgia
National. The 1999 Stock Incentive Plan provides for issuance of up to 400,000
shares of North Georgia National's common stock under stock options.
Vote Required (Page ____)
Approval of the 1999 Stock Incentive Plan requires the affirmative vote of
a majority of shares of North Georgia National common stock represented in
person or by proxy at the annual meeting.
Recommendation (Page ____)
North Georgia National's board of directors unanimously recommends that
you vote FOR the 1999 Stock Incentive Plan.
PROPOSAL 3 - ELECTION OF DIRECTORS
Director Nominees (Page ____)
We propose that the director nominees listed in this proxy
statement/prospectus be elected as North Georgia National directors to serve a
one-year term and until their successors are elected and qualified. If any
nominee becomes unavailable to serve as a director, then the persons named as
proxies reserve full discretion to vote for any other person or persons who may
be nominated.
Vote Required (Page ____)
To be elected, a director nominee must receive more affirmative votes,
represented in person or by proxy at the annual meeting, than any other nominee
for the same seat on the board of directors.
In the election of directors, North Georgia National shareholders may
choose to cumulate their votes. This means that the total number of votes cast
by each holder of common stock is determined by multiplying the number of shares
he or she owns by the number of directors to be elected. A shareholder may cast
all of his or her total number of votes for a single nominee for director, or
may distribute his or her votes in any manner among two or more of the director
nominees.
Recommendation (Page ____)
North Georgia National's board unanimously recommends that you vote FOR
the election of the director nominees listed in this proxy statement/prospectus.
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RISK FACTORS
The following describes what we believe are the material risks of an
investment in North Georgia Community's common stock compared to your investment
in North Georgia National's common stock. There may be other risks, which we
have not anticipated.
Provisions of North Georgia Community's articles of incorporation and bylaws
will significantly limit the ability of others to acquire us.
In many cases, shareholders receive a premium for their shares when a
company is purchased by another. However, North Georgia Community's articles of
incorporation and bylaws make it difficult for anyone to purchase North Georgia
Community without the approval of its board of directors. The provisions in
North Georgia Community's articles of incorporation and bylaws include the
existence of preferred stock, staggered terms for the directors when the board
of directors consists of six or more members, restrictions on the ability to
change the number of directors or to remove a director, supermajority voting
requirements and flexibility in considering acquisition proposals. These
provisions are described later in this proxy statement/prospectus beginning on
page ___.
North Georgia Community is authorized to issue additional shares of preferred
stock which, if issued, may adversely affect your voting rights and reduce the
market price of our common stock.
North Georgia Community is authorized by its articles of incorporation to
issue additional shares of preferred stock without the consent of its
shareholders. Preferred stock, when issued, may rank senior to common stock with
respect to voting rights, payment of dividends, and amounts received by
shareholders upon liquidation, dissolution or winding up. The existence of
rights which are senior to common stock may reduce the price of our shares of
common stock. North Georgia Community does not have any plans to issue any
shares of preferred stock at this time.
Departures of our key personnel or directors may impair our operations.
David J. Lance, North Georgia National's president and chief executive
officer, is important to our success and, without him, our financial condition
and results of operations may be adversely affected. Mr. Lance was instrumental
in raising capital for North Georgia National in its recent non-public offering,
and, as president and chief executive officer of North Georgia National, will be
the management official in charge of our daily business operations. We have a
three-year employment agreement with Mr. Lance, but cannot be assured of his
continued service. Additionally, North Georgia National's directors' business
skills, community involvement, diverse backgrounds and extensive local business
relationships are important to our success. Our growth could be adversely
affected if the composition of North Georgia National's board of directors
changes materially.
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A WARNING ABOUT FORWARD-LOOKING STATEMENTS
North Georgia Community and North Georgia National make forward-looking
statements in this document that are subject to risks and uncertainties. North
Georgia National's public documents also contain forward-looking statements.
Forward-looking statements include information about possible or assumed
future results of the operations or the performance of North Georgia Community
and/or North Georgia National after the reorganization is accomplished. When we
use words such as "believes," "anticipates," "expects," "intends," "targeted,"
and similar expressions, we are making forward-looking statements that are
subject to risks and uncertainties. Various economic, regulatory, and
technological future events or factors may cause results of operations or
performances to differ materially from those expressed in our forward-looking
statements.
When you vote on the reorganization, you should consider the risk factors
and uncertainties that North Georgia Community and North Georgia National face
because of the proposed reorganization and by virtue of being in the banking
business. We list and describe these risk factors elsewhere in this proxy
statement/prospectus beginning on page ____.
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MEETING OF NORTH GEORGIA NATIONAL
SHAREHOLDERS
Date, Place, Time, and Purpose
North Georgia National's board of directors is sending you this proxy
statement/prospectus primarily to solicit your proxy for use at our annual
meeting. At the annual meeting, we will ask you to vote on proposals to approve
the Agreement, to approve the 1999 Stock Incentive Plan, and to elect directors.
North Georgia National will pay the costs of soliciting proxies for the annual
meeting. North Georgia National will hold its annual meeting at its main office,
located at 350 West Belmont Drive, Calhoun, Georgia, on ______, _____ __, 2000,
at ____ a.m./p.m. local time.
Record Date
North Georgia National has set the close of business on [_________ __],
2000, as the record date for determining holders of all outstanding shares of
common stock entitled to notice of and to vote at the annual meeting. Only
holders of common stock on our records at the close of business on the record
date are entitled to notice of and to vote at the annual meeting. As of the
record date, there were [_______] shares of North Georgia National common stock
issued and outstanding and entitled to vote at the annual meeting, which were
held by [____] holders of record.
Voting
North Georgia National shareholders are entitled to one vote for each
share of common stock owned on the record date.
The affirmative vote of a majority of the shares represented in person or
by proxy at the annual meeting is required for approval of the 1999 Stock
Incentive Plan. To be elected, a director nominee must receive more votes, cast
in person or by proxy, than any other nominee for the same seat on the board of
directors.
The vote required for the approval of the Agreement is two-thirds of the
issued and outstanding shares of North Georgia National common stock entitled to
vote at the annual meeting. Abstentions and broker "non-votes" will count in
determining if the proposal to approve the Agreement has received the requisite
number of votes for approval. Thus, an abstention or a broker non-vote will have
the same effect as a vote against this proposal. Broker "non-votes" result from
a broker's inability to vote a client's shares on non-discretionary matters like
approval of the Agreement.
Proxies
The designated proxy holder will vote shares of North Georgia National
common stock in accordance with the instructions on the proxies, if the proxies
are properly executed, received in time and not revoked. If the proxy does not
contain instructions on how to vote:
o The proxy holder will vote for approval of the Agreement, the 1999
Stock Incentive Plan, and the director nominees; and
o The proxy holder will use his or her discretion to vote on any other
matter which may properly come before the annual meeting.
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The proxy holder may vote to adjourn the annual meeting in order to permit
further solicitation of proxies if there are not sufficient votes to approve the
proposals at the annual meeting. No proxy that is voted against approval of the
Agreement will be voted in favor of an adjournment of the annual meeting to
permit further solicitation of proxies.
- --------------------------------------------------------------------------------
Failure to vote by proxy or in person at the annual meeting will have the
effect of a vote cast against approval of the Agreement.
- --------------------------------------------------------------------------------
A North Georgia National shareholder who has given a proxy may revoke it
at any time prior to its exercise at the annual meeting by:
o Giving written notice of revocation to the Secretary of North
Georgia National;
o Properly submitting to North Georgia National a duly executed proxy
bearing a later date; or
o Attending the annual meeting and voting in person.
All written notices of revocation and other communications concerning
proxies should be addressed to: North Georgia National Bank, 350 West Belmont
Drive, Calhoun, Georgia 30701, Attention: David J. Lance, President.
As of the record date, all directors and executive officers of North
Georgia National as a group were entitled to vote approximately ________ shares
of North Georgia National common stock, constituting approximately _____% of the
total number of shares of common stock outstanding at that date. All directors
and executive officers of North Georgia National have committed to vote their
shares of common stock in favor of reorganization.
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PROPOSAL 1 - APPROVAL OF THE AGREEMENT AND PLAN OF SHARE EXCHANGE
DESCRIPTION OF THE REORGANIZATION
The following information describes the material terms and conditions of
the reorganization. However, this description may not contain all of the
information that is important to you. The Agreement and Plan of Share Exchange
is attached as Appendix A to this proxy statement/prospectus and is incorporated
in this proxy statement/prospectus by reference. You are urged to read the
Appendices.
The Agreement
Under the terms of the Agreement, North Georgia National will become a
wholly-owned subsidiary of North Georgia Community. Each share of North Georgia
National common stock issued and outstanding, excluding shares held by
shareholders who perfect their dissenters' rights, will be converted into and
exchanged for the right to receive one share of North Georgia Community common
stock. After the share exchange, North Georgia Community will be the holding
company for North Georgia National, and North Georgia National will be North
Georgia Community's only significant asset.
Parties to the Agreement
North Georgia National is a national bank organized and operating under
the laws of the United States. Its main and only office is located in Calhoun,
Georgia. North Georgia National offers a broad range of banking and
banking-related products and services. As of March 31, 2000, North Georgia
National's total assets were about $28.4 million, total deposits were about
$20.2 million, and total shareholder's equity was about $7.4 million.
North Georgia Community is a Georgia corporation organized by North
Georgia National to serve as the holding company for and the sole shareholder of
North Georgia National.
As of the close of business on the record date, North Georgia Community
had 10,000,000 shares of common stock authorized, no par value, of which one
share was issued and outstanding. Currently, North Georgia Community's sole
shareholder is David J. Lance.
After the reorganization, each North Georgia National shareholder will
hold the same number of shares of North Georgia Community common stock that he
or she held of North Georgia National common stock prior to the reorganization.
Terms of the Reorganization
North Georgia National will be reorganized into a one-bank holding company
structure by virtue of the share exchange described in the Agreement. All of the
issued and outstanding shares of North Georgia National common stock will be
owned by North Georgia Community, with the exception of those shares held by
shareholders who perfect their dissenters' rights. We do not expect the
reorganization to change your relative equity ownership interest in the
underlying bank shares.
North Georgia National officers and directors will not change as a result
of the reorganization.
If North Georgia National shareholders approve the Agreement by the
necessary vote, the share exchange will be effective and the reorganization will
occur on the date specified in the certificate of share exchange to be issued by
the Georgia Secretary of State.
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Conversion of Stock
On the effective date of the reorganization:
o Each share of North Georgia National common stock will be converted
into one share of North Georgia Community common stock;
o Each option to purchase shares of North Georgia National common
stock whether or not then exercisable, will be converted into an
option to purchase the same number of shares of North Georgia
Community common stock; and
o North Georgia Community will redeem, at cost, the share of common
stock it issued to David J. Lance as part of its corporate
organization.
Exchange of Stock Certificates
As soon as practicable after the effective date of the reorganization,
North Georgia National will mail a letter of transmittal to shareholders who did
not perfect dissenters' rights. The letter of transmittal will include
instructions for the exchange of stock certificates representing North Georgia
National common stock for stock certificates representing North Georgia
Community common stock.
Each shareholder of North Georgia National common stock who returns a
properly completed letter of transmittal and his or her certificates
representing North Georgia National common stock will receive a certificate or
certificates representing the same number of shares of North Georgia Community
common stock.
Shareholders should not send in their stock certificates until they
receive and complete the letter of transmittal.
Failure to Surrender Stock Certificates
Until the holder surrenders his or her North Georgia National common stock
certificate or certificates to North Georgia National, or suitable arrangements
are made to account for any lost, stolen or destroyed certificates according to
our procedures, the holder:
o Will not be issued a certificate representing the shares of North
Georgia Community common stock which he or she is entitled to
receive;
o Will not be able to vote the shares of North Georgia Community
common stock which he or she is entitled to receive; and
o Will not be paid dividends or other distributions on the shares of
North Georgia Community common stock which he or she is entitled to
receive; instead, we will hold any dividends or distributions
without interest, for the holder's account until he or she
surrenders his or her North Georgia National common stock
certificate).
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Reasons for the Reorganization
North Georgia National's board of directors believes that the
reorganization of North Georgia National into a one-bank holding company
structure is in the best interests of North Georgia National and its
shareholders for the following reasons:
o As a bank holding company, North Georgia Community will have greater
corporate flexibility than North Georgia National to issue stock,
borrow money, and redeem stock under various circumstances;
o North Georgia Community may engage in a broader range of non-banking
and financial activities than North Georgia National, either
directly or through non-bank subsidiaries and affiliates; and
o North Georgia Community will be able to acquire interests in and
operate banks throughout Georgia and elsewhere in the Southeast.
We believe that the power and flexibility of a bank holding company
structure will better enable North Georgia National and North Georgia Community
to compete with other financial institutions and will place North Georgia
Community in a better position for future growth.
At the present time, neither North Georgia National nor North Georgia
Community has any understanding or commitment to make acquisitions or to engage
in new non-banking or financial activities. However, if the reorganization is
approved, North Georgia Community will continually review opportunities for
acquisitions and new activities to identify those that may be beneficial to
North Georgia Community and its shareholders.
The board of directors of North Georgia National has unanimously approved
the terms of the Agreement and recommends that shareholders of North Georgia
National vote in favor of the Agreement. The directors of North Georgia
Community also have unanimously approved the terms of the Agreement.
Conditions to Completion of the Reorganization
The completion of the reorganization depends upon satisfaction of the
following conditions:
o The holders of two-thirds of the outstanding shares of North Georgia
National common stock must approve the Agreement;
o The number of shares held by shareholders who have perfected
dissenters' rights of appraisal must not make completion of the
reorganization inadvisable;
o North Georgia Community must receive the required regulatory
approvals, and any waiting periods required by law must have passed;
and
o North Georgia National must receive a legal opinion confirming the
tax-free nature of the reorganization.
Effective Date of the Reorganization
The share exchange and the reorganization of North Georgia National into a
one-bank holding company structure will be effective after receipt of the
necessary shareholder and regulatory approvals, after satisfaction of the other
conditions to the reorganization, and on the date that the Georgia Secretary of
State issues a certificate of share exchange.
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We cannot assure you that we will obtain the necessary shareholder and
regulatory approvals or that we will satisfy the other conditions to the
reorganization. However, barring any unforeseen delays, we anticipate that the
reorganization will be completed during the third quarter of 2000.
Regulatory Approvals
Consummation of the reorganization is subject to approval by the Federal
Reserve and the Georgia Department of Banking and Finance. We are in the process
of filing applications for these approvals and do not expect any difficulty in
obtaining them.
Amendment and Termination of the Agreement
North Georgia National and North Georgia Community may agree to amend the
Agreement at any time before the reorganization is effective. However, no
amendment may reduce the number of shares of North Georgia Community common
stock that North Georgia National shareholders will receive in the
reorganization without the approval of North Georgia National shareholders.
The Agreement may be terminated by North Georgia National or North
Georgia Community if:
o The number of shares of North Georgia National common stock voted
against the Agreement makes the transaction inadvisable in the
opinion of North Georgia National or North Georgia Community;
o Any lawsuit has been instituted or threatened relating to the
proposed reorganization which makes completion of the reorganization
inadvisable in the opinion of North Georgia National or North
Georgia Community;
o Any of the conditions to completion of the reorganization have not
been satisfied; or
o For any other reason completion of the reorganization is deemed
inadvisable in the opinion of the boards of directors of North
Georgia National or North Georgia Community.
Federal Income Tax Consequences
The proposed reorganization will be treated as a reorganization under
Section 368(a)(1)(B) of the Internal Revenue Code of 1986, or an exchange under
Section 351 of the Code. In form, the share exchange between North Georgia
National and North Georgia Community is structured to qualify as a
reorganization within the meaning of Section 368(a)(1)(B) of the Internal
Revenue Code. The federal income tax consequences of the proposed reorganization
will be as follows:
o No gain or loss will be recognized by a North Georgia National
shareholder who exchanges his or her North Georgia National common
stock for North Georgia Community common stock.
o The aggregate basis and the holding period of North Georgia
Community common stock received by a North Georgia National
shareholder will be the same as the aggregate basis and the holding
period of North Georgia National common stock surrendered in the
exchange.
Shareholders who exercise their right to dissent to the share exchange and
receive cash will recognize gain or loss equal to the difference between the
cash received and the basis in their shares of
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North Georgia National common stock. However, the character of any gain or loss
recognized by a dissenting shareholder may depend upon whether the shareholder
is deemed to constructively own shares of North Georgia Community after the
share exchange. Dissenting shareholders are urged to consult their tax advisers
regarding tax consequences of a decision to dissent to the share exchange.
Accounting Treatment
We anticipate that the reorganization will be accounted for like a pooling
of interests. Under the pooling of interests method of accounting, the recorded
amounts of the assets and liabilities of North Georgia National will be carried
forward at their previously recorded amounts.
Dissenters' Rights
OCC regulations permit a national bank to adopt the corporate governance
procedures of the law of the state in which the main office of the bank is
located, to the extent that the state law is not inconsistent with applicable
federal banking statutes or regulations. North Georgia National recently amended
its bylaws to adopt the corporate governance provisions of Georgia law. This
amendment allows North Georgia National to accomplish its reorganization into a
one-bank holding company structure under the rules for a share exchange,
including the rules for dissenters' rights, contained in the Georgia Business
Corporations Code.
The Agreement provides for dissenters' rights under Georgia law for North
Georgia National shareholders who object to the proposed reorganization.
However, Georgia law concerning dissenters' rights in a share exchange in one
respect is not consistent with the rights of dissenters' under applicable
federal banking law. Georgia law provides that the corporation must pay the cost
of any judicial appraisal, unless the court finds that the dissenters acted
arbitrarily, vexiously, or not in good faith in demanding payment. Federal
banking law, in contrast, requires the bank to pay for any appraisal, without
exception.
To ensure consistency with federal banking law and OCC directives in
similar share exchange transactons, Section 6(b) of the Agreement provides that
North Georgia National agrees to pay the costs of any judicial appraisal
proceeding and also that North Georgia National agrees to pay the costs of
arbitration of any unsettled dissenters' demand for payment if the appropriate
court refuses jurisdiction of an appraisal proceeding.
Under the Georgia Business Corporations Code, as modified by the
provisions of Section 6(b) of the Agreement, any North Georgia National
shareholder of record who objects to the reorganization and who fully complies
with all of the applicable provisions of the Georgia Business Corporations Code
may demand and receive payment for all, but not less than all, of his or her
shares of North Georgia National common stock.
Any North Georgia National shareholder who objects to the reorganization
and desires to receive payment for his or her common stock:
o Must deliver to North Georgia National, before the vote is taken at
the annual meeting, written notice of his or her intent to demand
payment for his or her shares if the reorganization is completed;
AND
o Must either abstain from voting or vote against approval of the
Agreement; AND
o Must demand payment and deposit his or her certificates in
accordance with the terms of the dissenters' notice that North
Georgia National will send to all dissenting shareholders after
shareholder approval of the Agreement.
A vote against the Agreement alone will not constitute the separate
written notice and demand for payment referred to in the previous paragraph.
Dissenting shareholders must separately comply with each of the three
requirements listed above. Any notice to North Georgia National must be
forwarded to North Georgia National Bank, 350 West Belmont Drive, Calhoun,
Georgia 30701, Attention: David J. Lance.
One of the conditions to the Agreement is that the number of shares held
by persons who have perfected dissenters' rights shall not be deemed by the
parties to make completion of the reorganization inadvisable. If this condition
is not satisfied, the parties may terminate the Agreement, and the dissenters'
rights described in this section would also terminate. However, we expect few,
if any, dissenters.
This description of dissenters' rights is not a complete statement of the
dissenters rights provisions of the Georgia Business Corporations Code. It is
qualified in its entirety by reference to the applicable provisions which are
reproduced in full as Appendix B to this proxy statement/prospectus.
After fully exercising his or her dissenter's rights, a dissenting
shareholder will have no rights as a shareholder of North Georgia National or of
North Georgia Community. These rights include the right to receive dividends and
the right to vote on matters submitted for shareholder consideration.
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Resales of North Georgia Community Common Stock
The North Georgia Community common stock issued to North Georgia National
shareholders in the reorganization will be registered under the Securities Act.
Therefore, the North Georgia Community common stock that you receive will be
freely tradable, without restriction, as long as you are not an "affiliate" of
North Georgia Community. An "affiliate" is defined as a person or entity who
controls, is controlled by, or is under common control with, North Georgia
Community, and generally includes directors, executive officers and 10%
shareholders.
Affiliates of North Georgia Community must comply with the resale
limitations of Rule 144 under the Securities Act. Under Rule 144, an affiliate
may sell within any three-month period a number of shares that does not exceed
the greater of:
o 1% of the outstanding shares of common stock; or
o the average weekly trading volume during the four calendar weeks
preceding his or her sale.
Sales under Rule 144 are also subject to manner of sale provision, notice
requirements and the availability of current public information about North
Georgia Community. An affiliate will not be subject to the volume restrictions
and other limitations under Rule 144 beginning 90 days after his or her status
as an affiliate ends.
EFFECT OF THE REORGANIZATION ON RIGHTS
OF NORTH GEORGIA NATIONAL SHAREHOLDERS
General
North Georgia National is a national bank and the rights of its
shareholders are governed by its articles of association and bylaws, by the
provisions of the National Bank Act, and by regulations issued by the Office of
the Comptroller of the Currency. After the reorganization, North Georgia
National shareholders will become North Georgia Community shareholders. The
rights of North Georgia Community shareholders are governed by its articles of
incorporation and bylaws and by the provisions of the Georgia Business
Corporations Code.
We have summarized below the material differences between the rights of
North Georgia National shareholders and the rights of North Georgia Community
shareholders.
Authorized Capital Stock
North Georgia National. North Georgia National is authorized by its
articles of association to issue a maximum of 5,000,000 shares of common stock,
$5.00 par value per share. As of the record date, there were 902,917 shares of
North Georgia National common stock issued and outstanding. The outstanding
shares of North Georgia National common stock are fully paid.
North Georgia Community. North Georgia Community is authorized by its
articles of incorporation to issue 12,000,000 shares of stock, including
10,000,000 shares of common stock, no par value, and 2,000,000 shares of
preferred stock, no par value. As of the record date, one share of its common
stock was issued and outstanding. To accomplish the reorganization, North
Georgia Community will issue 902,917 shares of its common stock to North Georgia
National shareholders, assuming that no
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North Georgia National shareholders dissent. Upon their issuance, the
outstanding shares of North Georgia Community common stock will be fully paid
and nonassessable.
North Georgia Community has a large number of authorized shares to give it
the flexibility to issue shares as needed to benefit the business. North Georgia
Community has no plans to issue shares for any reason other than to accomplish
the reorganization.
Amendment of Articles of Incorporation, Articles of Association and Bylaws
North Georgia National. North Georgia National's articles of association
may be amended at any regular or special shareholder meeting by the affirmative
vote of the holders of a majority of the stock of North Georgia National, unless
a greater vote is required by law, and in that case by the vote of the holders
of the greater amount.
North Georgia National's bylaws may be amended, altered, or repealed at
any regular or special meeting of the board of directors, by a vote of a
majority of the total number of the directors. North Georgia's shareholders may
amend or repeal the bylaws by a majority vote, even though the bylaws also may
be amended or repealed by North Georgia's board of directors.
North Georgia Community. The Georgia Business Corporations Code contains
provisions concerning amendments to a Georgia corporation's articles of
incorporation. The Code provides that some amendments may be made by a
corporation's board of directors without any shareholder action. In other cases,
the Code provides that a corporation's directors must recommend the amendment to
the corporation's shareholders, and the corporation's shareholders must approve
the amendment by a majority vote. Finally, the Code itself or the corporation's
articles of incorporation may require a vote greater than a majority to amend
the articles.
North Georgia Community's articles of incorporation provide that unless
two-thirds of the directors approve a proposed change, the following provisions
of the articles may not be amended or rescinded except by the affirmative vote
of at least two-thirds of the issued and outstanding shares of North Georgia
Community entitled to vote at any regular or special meeting of the
shareholders:
o Article 6. Board of Directors;
o Article 7. Bylaws; Number of Directors;
o Article 8. Removal of Directors;
o Article 9. Liability of Directors;
o Article 12. Certain Business Transactions; and
o Article 13. Factors Considered in Business Transactions.
North Georgia Community's articles also require that notice of any proposed
change to the articles listed above must be contained in the notice of the
shareholder meeting at which a vote on the change will occur.
North Georgia Community's bylaws may be altered or amended by the
shareholders at any annual or special meeting of the shareholders or by the
board of directors at any regular or special meeting. Except as otherwise
provided in the articles, action by the shareholders with respect to bylaws
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may be taken by an affirmative vote of a majority of all shares entitled to
elect directors, and action by the board of directors with respect to bylaws
shall be taken by an affirmative vote of a majority of all directors.
Classified Board of Directors and Absence of Cumulative Voting
North Georgia National. North Georgia National's articles of association
and bylaws provide that the board of directors will have not less than five nor
more than twenty-five members. The exact number is fixed from time to time by
resolution of a majority of the board of directors or by a majority of the
shareholders at an annual or special meeting. A director is elected for a one
year term or until his or her successor is elected.
A North Georgia National shareholder may cumulate his or her votes in the
election of directors. This means that the total number of votes cast by each
shareholder is determined by multiplying the number of shares he or she owns by
the number of directors to be elected. A shareholder may cast all of his or her
total number of votes for a single nominee for director, or may distribute his
or her votes in any manner among two or more of the director nominees.
North Georgia Community. North Georgia Community's bylaws provide that the
board of directors shall have not less than one nor more than twenty-five
members. The number of directors may be fixed from time to time by North Georgia
Community shareholders by the affirmative vote of two-thirds of issued and
outstanding North Georgia Community shares, or by the board of directors by the
affirmative vote of two-thirds of the directors. Until the board of directors
has six or more members, directors are elected for a one year term or until
their successors are elected.
North Georgia Community's articles of incorporation and bylaws provide
that when the board of directors consists of six or more members, the board will
be divided into three classes as nearly equal in number as possible. The
directors in each class will serve three-year terms, and shareholders will elect
only one-third of the members of the board of directors each year. The effect of
dividing the board in this way is that shareholders need two annual meetings to
change a majority of the members of the board of directors.
North Georgia Community shareholders may not cumulate their votes in the
election of directors. Shareholders will have one vote for each North Georgia
Community share they own. To be elected, a director nominee must receive more
votes than any other nominee for the same seat on North Georgia Community's
board of directors.
Removal of Directors
North Georgia National. North Georgia National's articles of association
provide that a director may be removed by shareholders at a meeting called to
remove him or her if there is a failure to fulfill one of the affirmative
requirements for qualification, or for cause. A director may not be removed if
the number of votes sufficient to elect him or her under cumulative voting is
voted against his or her removal.
North Georgia Community. Under North Georgia Community's articles of
incorporation and bylaws, any one or more directors may be removed from office,
with cause, by the affirmative vote of a majority of the issued and outstanding
North Georgia Community shares. Any director may be removed, without cause, by
the affirmative vote of two-thirds of the issued and outstanding North Georgia
Community shares.
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Indemnification
North Georgia National. North Georgia National's bylaws provide that the
corporate law of the State of Georgia shall be the governing law on
indemnification payments made by North Georgia National. North Georgia
National's indemnification provisions are in all material respects the same as
those of North Georgia Community described below.
North Georgia Community. North Georgia Community's articles of
incorporation and bylaws provide that an eligible director or officer will be
indemnified against liability and other expenses incurred in a proceeding
initiated against him or her by reason of his or her serving as a director or
officer, to the fullest extent authorized by the Georgia Business Corporations
Code. North Georgia Community may elect to indemnify an individual made a party
to a proceeding because he or she is or was a North Georgia Community employee
or agent.
North Georgia Community's bylaws provide that it will not indemnify a
director or officer for any liability or expenses incurred by him or her:
o for any appropriation, in violation of his or her duties, of any
business opportunity of North Georgia Community;
o for any acts or omissions which involve intentional misconduct or a
knowing violation of law;
o for the types of liability set forth in the Georgia Business
Corporations Code dealing with illegal or unauthorized distributions
of corporate assets, whether as dividends or in liquidation of North
Georgia Community or otherwise; or
o for any transaction from which the director or officer derives an
improper personal benefit.
North Georgia Community's bylaws on indemnification provide for:
o the advancement of expenses to its directors at the outset of a
proceeding;
o the purchase of insurance against any liability of the director or
officer arising from his or her duties and actions as a director or
officer; and
o the survival of this indemnification to the director's or officer's
heirs, executors and administrators.
The indemnification provisions are non-exclusive, and will not impair any
other rights to which those seeking indemnification or advancement of expenses
may be entitled.
Limitation on Director Liability
North Georgia National. North Georgia National's articles of association
and bylaws contain no provisions that limit the personal liability of a director
to the shareholders of North Georgia National for monetary damages for breach of
his or her duty as a director of North Georgia National.
North Georgia Community. North Georgia Community's articles of
incorporation provide that a director of North Georgia Community will not be
personally liable to North Georgia Community or its shareholders for monetary
damages for breach of any duty as a director, except for liability for:
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o any appropriation, in violation of his or her duties, of any
business opportunity of the Corporation;
o acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
o the types of liability set forth in Section 14-2-832 of the Georgia
Business Corporations Code dealing with unlawful distributions of
corporate assets to shareholders; or
o any transaction from which the director derived an improper material
tangible personal benefit.
Section 14-2-832 of the Georgia Business Corporations Code provides that a
director who votes for or assents to a distribution made in violation of section
14-2-640 of the Georgia Business Corporations Code or the articles of
incorporation is personally liable to the corporation for the amount of the
distribution that exceeds what could have been distributed without violating
section 14-2-640 of the Georgia Business Corporations Code or the articles of
incorporation.
However, for the director to be liable for these distributions, the
corporation must establish that the director did not perform his or her duties
in a manner the director believed in good faith to be in the best interests of
the corporation and with the care an ordinarily prudent person in a like
position would exercise under similar circumstances. Section 14-2-640 of the
Georgia Business Corporations Code describes specific situations when a
corporation is not permitted to make distributions.
Special Meetings of Shareholders
North Georgia National. North Georgia National's articles of association
and bylaws provide that special shareholder meetings may be called for any
purpose, at any time, by North Georgia National's board of directors or by any
one or more North Georgia National shareholders owning not less than fifty
percent of the North Georgia National stock.
North Georgia Community. North Georgia Community bylaws provide that
special shareholder meetings may be called at any time by North Georgia
Community's board of directors, its president, or by North Georgia Community at
the written request of any one or more North Georgia Community shareholders
owning not less than twenty-five percent of the North Georgia Community stock.
Actions by Shareholders Without a Meeting
North Georgia National. Neither North Georgia National's articles of
association nor its bylaws contain provisions for shareholder actions without a
meeting.
North Georgia Community. North Georgia Community's articles of
incorporation and bylaws provide that an action that may be taken at a meeting
of North Georgia Community shareholders may be taken without a meeting, if a
written consent setting forth the action taken is signed by shareholders who
could cast not less than the minimum number of votes that would be necessary to
take such action at a meeting at which all shares entitled to vote were present
and voted.
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Mergers, Consolidations, and Sales of Assets
North Georgia National. North Georgia National's articles of association
and bylaws contain no provisions on mergers, consolidations and sales of assets.
However, OCC regulations require that a majority of North Georgia directors, and
shareholders owning at least two-thirds of the outstanding North Georgia
National shares, approve any merger, consolidation, or sale of substantially all
of North Georgia's assets.
North Georgia Community. North Georgia Community's articles of
incorporation provide that when the Georgia Business Corporations Code or other
applicable law requires shareholder approval of a merger or share exchange of
North Georgia Community with any other corporation, or a sale of all or
substantially all of North Georgia Community's assets to another corporation,
the approval will require either:
o the affirmative vote of two-thirds of the North Georgia Community
directors and the affirmative vote of a majority of the issued and
outstanding North Georgia Community shares; or
o the affirmative vote of a majority of the North Georgia Community
directors and the affirmative vote of the holders of at least
two-thirds of the issued and outstanding North Georgia Community
shares.
Shareholders' Rights to Examine Books and Records
North Georgia National. North Georgia National's bylaws provide that a
copy of the bylaws, with all amendments, will be open for inspection by all
shareholders during banking hours. The National Bank Act requires North Georgia
National to maintain a full and correct list of its shareholders and to make the
list available for inspection by North Georgia National shareholders and
creditors during business hours. OCC regulations require North Georgia National
to prepare an annual financial disclosure statement and to make this statement
available to North Georgia National shareholders, depositors, and anyone who
requests it.
North Georgia Community. The Georgia Business Corporations Code provides
that a North Georgia Community shareholder may inspect and copy books and
records such as North Georgia Community's articles of incorporation or bylaws if
the shareholder makes a written demand at least five days before the date on
which he or she wishes to inspect the records. North Georgia Community's bylaws
provide that North Georgia Community will provide a shareholders' list for
inspection by any North Georgia Community shareholder during every meeting of
North Georgia Community shareholders.
North Georgia Community bylaws also provide that a North Georgia Community
shareholder or shareholders owning at least two percent of the outstanding
shares of any class of North Georgia Community stock may, upon written demand,
inspect its books and records of accounts, its minutes, and its records of
shareholders. A North Georgia Community shareholder may inspect these records
only if
o his or her demand for inspection is made in good faith, or made for
a proper purpose that is reasonably relevant to his or her
legitimate interest as a shareholder;
o the shareholder describes with reasonable particularity his or her
purpose for the inspection and the records that he or she wishes to
inspect;
o the records requested are directly connected with his or her stated
purpose; and
20
<PAGE>
o the records are to be used solely for the shareholder's stated
purpose.
North Georgia Community's bylaws also provide that not later than four
months after the close of each fiscal year, and in any case prior to the next
North Georgia Community annual meeting of shareholders, North Georgia Community
will prepare a balance sheet and a profit and loss statement. North Georgia
Community will mail to any North Georgia Community shareholder, at his or her
written request, a copy of its most recent balance sheet and profit and loss
statement.
Dividends
North Georgia National. North Georgia National's articles of association
and bylaws contain no provisions on dividends. OCC regulations permit North
Georgia directors to pay dividends as frequently and in such amounts of
undivided profits as the directors judge prudent, subject to capital and
earnings limitations contained in the regulations. OCC regulations also provide
that North Georgia National may not pay any dividend if, after the dividend,
North Georgia National would be undercapitalized by OCC standards.
North Georgia Community. North Georgia Community's articles of
incorporation and bylaws contain no provisions on dividends. The Georgia
Business Corporations Code provides that North Georgia Community may not pay a
dividend if, after the dividend:
o North Georgia Community would not be able to pay its debts as they
become due in the usual course of business; or
o North Georgia Community's total assets would be less than the sum of
its total liabilities plus any amount that would be needed, if North
Georgia were to be dissolved at the time of the dividend, to satisfy
the preferential rights upon dissolution of shareholders whose
preferential rights are superior to those receiving the dividend.
Preemptive and Other Rights
North Georgia National. North Georgia National shareholders do not have
any preemptive rights with respect to acquiring additional shares of North
Georgia National common stock. In addition, North Georgia National shares of
common stock are not subject to any conversion, redemption or sinking fund
provisions.
North Georgia Community. North Georgia Community shareholders do not have
any preemptive rights with respect to acquiring additional shares of North
Georgia Community common stock. In addition, North Georgia Community shares of
common stock are not subject to any conversion, redemption or sinking fund
provisions.
21
<PAGE>
COMPARATIVE MARKET PRICES AND DIVIDENDS
As of March 31, 2000, the 902,917 shares of North Georgia National common
stock outstanding were held by 437 shareholders. There is no established public
trading market for North Georgia National's common stock, and there is no
reliable information about any trades of its shares or about the prices at which
any shares have traded.
To the knowledge of North Georgia National, during 1999, trades occurred
at prices ranging from $10.00 to $12.00 and during 2000 through April ___, 2000,
trades have occurred at prices ranging from $ ____ to $____.
The foregoing information regarding North Georgia National's common stock
is provided for informational purposes only and, due to the absence of an active
market for the North Georgia National's stock, should not be viewed as
indicative of the actual or market value of the common stock.
North Georgia National has not paid dividends to its shareholders in the
past. The holders of North Georgia Community common stock will be entitled to
receive dividends when and if declared by North Georgia Community out of funds
legally available for dividends. North Georgia Community is a legal entity
separate and distinct from North Georgia National, and its revenues depend in
significant part on the payment of dividends from North Georgia National. North
Georgia National is subject to legal restrictions on the amount of dividends it
may pay.
BUSINESS OF NORTH GEORGIA NATIONAL
General
On September 19, 1997, the organizers of North Georgia National filed an
application with the OCC for approval to organize a national bank located in
Calhoun, Georgia and with the FDIC for insurance of deposits. North Georgia
National received preliminary approval from the OCC on March 11, 1998, and from
the FDIC on May 20, 1998. North Georgia National opened for business on February
10, 1999.
North Georgia National is a full-service commercial bank. It offers
personal and business checking accounts, interest-bearing checking accounts,
savings accounts, money market checking accounts, various types of certificates
of deposit and Individual Retirement Accounts. It also offers real estate loans,
including home equity lines of credit, commercial loans, construction loans,
education loans and consumer loans. In addition, North Georgia National provides
official bank checks, MasterCard and Visa credit cards, debit cards, safe
deposit boxes, traveler's checks, bank by mail, direct deposit of payroll and
social security checks, and US Savings Bonds.
Recent Developments
In November, 1999, David J. Lance became President and Chief Executive
Officer of North Georgia National. Mr. Lance was previously Chairman, President
and Chief Executive Officer of First National Bank of Northwest Georgia,
Calhoun, Georgia, Chairman of Peoples First National Bank, Cartersville,
Georgia, and director of Hardwick Holding Company, Dalton, Georgia.
In November, 1999, M. Lauch McKinnon resigned from his position as
President and Chief Executive Officer of North Georgia National.
22
<PAGE>
On March 3, 2000, Rita B. Gray resigned from her position as Chief
Financial Officer of North Georgia National. On March 22, 2000, North Georgia
National hired Rhonda C. Massengill as Chief Financial Officer of North
Georgia National. Ms. Massengill has worked at First National Bank of
Northwest Georgia, Calhoun, Georgia, since 1974. From 1995 to March 2000, Ms.
Massengill was a Senior Vice President and Controller of First National Bank
of Northwest Georgia.
Management Stock Ownership
The following table lists the number and percentage ownership of shares of
North Georgia National's common stock beneficially owned as of March 3, 2000 by
each director of North Georgia National and all directors and executive officers
as a group. North Georgia National does not have any shareholders who own more
than 5% of its outstanding common stock who are not also directors. Unless
otherwise indicated, each person is the record owner of, and has sole voting and
investment power with respect to, his or her shares.
AMOUNT AND
NAME AND ADDRESS OF NATURE OF BENEFICIAL % OF
BENEFICIAL OWNER OWNERSHIP CLASS
- ---------------- --------- -----
Directors
Ernest M. Acree, Jr 60,000(1) 6.6%
212 W. Gordon Street
Dalton, Georgia 30720
Sharon A. Black 2,500(2) *
108 Meadow Lane
Calhoun, Georgia 30701
Marcus G. Ethridge 100 *
118 Shadow Wood Drive
Calhoun, Georgia 30701
Franklin G. Fuller 25,000(3) 2.8%
1901 Kimberly Park
Dalton, Georgia 30740
Jim Tyson Griffin 30,000(4) 3.3%
P.O. Box 39
Dalton, Georgia 30720
Henry E. Holland, Jr 2,500(5) *
110 Timber Ridge Lane
Calhoun, Georgia 30701
Michael E. Jinright 10,000(6) 1.1%
212 W. Gordon Street
Dalton, Georgia 30720
23
<PAGE>
AMOUNT AND
NAME AND ADDRESS OF NATURE OF BENEFICIAL % OF
BENEFICIAL OWNER OWNERSHIP CLASS
- ---------------- --------- -----
Thomas M. Kinnamon 116,400(7) 12.9%
604 Sheridan Avenue
Dalton, Georgia 30721
David J. Lance 110,450(8) 11.3%
350 West Belmont Avenue
Calhoun, Georgia 30701
John D. Oxford 40,000 4.4%
604 Sheridan Avenue
Dalton, Georgia 30721
Roger D. Rigney 35,000 3.9%
1014 South Wall Street
Calhoun, Georgia 30701
All Directors and Executive 433,150(9) 47.9%
Officers, as a Group (12 persons)
Other 5% Shareholders
None
- --------------------
* Represents less than 1% of North Georgia National's 902,917
outstanding shares.
(1) Consists of 10,000 shares held of record by Mr. Acree and 50,000
shares held of record by the Ernest M. Acree, Sr. Family
Partnership.
(2) Consists of shares held of record by AmSouth Bank as trustee for Ms.
Black.
(3) Consists of 25,000 shares held of record by Mr. Fuller with his
spouse as to which beneficial ownership is shared.
(4) Consists of 25,000 shares held of record by Mr. Griffin, and 5,000
shares held by Mr. Griffin with his mother as to which beneficial
ownership is shared.
(5) Consists of 500 shares held of record by Mr. Holland with his spouse
as to which beneficial ownership is shared, 1,000 shares held of
record by Mr. Holland as custodian for his son, and 1,000 shares
underlying an option.
(6) Consists of 10,000 shares held of record by Mr. Jinright with his
spouse as to which beneficial ownership is shared.
24
<PAGE>
(7) Consists of 90,000 shares held of record by Mr. Kinnamon, 1,000
shares held of record by Mr. Kinnamon's spouse as to which beneficial
ownership is shared, 10,000 shares held of record by Mr. Kinnamon's
sons as to which beneficial ownership is shared, and 15,400 shares
held of record by Raymond James & Associates as custodian for Mr.
Kinnamon.
(8) Consist of 35,450 shares held of record by Mr. Lance, and 75,000
shares underlying an option.
(9) Includes 1,200 shares beneficially owned by an executive officer of
North Georgia National who does not also serve as a director.
Related Party Transactions
North Georgia National's directors and principal offices, their immediate
family members and companies and other entities associated with them, have been
customers of and have had banking transactions with North Georgia National and
are expected to continue these relationships in the future. In the opinion of
North Georgia National's management, the extensions of credit made by North
Georgia National to such individuals, companies and entities:
o Were made in the ordinary course of business;
o Were made on substantially the same terms, including interest rates
and collateral, as those prevailing at the time for comparable
transactions with other persons; and
o Did not involve more than a normal risk of collectibility or present
other unfavorable features.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS OF NORTH GEORGIA NATIONAL
Financial Condition
North Georgia National had total assets of $24.3 million as of December
31, 1999. Total deposits were $16.9 million and consisted of deposits of
individuals and small businesses in the local market. Stockholders' equity was
$7.3 million. North Georgia National raised $7.0 million from the sale of its
common stock in its original offering during 1998. An additional $2 million was
raising during 1999 -- $0.2 million through a sale of 20,500 shares to CEO David
J. Lance at $10 per share, under his employment agreement; and $1.8 million
through the sale of 149,800 shares at $12 per share to investors through a
non-public offering. Capital was reduced by (1) $43 thousand for costs incurred
in the original offering and issuance of the stock and $6 thousand for costs
incurred in the non-public offering, (2) $466 thousand in pre-opening losses,
(3) $1,147 thousand accumulated loss since opening, and (4) $72 thousand
unrealized loss in the available for sale investment portfolio. The funds
available from the stock and the deposits were invested in premises and
equipment ($2.2 million), investments ($2.6 million), Federal funds sold ($1.3
million) and loans ($16.8 million).
Management expects significant growth in loans and deposits during the
early periods of operations. This growth is common for new banks.
25
<PAGE>
Liquidity
As of December 31, 1999, North Georgia National had liquid assets of $3.0
million - $1.7 million in unpledged, available for sale investment securities
and $1.3 million in Federal funds sold. Management believes that liquidity is
adequate to meet anticipated needs.
Capital
The minimum capital requirements for banks require a leverage capital to
assets ratio of at least 4%, a core capital to risk-weighted assets ratio of at
least 4%, and total capital to risk-weighted assets of at least 8%. In addition
to these regulatory requirements, new banks are required to maintain higher
ratios during the first five years of operation. At December 31, 1999, North
Georgia National's leverage ratio was 36%, its core capital to risk-weighted
ratio was 39%, and its total capital to risk-weighted ratio was 40%. As asset
growth continues, management expects that these ratios will decrease to levels
closer to, but still in excess of, the minimum requirements.
Results of Operations
North Georgia National began its operations on February 10, 1999. Prior to
beginning operations, North Georgia National was engaged in activities involving
its formation, selling its common stock and obtaining necessary regulatory
approvals. North Georgia National incurred operating losses totaling $466
thousand during its organizational period - $1 thousand in 1997, $448 thousand
in 1998, and $17 thousand in 1999. From beginning of operations to December
31,1999, North Georgia National has incurred additional operating losses of
$1,147 thousand. Management expects that North Georgia National will continue to
incur operating losses during the first three quarters of 2000. As loans and
other interest-earning assets increase, management expects that they will
generate interest income sufficient to cover interest expense and other
operating expenses.
North Georgia National was still in its organizational stage as of
December 31, 1998. Therefore, comparative analysis with December 31, 1999 is not
presented.
Capability of Data Processing Systems to Accommodate the Year 2000
Like most financial institutions, North Georgia National relies upon
computers to conduct its business. In view of the attention in the industry to
ensure that computers are able to provide accurate information after December
31, 1999, North Georgia National has taken the necessary actions to test the
capabilities of its systems. Prior to installation of systems, North Georgia
National relied on representation of the system providers. Management has since
identified systems and functions that are critical to its daily operations.
These critical systems were tested either in-house or by the vendor with proxy
test results provided to North Georgia National. In addition, North Georgia
National evaluated the liquidity needs of its deposit and loan customers and
implemented a plan to ensure adequate liquidity for customer cash needs during
the time around the century date change.
As a result of North Georgia National's efforts, there was no interruption
of service and all systems were fully operational following the century date
change. However, North Georgia National is aware that risks associated with year
2000 remain. These risks involve future critical dates that may cause system
problems, risks associated with suitable year 2000 records retention, and
general and specific risks related to borrowers, depositors, and capital
markets/asset management counterparties. Management believes that North Georgia
National has adequate systems and procedures in place to continue to monitor and
respond to these risks.
26
<PAGE>
No significant costs were incurred in connection with the year 2000
issues. Based on current information, North Georgia National does not expect to
incur significant additional costs related to year 2000 risks.
Trends
North Georgia National is not aware of any other known trends, events or
uncertainties, other than the effect of events described above, that will have
or that are reasonably likely to have a material effect on its liquidity,
capital resources or operations. North Georgia National is not aware of any
current recommendations by regulatory authorities, which, if implemented, would
have such an effect.
Asset/Liability Management
It is North Georgia National's objective to manage assets and liabilities
to provide a satisfactory, consistent level of profitability within the
framework of established cash, loan, investment, borrowing, and capital
policies. Specified officers are charged with responsibility for monitoring
policies and procedures that are designed to ensure acceptable composition of
the asset/liability mix. It is the overall philosophy of management to support
asset growth primarily through growth of core deposits of all categories made by
local individuals and businesses.
North Georgia National's asset/liability mix is monitored on a regular
basis with a report reflecting the interest rate-sensitive assets and interest
rate-sensitive liabilities being prepared and presented to the board of
directors of North Georgia National on a monthly basis. The objective of this
policy is to monitor interest rate-sensitive assets and liabilities to minimize
the impact of substantial movements in interest rates on earnings. An asset or
liability is considered to be interest rate-sensitive if it will reprice or
mature within the time period analyzed, usually one year or less. The interest
rate-sensitivity gap is the difference between the interest-earning assets and
interest-bearing liabilities scheduled to mature or reprice within the time
period. A gap is considered positive when the amount of interest rate-sensitive
assets exceeds the amount of interest rate-sensitive liabilities. A gap is
considered negative when the amount of interest rate-sensitive liabilities
exceeds the interest rate-sensitive assets. During a period of rising interest
rates, a negative gap would tend to adversely affect net interest income, while
a positive gap would tend to result in an increase in net interest income.
Conversely, during a period of falling interest rates, a negative gap would tend
to result in an increase in net interest income, while a positive gap would tend
to adversely affect net interest income. If North Georgia National's assets and
liabilities were equally flexible and moved concurrently, the impact of any
increase or decrease in interest rates on net interest income would be minimal.
A simple interest rate gap analysis by itself may not be an accurate
indicator of how net interest income will be affected by changes in interest
rates. Accordingly, North Georgia National also evaluates how the repayment of
particular assets and liabilities is impacted by changes in interest rates.
Income associated with interest-earning assets and costs associated with
interest-bearing liabilities may not be affected uniformly by changes in
interest rates. In addition, the magnitude and duration of changes in interest
rates may have a significant impact on net interest income. For example,
although selected assets and liabilities may have similar maturities or periods
of repricing, they may react in different degrees to changes in market interest
rates. Interest rates on specified types of assets and liabilities fluctuate in
advance of changes in general market rates, while interest rates on other types
may lag behind changes in general market rates. In addition, specified assets,
such as adjustable rate mortgage loans, have features, generally referred to as
interest rate caps and floors, which limit changes in interest rates. Prepayment
and early withdrawal levels also could deviate significantly from those assumed
in calculating the interest
27
<PAGE>
rate gap. The ability of many borrowers to service their debts also may decrease
during periods of rising interest rates.
Changes in interest rates also affect North Georgia National's liquidity
position. North Georgia National currently prices deposits in response to market
rates and management intents to continue this policy. If deposits are not priced
in response to market rates, a loss of deposits could occur which would
negatively affect North Georgia National's liquidity position.
At December 31, 1999, North Georgia National's cumulative one year
interest rate-sensitivity gap ratio was 64%. North Georgia National's targeted
ratio is 80% to 120% in this time horizon. This indicates that North Georgia
National's interest-bearing liabilities will reprice during this period at a
rate faster than its interest-earning assets. North Georgia National is not
within its targeted parameters due primarily to 98% of its certificates of
deposit repricing within a one-year time frame as opposed to 45% of loans and
securities repricing within a one-year time frame. North Georgia National
believes that it is paying competitive market rates for certificates of deposit,
and as long as its rates remain competitive, its liquidity, while not assured,
should not be materially adversely affected. However, due to the long-term
nature of North Georgia National's interest-earning assets and the short-term
nature of its interest-bearing liabilities, North Georgia National's earnings
could be negatively impacted in a rising interest rate environment.
The following table sets forth the repricing of North Georgia National's
interest-earning assets and interest-bearing liabilities as of December 31,
1999, the interest rate-sensitivity gap, the cumulative interest
rate-sensitivity gap, the interest rate-sensitivity gap ratio and the cumulative
interest rate-sensitivity gap ratio. The table also sets forth the time periods
in which interest-earning assets and interest-bearing liabilities will mature or
may reprice in accordance with their contractual terms. However, the table does
not necessarily indicate the impact of general interest rate movements on the
net interest margin since the repricing of various categories of assets and
liabilities is subject to competitive pressures and the needs of North Georgia
National's customers. In addition, various assets and liabilities indicated as
repricing within the same period may in fact, reprice at different times within
such period and at different rates.
28
<PAGE>
<TABLE>
<CAPTION>
After Three After One
Within Months but Year but
Three Within One Within After Five
Months Year Five Years Years Total
-------- -------- -------- -------- --------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
Interest-earning
assets:
Federal funds sold $ 1,315 $ -- $ -- $ -- $ 1,315
Securities 254 -- 2,174 -- 2,428
Loans 6,040 2,418 7,608 778 16,844
-------- -------- -------- -------- --------
7,609 2,418 9,782 778 20,587
-------- -------- -------- -------- --------
Interest-bearing
liabilities:
Interest-bearing
demand deposits 9,809 -- -- -- 9,809
Savings 274 -- -- -- 274
Certificates, less
than $100,000 834 1,339 85 -- 2,258
Certificates,
$100,000 and over 2,603 830 -- -- 3,433
-------- -------- -------- -------- --------
13,520 2,169 85 -- 15,774
-------- -------- -------- -------- --------
Interest rate
sensitivity gap $ (5,911) $ 249 $ 7,523 $ 778 $ 2,639
======== ======== ======== ======== ========
Cumulative interest
rate sensitivity gap $ (5,911) $ (5,662) $ 1,861 $ 2,639
======== ======== ======== ========
Interest rate
sensitivity gap ratio 0.56 1.11 89.51 --
======== ======== ======== ========
Cumulative interest
rate sensitivity gap ratio 0.56 0.64 1.12 1.17
======== ======== ======== ========
</TABLE>
29
<PAGE>
SELECTED FINANCIAL INFORMATION AND STATISTICAL DATA
The tables and schedules on the following pages set forth significant
financial information and statistical data with respect to the distribution of
assets, liabilities and shareholders' equity of North Georgia National, and the
interest rates experienced by North Georgia National; the investment portfolio
of North Georgia National; the loan portfolio of North Georgia National,
including types of loans, maturities, and sensitivities of loans to changes in
interest rates and information on nonperforming loans; summary of the loan loss
experience and reserves for loan losses of North Georgia National; types of
deposits of North Georgia National and the return on equity and assets for North
Georgia National.
DISTRIBUTION OF ASSETS, LIABILITIES, AND
STOCKHOLDERS' EQUITY:
INTEREST RATES AND INTEREST DIFFERENTIALS
Average Balances
The condensed average balance sheet for the period indicated is presented
below. (1)
Year Ended December 31, 1999
----------------------------
ASSETS (Dollars in Thousands)
Cash and due from banks $ 968
Taxable securities 2,200
Federal funds sold 1,469
Loans (2) 7,199
Allowance for loan losses (17)
Other assets 2,303
------
$ 14,122
======
Total interest-earning assets $ 10,868
======
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Noninterest-bearing demand $ 811
Interest-bearing demand 4,302
Savings 161
Time 2,539
------
Total deposits $ 7,813
Federal funds purchased 126
Other liabilities 56
------
Total liabilities 7,995
------
Stockholders' equity 6,127
------
$ 14,122
======
Total interest-bearing liabilities $ 7,128
======
(1) Average balances were determined using the daily average balances during
the year.
(2) There were no nonaccrual loans included in average loans.
30
<PAGE>
Interest Income and Interest Expense
The following tables set forth the amount of North Georgia National's
interest income and interest expense for each category of interest-earning
assets and interest-bearing liabilities; the average interest rate for total
interest-earning assets and total interest-bearing liabilities; net interest
spread; and net yield on average interest-earning assets. These rates do not
include the time period prior to the beginning of its banking operations.
Year Ended December 31, 1999
----------------------------
Average
Interest Rate
-------- ----
(Dollars in Thousands)
INTEREST INCOME:
Interest and fees on loans (1) $ 533 8.09%
Interest on taxable securities 112 5.53
Interest on Federal funds sold 68 5.06
Interest earned during the period
prior to beginning of banking
operations 78 --
------ ------
Total interest income $ 791 7.16
----- ----
INTEREST EXPENSE:
Interest on interest-bearing demand
Deposits $ 148 3.77
Interest on savings deposits 4 2.40
Interest on time deposits 114 4.91
Interest on Federal funds purchased 7 6.33
Interest incurred during the period
prior to beginning of banking
operations 19 --
------- ------
Total interest expense 292 4.19
------- ----
NET INTEREST INCOME $ 499
======
Net interest spread 2.97%
====
Net yield on average
interest-earning assets 4.41%
====
(1) Interest and fees on loans includes $27,000 of loan fee income for the
year ended December 31, 1999. There were no nonaccrual loans during 1999.
Rate and Volume Analysis
Because North Georgia National began its banking operations in 1999, the
change in net interest income from banking operations is all due to volume.
Therefore, a rate and volume analysis is not presented.
31
<PAGE>
INVESTMENT PORTFOLIO
Types of Investments
The carrying amounts of securities at the dates indicated, which are all
classified as available-for-sale, are summarized as follows:
December 31, 1999
----------------------
(Dollars in Thousands)
U.S. Government agencies $2,174
Equity securities 254
------
$2,428
======
Maturities
The amounts of debt securities in each category as of December 31, 1999
are shown in the following table according to contractual maturity
classifications (1) one year or less, (2) after one year through five years, (3)
after five years through ten years and (4) after ten years.
<TABLE>
<CAPTION>
After one year After five years
One year or less Through five years Through ten years
----------------- ---------------- ------------------
Amount Yield (1) Amount Yield (1) Amount Yield (1)
----------------- ---------------- ------------------
<S> <C> <C> <C> <C> <C> <C>
U.S. Government agencies $ -- -- $2,174 5.56% $ -- --
===== ====== ======
</TABLE>
After ten years Total
--------------------- -----------------------
Amount Yield (1) Amount Yield (1)
--------------------- -----------------------
U.S. Government agencies $ -- -- $ 2,174 5.56%
===== ========
(1) Yields were computed using coupon interest, adding discount accretion or
subtracting premium amortization, as appropriate, on a ratable basis over
the life of each security. The weighted average yield for each maturity
range was computed using the carrying value of each security in that
range.
32
<PAGE>
LOAN PORTFOLIO
Types of Loans
The amount of loans outstanding at the indicated dates are shown in the
following table according to the type of loan.
December 31, 1999
-----------------
(Dollars in Thousands)
Commercial $ 7,931
Real estate-construction 253
Real estate-mortgage 5,522
Consumer installment loans and other 3,138
--------
16,844
Less allowance for loan losses (200)
--------
Net loans $ 16,644
========
Maturities and Sensitivities of Loans to Changes in Interest Rates
Total loans as of December 31, 1999 are shown in the following table
according to contractual maturity classifications (1) one year or less, (2)
after one year through five years, and (3) after five years.
The disclosure of loans by the required categories, commercial and
financial and real estate - construction, is not available and would involve
undue burden and expense to North Georgia National. In making this
determination, North Georgia National has considered the estimated cost to
compile the required information and its current electronic data processing
capability.
(Dollars in Thousands)
Maturity
One year or less $ 13,170
After one year through five years 3,674
After five years --
---------
$ 16,844
=========
The following table summarizes loans at December 31, 1999 with the due
dates after one year which have predetermined and floating or adjustable
interest rates.
(Dollars in Thousands)
Predetermined interest rates $ 1,576
Floating or adjustable interest rates 2,098
--------
$ 3,674
========
33
<PAGE>
Risk Elements
Information with respect to nonaccrual, past due, and restructured loans
at December 31, 1999 is as follows:
December 31, 1999
-----------------
(Dollars in Thousands)
Nonaccrual loans $0
Loans contractually past due ninety days or more
as to interest or principal payments and still accruing 0
Restructured loans 0
Loans, now current about which there are serious
doubts as to the ability of the borrower to comply
with loan repayment terms 0
Interest income that would have been recorded on nonaccrual and
restructured loans under original terms 0
Interest income that was recorded on nonaccrual and
restructured loans 0
It is North Georgia National's policy to discontinue the accrual of
interest income when, in the opinion of management, collection of such interest
becomes doubtful. This status is accorded such interest when (1) there is a
significant deterioration in the financial condition of the borrower and full
repayment of principal and interest is not expected and (2) the principal or
interest is more than ninety days past due, unless the loan is both well-secured
and in the process of collection.
Loans classified for regulatory purposes as loss, doubtful, substandard,
or special mention that have not been included in the table above do not
represent or result from trends or uncertainties which management reasonably
expects will materially impact future operating results, liquidity, or capital
resources. These classified loans do not represent material credits about which
management is aware of any information which causes management to have serious
doubts as to the ability of such borrowers to comply with the loan repayment
terms.
34
<PAGE>
SUMMARY OF LOAN LOSS EXPERIENCE
The following table summarizes average loan balances for the year
determined using the daily average balances during the period of banking
operations; changes in the allowance for loan losses arising from loans charged
off and recoveries on loans previously charged off; additions to the allowance
which have been charged to operating expense; and the ratio of net charge-offs
during the period to average loans.
Year Ended December 31, 1999
------------------------------
(Dollars in Thousands)
Average amount of loans outstanding $7,199
======
Balance of allowance for loan losses
at beginning of period $ --
------
Loans charged off, installment 1
------
Loans recovered --
------
Net charge-offs 1
------
Additions to allowance charged to operating
expense during period 201
------
Balance of allowance for loan losses
at end of period $ 200
======
Ratio of net loans charged off during the
period to average loans outstanding .01%
======
Allowance for Loan Losses
The allowance for loan losses is maintained at a level that is deemed
appropriate by management to adequately cover all known and inherent risks in
the loan portfolio. Management's evaluation of the loan portfolio includes a
periodic review of loan loss experience, current economic conditions which may
affect the borrower's ability to pay and the underlying collateral value of the
loans.
As of December 31, 1999, management had made no allocations of its
allowance for loan losses to specific categories of loans. Based on management's
best estimate, the allocation of the allowance for loan losses to types of
loans, as of the indicated dates, is as follows:
December 31, 1999
Percent of loans in
each category to
Amount total loans
---------------------- -----------
(Dollars in Thousands)
Commercial $ 110 47.09%
Real estate - construction 10 1.50
Real estate - mortgage 50 32.78
Consumer installment loans and other 30 18.63
------ -----
$ 200 100.00%
====== ======
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DEPOSITS
The average amount of deposits and average rates paid thereon, classified
as to noninterest-bearing demand deposits, interest-bearing demand deposits,
savings deposits, and time deposits, for the period of banking operations is
presented below.(1)
1999
Amount Rate
------ ----
(Dollars in Thousands)
Noninterest-bearing demand deposits $ 811 --%
Interest-bearing demand deposits 4,302 3.77
Savings deposits 161 2.40
Time deposits 2,539 4.91
------
Total deposits $7,813
======
(1) Average balances were determined using the daily average balances during
the year.
The amounts of time certificates of deposit issued in amounts of $100,000
or more as of December 31, 1999 are shown below by category, which is based on
time remaining until maturity of (1) three months or less, (2) over three
through six months, (3) over six through twelve months, and (4) over twelve
months.
(Dollars in Thousands)
Three months or less $ 2,603
Over three months through six months 830
Over six months through twelve months --
Over twelve months --
--------
Total $ 3,433
========
RETURN ON ASSETS AND STOCKHOLDERS' EQUITY
The following rate of return information for the year indicated is
presented below.
1999
Return on assets (1) (8.24)%
Return on equity (2) (19.00)
Dividend payout ratio (3) --
Equity to assets ratio (4) 43.38
(1) Net loss divided by average total assets.
(2) Net loss divided by average equity.
(3) Dividends declared per share of common stock divided by net loss per
share.
(4) Average common equity divided by average total assets.
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BUSINESS OF NORTH GEORGIA COMMUNITY
General
North Georgia Community was incorporated as a Georgia corporation on
February 18, 2000 to serve as the holding company for and the sole shareholder
of North Georgia National. North Georgia Community was organized at the
direction of North Georgia National and has had no business operations since its
incorporation.
Proposed Activities
Management of North Georgia Community is reviewing nonbanking and
financial activities permissible for the holding company but has no specific
plans with respect to such activities. North Georgia Community's future
activities may be conducted by subsidiary corporations which have not yet been
organized. Beginning nonbanking and financial operations by subsidiaries, if
they are organized, will depend upon approval by the board of directors of North
Georgia Community and by the appropriate regulatory authorities.
Competition
Currently, six commercial banks and one savings bank operate in North
Georgia Community's primary market area of Gordon County, Georgia. They are:
o AmSouth Bank, a bank of an Alabama-based bank holding company;
o Wachovia Bank, N.A., a bank of a North Carolina-based bank holding
company;
o First National Bank of Northwest Georgia, a bank owned by Hardwick Holding
Company, Dalton, Georgia;
o Georgia Bank & Trust, a bank owned by Synovus Financial Corp., Columbus,
Georgia;
o First Market Bank, a bank of a Tennessee-based holding company;
o NBC Bank, FSB, a branch of a Tennessee-based savings association; and
o Regions Bank, a bank of an Alabama-based bank holding company.
North Georgia Community will compete with these financial institutions for
deposit and loan customers in Gordon County. Most of these financial
institutions have greater resources than are now available to North Georgia
Community. With limited exceptions, these financial institutions offer all of
the banking services offered by North Georgia Community and North Georgia
National.
Employees
David J. Lance is President of North Georgia Community. North Georgia
Community does not have any other employees at this time.
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Property
North Georgia Community's main office is located at 350 West Belmont
Drive, Calhoun, Georgia. At the present time, North Georgia Community does not
have any plans to establish additional offices.
Legal Proceedings
North Georgia Community is not a party to any legal proceedings.
Directors and Executive Officers
David J. Lance is a director and President of North Georgia Community.
Thomas M. Kinnamon is a director and Secretary of North Georgia Community.
Directors will be elected at each annual meeting of shareholders to serve
a term of one year. When and if the board of directors consists of six or more
members, directors will be elected for three-year terms, so that the term of
office of one class of directors will expire each year.
At the present time, the directors and officers of North Georgia Community
do not receive compensation for their services to North Georgia Community.
Interests of Management in the Reorganization
At the present time, David J. Lance owns the one issued and outstanding
share of North Georgia Community common stock, and he paid $12.00 for the share.
As soon as practicable after the reorganization, North Georgia Community will
redeem the one share issued to Mr. Lance. After the redemption, the outstanding
shares of North Georgia Community common stock will consist solely of shares
issued to North Georgia National shareholders in the reorganization.
Except as described above, no director or officer of North Georgia
National has any direct or indirect interest in the reorganization, except an
interest related to his or her ownership of North Georgia National common stock
or to his or her position as a director or officer of North Georgia National.
Management Stock Ownership
As of the date of this proxy statement/prospectus, David J. Lance owned
the one issued and outstanding share of North Georgia Community common stock.
See - Interests of Management in the Reorganization.
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Pro Forma Capitalization
The following table presents the capitalization of North Georgia Community
and North Georgia National at March 31, 2000, and the resulting consolidated
capitalization on a pro forma basis.
PRO FORMA CAPITALIZATION
MARCH 31, 2000
<TABLE>
<CAPTION>
North North Pro
Georgia Georgia Pro Forma Forma
Community National Adjustments Consolidated
--------- --------- ------------ ------------
<S> <C> <C> <C> <C>
Common stock $ 12 $ 4,514,585 (a) (12) $ 9,306,401
(b) 4,791,816
Preferred stock 0 0 0
Capital surplus 0 4,791,816 (b)(4,791,816) 0
Accumulated deficit 0 (1,834,094) (1,834,094)
Accumulated other
comprehensive loss 0 (74,851) (74,851)
------- ----------- ------------
Total stockholders' equity $ 12 $ 7,397,456 $ 7,397,456
======= =========== ============
</TABLE>
(a) To record redemption of common stock
(b) To reclassify capital surplus to common stock
Supervision and Regulation
North Georgia National is subject to extensive state and federal banking
regulations that impose restrictions on and provide for general regulatory
oversight of our operations. These laws are generally intended to protect
depositors, not shareholders. Upon completion of the reorganization, North
Georgia Community will also be subject to extensive state and federal banking
regulations. The following discussion describes the material elements of the
regulatory framework that will apply to North Georgia Community and North
Georgia National.
North Georgia Community
Since North Georgia Community will own all of the capital stock of North
Georgia National, it will be a bank holding company under the federal Bank
Holding Company Act of 1956. As a result, North Georgia Community will primarily
be subject to the supervision, examination, and reporting requirements of the
Bank Holding Company Act and the regulations of the Federal Reserve.
Acquisitions of Banks. The Bank Holding Company Act requires every bank
holding company to obtain the Federal Reserve's prior approval before:
o Acquiring direct or indirect ownership or control of any voting shares of
any bank if, after the acquisition, the bank holding company will directly
or indirectly own or control more than 5% of the bank's voting shares;
o Acquiring all or substantially all of the assets of any bank; or
o Merging or consolidating with any other bank holding company.
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<PAGE>
Additionally, the Bank Holding Company Act provides that the Federal
Reserve may not approve any of these transactions if it would result in or tend
to create a monopoly or, substantially lessen competition or otherwise function
as a restraint of trade, unless the anticompetitive effects of the proposed
transaction are clearly outweighed by the public interest in meeting the
convenience and needs of the community to be served. The Federal Reserve is also
required to consider the financial and managerial resources and future prospects
of the bank holding companies and banks concerned and the convenience and needs
of the community to be served. The Federal Reserve's consideration of financial
resources generally focuses on capital adequacy, which is discussed below.
Under the Bank Holding Company Act, if adequately capitalized and
adequately managed, North Georgia Community or any other bank holding company
located in Georgia may purchase a bank located outside of Georgia. Conversely,
an adequately capitalized and adequately managed bank holding company located
outside of Georgia may purchase a bank located inside Georgia. In each case,
however, restrictions may be placed on the acquisition of a bank that has only
been in existence for a limited amount of time or will result in specified
concentrations of deposits. For example, Georgia law prohibits a bank holding
company from acquiring control of a financial institution until the target
financial institution has been incorporated for five years. As a result, no bank
holding company may acquire control of North Georgia Community until after the
fifth anniversary date of North Georgia National's incorporation.
Change in Bank Control. Subject to various exceptions, the Bank Holding
Company Act and the Change in Bank Control Act, together with related
regulations, require Federal Reserve approval prior to any person or company
acquiring "control" of a bank holding company. Control is conclusively presumed
to exist if an individual or company acquires 25% or more of any class of voting
securities of the bank holding company. Control is rebuttably presumed to exist
if a person or company acquires 10% or more, but less than 25%, of any class of
voting securities and either:
o The bank holding company has registered securities under Section 12
of the Securities Act of 1934, or
o No other person owns a greater percentage of that class of voting
securities immediately after the transaction.
North Georgia Community intends to register our common stock under the
Securities Exchange Act of 1934. The regulations provide a procedure for
challenge of the rebuttable control presumption.
Permitted Activities. On November 12, 1999, President Clinton signed the
Gramm-Leach-Bliley Act. This Act amends the Bank Holding Company Act and greatly
expands the activities in which bank holding companies and affiliates of banks
are permitted to engage. The Act eliminates many federal and state law barriers
to affiliations among banks and securities firms, insurance companies, and other
financial service providers. The provisions of the Act relating to permitted
activities of bank holding companies and affiliates of banks became effective on
March 11, 2000. The following discussion describes the activities in which North
Georgia Community will be permitted to engage under the Bank Holding Company
Act, as amended by the Gramm-Leach-Bliley Act, upon completion of the
reorganization.
Generally, if North Georgia Community qualifies and elects to become a
financial holding company, which is described below, it may engage in activities
that are:
o Financial in nature;
o Incidental to a financial activity; or
40
<PAGE>
o Complementary to a financial activity and do not pose a substantial
risk to the safety or soundness of depository institutions or the
financial system generally.
In determining whether a particular activity is financial in nature or
incidental or complementary to a financial activity, the Federal Reserve must
consider (1) the purpose of the Bank Holding Company and Gramm-Leach-Bliley
Acts, (2) changes or reasonable expected changes in the marketplace in which
financial holding companies compete and in the technology for delivering
financial services, and (3) whether the activity is necessary or appropriate to
allow financial holding companies to effectively compete with other financial
service providers and to efficiently deliver information and services. The Act
expressly lists the following activities as financial in nature:
o Lending, trust and other banking activities;
o Insuring, guaranteeing, or indemnifying against loss or harm, or
providing and issuing annuities, and acting as principal, agent, or
broker for these purposes, in any state;
o Providing financial, investment, or advisory services;
o Issuing or selling instruments representing interests in pools of
assets permissible for a bank to hold directly;
o Underwriting, dealing in or making a market in securities;
o Other activities that the Federal Reserve may determine to be so
closely related to banking or managing or controlling banks as to be
a proper incident to managing or controlling banks;
o Foreign activities permitted outside of the United States if the
Federal Reserve has determined them to be usual in connection with
banking operations abroad;
o Merchant banking through securities or insurance affiliates; and
o Insurance company portfolio investments.
To qualify to become a financial holding company, North Georgia
Community's depository institution subsidiaries must be well capitalized and
well managed and must have a Community Reinvestment Act rating of at least
"satisfactory." Additionally, North Georgia Community must file an election with
the Federal Reserve to become a financial holding company and provide the
Federal Reserve with 30 days written notice prior to engaging in a permitted
financial activity. Although North Georgia Community does not have any immediate
plans to file an election with the Federal Reserve to become a financial holding
company, one of the primary reasons North Georgia National selected the holding
company structure was to have increased flexibility. Accordingly, if deemed
appropriate in the future, North Georgia Community may elect to become a
financial holding company.
Under the Bank Holding Company Act, a bank holding company which has not
qualified or elected to become a financial holding company is generally
prohibited from engaging in non-banking activities, or acquiring direct or
indirect control of more than 5% of the voting shares of any company engaged in
nonbanking activities unless, prior to the enactment of the Gramm-Leach-Bliley
Act, the Federal Reserve found those activities to be so closely related to
banking as to be a proper incident to the business of banking. Activities that
the Federal Reserve has found to be so closely related to banking as to be a
proper incident to the business of banking include:
41
<PAGE>
o Factoring accounts receivable;
o Acquiring or servicing loans;
o Leasing personal property;
o Conducting discount securities brokerage activities;
o Performing selected data processing services;
o Acting as agent or broker in selling credit life insurance and other
types of insurance in connection with credit transactions; and
o Performing selected insurance underwriting activities.
Despite prior approval of a non-banking activity, the Federal Reserve may
order a bank holding company or its subsidiaries to terminate any of these
activities, or to terminate its ownership or control of any subsidiary engaged
in the activities, when it has reasonable cause to believe that the bank holding
company's continued activity, ownership, or control constitutes a serious risk
to the financial safety, soundness, or stability of any of its bank
subsidiaries.
Support of Subsidiary Institutions. Under Federal Reserve policy, North
Georgia Community is expected to act as a source of financial strength for North
Georgia National and to commit resources to support North Georgia National. This
support may be required at times when, without this Federal Reserve policy,
North Georgia Community might not be inclined to provide it. In the unlikely
event of North Georgia Community' bankruptcy, any commitment by it to a federal
bank regulatory agency to maintain the capital of North Georgia National will be
assumed by the bankruptcy trustee and entitled to a priority of payment.
North Georgia National
Since North Georgia National is a national bank, it is subject to the
supervision, examination and reporting requirements of the National Bank Act and
the regulations of the Office of the Comptroller of the Currency. The Office of
the Comptroller of the Currency regularly examines North Georgia National's
operations and has the authority to approve or disapprove mergers, the
establishment of branches and similar corporate actions. The Office of the
Comptroller of the Currency also has the power to prevent the continuance or
development of unsafe or unsound banking practices or other violations of law.
Additionally, North Georgia National's deposits are insured by the FDIC to the
maximum extent provided by law. North Georgia National is also subject to
numerous state and federal statutes and regulations that affect its business,
activities and operations.
Branching. National banks are required by the National Bank Act to adhere
to branching laws applicable to state banks in the states in which they are
located. Under current Georgia law, North Georgia National may open branch
offices throughout Georgia with the prior approval of the Office of the
Comptroller of the Currency. In addition, with prior regulatory approval, North
Georgia National will be able to acquire branches of existing banks located in
Georgia. North Georgia National and any other national or state-chartered bank
generally may branch across state lines by merging with banks in other states if
allowed by the applicable states' laws. Georgia law, with limited exceptions,
currently permits branching across state lines through interstate mergers.
42
<PAGE>
Under the Federal Deposit Insurance Act, states may "opt-in" and allow
out-of-state banks to branch into their state by establishing a new start-up
branch in the state. Currently, Georgia has not opted-in to this provision.
Therefore, interstate merger is the only method through which a bank located
outside of Georgia may branch into Georgia. This provides a limited barrier of
entry into the Georgia banking market, which protects us from an important
segment of potential competition. However, because Georgia has elected not to
opt-in, our ability to establish a new start-up branch in another state may be
limited. Many states that have elected to opt-in have done so on a reciprocal
basis, meaning that an out-of-state bank may establish a new start-up branch
only if their home state has also elected to opt-in. Consequently, until Georgia
changes its election, the only way North Georgia National will be able to branch
into states that have elected to opt-in on a reciprocal basis will be through
interstate merger.
Prompt Corrective Action. The Federal Deposit Insurance Corporation
Improvement Act of 1991 establishes a system of prompt corrective action to
resolve the problems of undercapitalized financial institutions. Under this
system, the federal banking regulators have established five capital categories
(well capitalized, adequately capitalized, undercapitalized, significantly
undercapitalized and critically undercapitalized) in which all institutions are
placed. Federal banking regulators are required to take various mandatory
supervisory actions and are authorized to take other discretionary actions with
respect to institutions in the three undercapitalized categories. The severity
of the action depends upon the capital category in which the institution is
placed. Generally, subject to a narrow exception, the banking regulator must
appoint a receiver or conservator for an institution that is critically
undercapitalized. The federal banking agencies have specified by regulation the
relevant capital level for each category.
An institution that is categorized as undercapitalized, significantly
undercapitalized, or critically undercapitalized is required to submit an
acceptable capital restoration plan to its appropriate federal banking agency. A
bank holding company must guarantee that a subsidiary depository institution
meets its capital restoration plan, subject to various limitations. The
controlling holding company's obligation to fund a capital restoration plan is
limited to the lesser of 5% of an undercapitalized subsidiary's assets or the
amount required to meet regulatory capital requirements. An undercapitalized
institution is also generally prohibited from increasing its average total
assets, making acquisitions, establishing any branches or engaging in any new
line of business, except under an accepted capital restoration plan or with FDIC
approval. The regulations also establish procedures for downgrading an
institution and a lower capital category based on supervisory factors other than
capital.
FDIC Insurance Assessments. The FDIC has adopted a risk-based assessment
system for insured depository institutions that takes into account the risks
attributable to different categories and concentrations of assets and
liabilities. The system assigns an institution to one of three capital
categories: (1) well capitalized; (2) adequately capitalized; and (3)
undercapitalized. These three categories are substantially similar to the prompt
corrective action categories described above, with the "undercapitalized"
category including institutions that are undercapitalized, significantly
undercapitalized, and critically undercapitalized for prompt corrective action
purposes. The FDIC also assigns an institution to one of three supervisory
subgroups based on a supervisory evaluation that the institution's primary
federal regulator provides to the FDIC and information that the FDIC determines
to be relevant to the institution's financial condition and the risk posed to
the deposit insurance funds. Assessments range from 0 to 27 cents per $100 of
deposits, depending on the institution's capital group and supervisory subgroup.
In addition, the FDIC imposes assessments to help pay off the $780 million in
annual interest payments on the $8 billion Financing Corporation bonds issued in
the late 1980s as part of the government rescue of the thrift industry. This
assessment rate is adjusted quarterly and is set at 2.08 cents per $100 of
deposits for the second quarter of 2000.
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The FDIC may terminate its insurance of deposits if it finds that the
institution has engaged in unsafe and unsound practices, is in an unsafe or
unsound condition to continue operations, or has violated any applicable law,
regulation, rule, order or condition imposed by the FDIC.
Community Reinvestment Act. The Community Reinvestment Act requires that,
in connection with examinations of financial institutions within their
respective jurisdictions, the Federal Reserve, the FDIC, or the Office of the
Comptroller of the Currency, shall evaluate the record of each financial
institution in meeting the credit needs of its local community, including low
and moderate income neighborhoods. These facts are also considered in evaluating
mergers, acquisitions, and applications to open a branch or facility. Failure to
adequately meet these criteria could impose additional requirements and
limitations on North Georgia National. Under the Gramm-Leach-Bliley Act, banks
with aggregate assets of not more than $250 million will be subject to a
Community Reinvestment Act examination only once every 60 months if the bank
receives an outstanding rating, once every 48 months if it receives a
satisfactory rating and as needed if the rating is less than satisfactory.
Additionally, banks will be required to publicly disclose the terms of various
Community Reinvestment Act-related agreements.
Other Regulations. Interest and other charges collected or contracted for
by North Georgia National are subject to state usury laws and federal laws
concerning interest rates. North Georgia National's loan operations are also
subject to federal laws applicable to credit transactions, such as:
o The federal Truth-In-Lending Act, governing disclosures of credit
terms to consumer borrowers;
o The Home Mortgage Disclosure Act of 1975, requiring financial
institutions to provide information to enable the public and public
officials to determine whether a financial institution is fulfilling
its obligation to help meet the housing needs of the community it
serves;
o The Equal Credit Opportunity Act, prohibiting discrimination on the
basis of race, creed or other prohibited factors in extending
credit;
o The Fair Credit Reporting Act of 1978, governing the use and
provision of information to credit reporting agencies;
o The Fair Debt Collection Act, governing the manner in which consumer
debts may be collected by collection agencies; and
o The rules and regulations of the various federal agencies charged
with the responsibility of implementing these federal laws.
The deposit operations of North Georgia National are subject to:
o The Right to Financial Privacy Act, which imposes a duty to maintain
confidentiality of consumer financial records and prescribes
procedures for complying with administrative subpoenas of financial
records; and
o The Electronic Funds Transfer Act and Regulation E issued by the
Federal Reserve to implement that act, which govern automatic
deposits to and withdrawals from deposit accounts and customers'
rights and liabilities arising from the use of automated teller
machines and other electronic banking services.
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Capital Adequacy
North Georgia Community will be required to comply with the capital
adequacy standards established by the Federal Reserve. The Federal Reserve has
established a risk-based and a leverage measure of capital adequacy for bank
holding companies.
The Federal Reserve's risk-based capital standards are designed to make
regulatory capital requirements more sensitive to differences in risk profiles
among bank holding companies, to account for off-balance-sheet exposure, and to
minimize disincentives for holding liquid assets. Assets and off-balance-sheet
items, such as letters of credit and unfunded loan commitments, are assigned to
broad risk categories, each with appropriate risks weights. The resulting
capital ratios represent capital as a percentage of total risk-weighted assets
and off-balance-sheet items.
The minimum guideline for the ratio of total capital to risk-weighted
assets is 8%. Total capital consists of two components, Tier 1 Capital and Tier
2 Capital. Tier 1 Capital generally consist of common stock, minority interests
in the equity accounts of consolidated subsidiaries, noncumulative perpetual
preferred stock, and a limited amount of cumulative perpetual preferred stock,
less goodwill and other specified intangible assets. Tier 1 Capital must equal
at least 4% of risk-weighted assets. Tier 2 Capital generally consists of
subordinated debt, other preferred stock, and a limited amount of loan loss
reserves. The total amount of Tier 2 Capital is limited to 100% of Tier 1
Capital.
The Federal Reserve's leverage ratio guidelines for bank holding companies
provide for a minimum ratio of Tier 1 Capital to average assets, less goodwill
and other specified intangible assets, of 3% for bank holding companies that
meet specified criteria, including having the highest regulatory rating and
implementing the Federal Reserve's risk-based capital measure for market risk.
All other bank holding companies generally are required to maintain a leverage
ratio of at least 4%. The guidelines also provide that bank holding companies
experiencing internal growth, as will be the case for North Georgia Community,
or making acquisitions will be expected to maintain strong capital positions
substantially above the minimum supervisory levels. Furthermore, the Federal
Reserve has indicated that it will consider a bank holding company's Tier 1
Capital leverage ratio, after deducting all intangibles and other indicators of
capital strength in evaluating proposals for expansion or new activities.
Failure to meet capital guidelines could subject a bank holding company to a
variety of enforcement remedies, including issuance of a capital directive.
North Georgia Community is also subject to capital guidelines which
provide for minimum ratios of total capital to total assets.
Payment of Dividends
North Georgia Community is a legal entity separate and distinct from North
Georgia National. The principal sources of North Georgia Community's cash flow,
including cash flow to pay dividends to its shareholders, will be dividends that
North Georgia National will pay to North Georgia Community. Statutory and
regulatory limitations apply to North Georgia National's payment of dividends to
North Georgia Community as well as to North Georgia Community's payment of
dividends to its shareholders.
Restrictions on Transactions with Affiliates
Upon completion of the reorganization, North Georgia Community and North
Georgia National will be subject to the provisions of Section 23A of the Federal
Reserve Act. Section 23A places limits on the amount of:
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o A bank's loans or extensions of credit to affiliates;
o A bank's investment in affiliates;
o Assets a bank may purchase from affiliates, except for real and personal
property exempted by the Federal Reserve;
o The amount of loans or extensions of credit to third parties
collateralized by the securities or obligations of affiliates; and
o A bank's guarantee, acceptance or letter of credit issued on behalf of an
affiliate.
The total amount of the above transactions is limited in amount, as to any
one affiliate, to 10% of a bank's capital and surplus and, as to all affiliates
combined, to 20% of a bank's capital and surplus. In addition to the limitation
on the amount of these transactions, each of the above transactions must also
meet specified collateral requirements. North Georgia National must also comply
with other provisions designed to avoid the taking of low-quality assets.
North Georgia Community and North Georgia National will also be subject to
the provisions of Section 23B of the Federal Reserve Act which, among other
things, prohibit an institution from engaging in the above transactions with
affiliates unless the transactions are on terms substantially the same, or at
least as favorable to the institution or its subsidiaries, as those prevailing
at the time for comparable transactions with nonaffiliated companies.
Privacy
Financial institutions are required to disclose their policies for
collecting and protecting confidential information. Customers generally may
prevent financial institutions from sharing personal financial information with
nonaffiliated third parties except for third parties that market the
institutions' own products and services. Additionally, financial institutions
generally may not disclose consumer account numbers to any nonaffiliated third
party for use in telemarketing, direct mail marketing or other marketing through
electronic mail to consumers.
Proposed Legislation and Regulatory Action
New regulations and statutes are regularly proposed that contain
wide-ranging proposals for altering the structures, regulations and competitive
relationships of the nation's financial institutions. We cannot predict whether
or in what form any proposed regulation or statute will be adopted or the extent
to which North Georgia Community's business may be affected by any new
regulation or statute.
Effect of Governmental Monetary Policies
North Georgia National's earnings are, and upon completion of the
reorganization, North Georgia Community's earnings will be affected by domestic
economic conditions and the monetary and fiscal policies of the United States
government and its agencies. The Federal Reserve's monetary policies have had,
and are likely to continue to have, an important impact on the operating results
of financial institutions through its power to implement national monetary
policy in order, among other things, to curb inflation or combat a recession.
The monetary policies of the Federal Reserve affect the levels of bank loans,
investments and deposits through its control over the issuance of United States
government securities, its regulation of the discount rate applicable to member
banks and its influence over reserve requirements to
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<PAGE>
which member banks are subject. We cannot predict the nature or impact of future
changes in monetary and fiscal policies.
Vote Required
To approve the Agreement, shareholders holding two-thirds of the
outstanding shares of North Georgia National common stock must vote in favor of
it. As of the record date, all directors and executive officers of North Georgia
National as a group (12 persons) could vote approximately ________ shares of
North Georgia National common stock, constituting approximately ____% of the
total number of shares of North Georgia National common stock outstanding. North
Georgia National's directors and executive officers have committed to vote their
shares of common stock in favor of the Agreement.
Recommendation
We believe that the proposed reorganization is in the best interests of
North Georgia National and its shareholders, and we unanimously recommend that
you vote FOR the Agreement.
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PROPOSAL 2 - APPROVAL OF THE NORTH GEORGIA NATIONAL
1999 STOCK INCENTIVE PLAN
On November 18, 1999, the board of directors of North Georgia National
adopted the North Georgia National Bank 1999 Stock Incentive Plan, subject to
approval by the shareholders of North Georgia National. At the annual meeting,
shareholders will be asked to consider and vote on the approval and adoption of
the Stock Incentive Plan. The board of directors believes that the granting of
stock options will assist North Georgia National in its efforts to attract and
retain highly qualified persons to serve as directors, officers and employees.
The board of directors has reserved 400,000 shares of North Georgia
National's common stock for issuance under awards that may be made under the
Stock Incentive Plan, subject to adjustment as provided in the Stock Incentive
Plan.
Applicable provisions of the Internal Revenue Code of 1986, as amended
(the "Code"), restrict North Georgia National's ability, in the absence of
shareholder approval, to grant incentive stock options under Code Section 421
and to claim deductions which may otherwise be associated with the grant of
nonqualified options under Code Section 162(m).
The following description of the Stock Incentive Plan is qualified in its
entirety by reference to the applicable provisions of the plan document, which
is attached to this proxy statement/prospectus as Appendix C.
TERMS OF THE STOCK INCENTIVE PLAN
Administration
The Stock Incentive Plan will be administered by a committee of the board
of directors whose members are selected by the board (the "Administrative
Committee"). When appointing members to the Administrative Committee, the board
of directors will consider the advisability of complying with the disinterested
standards contained in both Section 162(m) of the Code and Rule 16b-3 under the
Securities Exchange Act of 1934, as amended. The Administrative Committee will
have at least two members. At the present time, the Compensation Committee of
the North Georgia National board of directors acts as the Administrative
Committee. The Administrative Committee has the authority to grant awards under
the Stock Incentive Plan and to make all other determinations that it may deem
necessary or advisable for the administration of the Stock Incentive Plan.
In the event that the reorganization of North Georgia National into a
one-bank holding company is approved by the shareholders, the Stock Incentive
Plan will be assumed by North Georgia Community and will be administered by a
committee of that board.
Stock Options
The Stock Incentive Plan permits the Administrative Committee to make
awards of options to purchase shares of North Georgia National's common stock
and tax reimbursement payments to eligible persons. These discretionary awards
may be made on an individual basis or through a program approved by the
Administrative Committee for the benefit of a group of eligible persons. The
Stock Incentive Plan permits the Administrative Committee to make awards
incentive stock options and nonqualified stock options (collectively, "Stock
Options").
48
<PAGE>
The number of shares of common stock as to which any Stock Option is
granted and to whom any Stock Option is granted will be determined by the
Administrative Committee, subject to the provisions of the Stock Incentive Plan.
Stock Options may be made exercisable at the prices and may be made forfeitable
or terminable under the terms established by the Administrative Committee, to
the extent not otherwise inconsistent with the terms of the Stock Incentive
Plan. Stock Options generally are not transferable or assignable during a
holder's lifetime.
The Stock Incentive Plan provides for the grant of incentive stock options
and nonqualified stock options. The Administrative Committee will determine
whether a Stock Option is an incentive stock option or a nonqualified stock
option at the time the option is granted, and the option will be evidenced by a
stock option agreement. Stock Options may be made exercisable on terms
established by the Administrative Committee, to the extent not otherwise
inconsistent with the terms of the Stock Incentive Plan. No eligible employee
may be granted during any single fiscal year rights to shares of common stock
under Stock Option which, in the aggregate, exceed 75,000 shares of common
stock.
The exercise price of a Stock Option will be set forth in the applicable
stock option agreement. The exercise price of an incentive stock option may not
be less than the fair market value of the common stock on the date of the grant
nor less than 110% of the fair market value if the participant owns more than
10% of the outstanding common stock of North Georgia National or any subsidiary.
At the time an incentive stock option is exercised, North Georgia National will
be entitled to place a legend on the certificates representing the shares of
common stock purchased to identify them as shares of common stock purchased upon
the exercise of an incentive stock option. Nonqualified stock options may be
made exercisable at a price no less than 85% of the fair market value of the
common stock on the date that the option is granted. The Administrative
Committee may permit an option exercise price:
o To be paid in cash; or
o By the delivery of previously-owned shares of common stock; or
o To be satisfied through a cashless exercise executed through a
broker; or
o By having a number of shares of common stock otherwise issuable at
the time of exercise withheld.
The Administrative Committee also may authorize financing by North Georgia
National to assist a participant with payment of the exercise price.
The term of a Stock Option will be specified in the applicable stock
option agreement. The term of any Stock Option may not exceed ten years from the
date of grant; however, any incentive stock option granted to a participant who
owns more than 10% of the common stock of North Georgia National or any
subsidiary will not be exercisable after the expiration of five years from the
date the option is granted. Subject to any further limitations in a stock option
agreement, in the event of a participant's termination of employment, the term
of an incentive stock option will expire, terminate and become unexercisable no
later than three months after the date of the termination of employment;
provided, however, that if termination of employment is due to death or
disability, up to one year will be substituted for the three-month period.
Tax Reimbursement Payments
The Administrative Committee may make cash tax reimbursement payments
designed to cover tax obligations of recipients that result from the exercise of
a Stock Option.
49
<PAGE>
Termination of Stock Options
The terms of a particular Stock Option may provide that they terminate,
among other reasons:
o Upon the holder's termination of employment or other status with
respect to North Georgia National or any affiliate of North Georgia
National;
o Upon a specified date;
o Upon the holder's death or disability; or
o Upon the occurrence of a change in control of North Georgia
National.
Stock Options may include exercise rights for a holder's estate or personal
representative in the event of the holder's death or disability. At the
Administrative Committee's discretion, Stock Options that are subject to
termination may be cancelled, accelerated, paid or continued, subject to the
terms of the applicable agreement reflecting the terms of a Stock Option and to
the provisions of the Stock Incentive Plan.
Reorganizations
The number of shares of common stock reserved for issuance in connection
with the grant of a Stock Option and the exercise price of a Stock Option are
subject to adjustment in the event of any recapitalization of North Georgia
National or similar event effected without the receipt of consideration.
In the event of specified corporate reorganizations, Stock Options may be
substituted, cancelled, accelerated, cashed-out or otherwise adjusted by the
Administrative Committee, provided that the adjustment is not inconsistent with
the terms of the Stock Incentive Plan or any agreement reflecting the terms of a
Stock Option. North Georgia National may also use the Stock Incentive Plan to
assume obligations previously incurred in favor of persons who are eligible to
participate under the Stock Incentive Plan.
In the event the reorganization of North Georgia National into a one-bank
holding company is approved by the shareholders, North Georgia Community will
assume the Stock Incentive Plan and, as a result, North Georgia Community will
be substituted for North Georgia National with regard to the operative
provisions of the Stock Incentive Plan. In addition, North Georgia Community
common stock will be substituted for North Georgia National common stock on a
one-to-one basis as the shares reserved for issuance under the Stock Incentive
Plan.
Amendments or Termination
Although the Stock Incentive Plan may be amended or terminated by the
North Georgia National board of directors without shareholder approval, the
board of directors also may condition any amendment upon shareholder approval if
shareholder approval is deemed necessary or appropriate in consideration of tax,
securities or other laws. No amendment or termination by the board of directors
may adversely affect the rights of a holder of a Stock Option without the
holder's consent.
50
<PAGE>
FEDERAL INCOME TAX CONSEQUENCES
The following discussion outlines generally the federal income tax
consequences of participation in the Stock Incentive Plan. Individual
circumstances may vary and each participant should rely on his or her own tax
counsel for advice regarding federal income tax treatment under the Stock
Incentive Plan.
Incentive Stock Options
A participant will not recognize income and will not be taxed upon the
grant of an incentive stock option nor upon exercise of all or a portion of the
option. Instead, the participant will be taxed at the time he or she sells the
shares of common stock purchased on exercise of the incentive stock option. The
participant will be taxed on the difference between the price he or she paid for
the common stock and the amount for which he or she sells the common stock. If
the participant does not sell the shares of common stock during the two-year
period from the date of grant of the incentive stock option or the one-year
period from the date the common stock is transferred to him or her, the gain
will be capital gain, and North Georgia National will not be entitled to a
corresponding deduction. If the participant sells the shares of common stock at
a gain prior to that time, the difference between the amount the participant
paid for the common stock and the lesser of fair market value on the date of
exercise or the amount for which the stock is sold will be taxed as ordinary
income. If the participant sells the shares of common stock for less than the
amount he or she paid for the stock prior to the one- or two-year periods
indicated, no amount will be taxed as ordinary income and the loss will be taxed
as a capital loss. Exercise of an incentive stock option may subject a
participant to, or increase a participant's liability for, the alternative
minimum tax.
Nonqualified Options
A participant will not recognize income and will not be taxed upon the
grant of a nonqualified option or at any time prior to the exercise of all or a
portion of the option. At the time the participant exercises all or a portion of
a nonqualified option, he or she will recognize compensation taxable as ordinary
income in an amount equal to the excess of the fair market value of the common
stock on the date the option is exercised over the price paid for the common
stock, and North Georgia National will then be entitled to a corresponding
deduction.
Depending upon the period shares of common stock are held after exercise,
the sale or other taxable disposition of shares acquired through the exercise of
a nonqualified option generally will result in a short- or long-term capital
gain or loss equal to the difference between the amount realized on the
disposition and the fair market value of the shares when the nonqualified option
was exercised.
Special rules apply to a participant who exercises a nonqualified option
by paying the exercise price, in whole or in part, by the transfer of shares of
common stock to North Georgia National.
Shareholder Approval
The board of directors seeks shareholder approval of the adoption of the
Stock Incentive Plan and the reservation of 400,000 shares of common stock of
North Georgia National for the issuance of Stock Options under the Stock
Incentive Plan because approval is required under the Code as a condition to
incentive stock option treatment and will maximize the potential for deductions
associated with any nonqualified options granted under the Stock Incentive Plan.
51
<PAGE>
Approval of the Stock Incentive Plan requires the affirmative vote of the
holders of at least a majority of the outstanding shares of common stock of
North Georgia National present, or represented and entitled to a vote, at the
annual meeting. Proxies received which contain no instructions to the contrary
will be voted for the approval of the adoption of the Stock Incentive Plan.
Recommendation
North Georgia National's board of directors recommends a vote FOR approval
of the adoption of the Stock Incentive Plan.
52
<PAGE>
PROPOSAL 3 - ELECTION OF DIRECTORS
Director Nominees
The North Georgia National board of directors proposes that its current
directors be reelected to serve an additional one-year term and until their
successors are duly elected and qualified. If any nominee becomes unavailable to
serve as a director, the persons named as proxies reserve full discretion to
vote for any other person or persons who may be nominated.
The table below sets forth each director nominee's name, his or her age at
January 1, 2000, the year he or she was first elected as a director, and his or
her position with North Georgia National other than as a director, and his or
her other business experience for the past five years.
To Serve a Term of One Year Until 2001
YEAR POSITIONS WITH NORTH
FIRST GEORGIA NATIONAL AND
NAME (AGE) ELECTED BUSINESS EXPERIENCE
- ---------- ------- -----------------------------
Ernest M. Acree Jr. (54) 1998 Accountant with Acree, Jinright &
Co., Dalton, Georgia (public
accounting)
Sharon A. Black (49) 1999 Northwest Georgia sales
representative for Roadway
Express, Akron, Ohio
(transportation of manufactured
goods)
Marcus G. Ethridge (44) 1999 Chief Financial Officer of Georgia
Tufters, LLC, Calhoun, Georgia
(bedding products manufacturer);
previously partner with Read,
Martin & Slickman, Calhoun,
Georgia (public accounting)
Franklin G. Fuller (40) 1998 Vice President with Fuller Sales
Company, Dalton, Georgia
(specialty textile products)
Jim Tyson Griffin (49) 1998 Accountant with Acree, Jinright &
Co., Dalton, Georgia (public
accounting) and owner of Griffin
Farms & Rentals, Dalton, Georgia
(real estate and beef cattle
farming)
Henry E. Holland, Jr. 1999 Senior Vice President for Business
(56) Development of North Georgia
National; previously held positions
of increasing responsibility
including chairman, president and
chief executive officer of First
Federal Savings Bank, Calhoun,
Georgia from 6/70 through 4/94 when
AmSouth Bank acquired First
Federal; thereafter he continued to
hold comparable positions with
AmSouth Bank, Calhoun, Georgia
until 9/98 when he joined
53
<PAGE>
YEAR POSITIONS WITH NORTH
FIRST GEORGIA NATIONAL AND
NAME (AGE) ELECTED BUSINESS EXPERIENCE
- ---------- ------- -----------------------------
North Georgia National
Michael E. Jinright (36) 1998 Managing Partner with Acree,
Jinright & Co., Dalton, Georgia
(public accounting)
Thomas M. Kinnamon (54) 1998 President of Accent Yarns &
Textiles, Inc., Dalton, Georgia
(yarn and textile business)
David J. Lance (45) 1999 President and Chief Executive
Officer of North Georgia National
since November, 1999; previously
Chairman, President and Chief
Executive Officer of First
National Bank, Calhoun, Georgia,
Chairman of Peoples First National
Bank, Cartersville, Georgia, and
director of Hardwick Holding
Company, Dalton, Georgia
John D. Oxford (46) 1998 Secretary and Treasurer of Accent
Yarns & Textiles, Inc., Dalton,
Georgia (yarn and textile business)
Roger D. Rigney (57) 1998 President of Calhoun First
Consumer Service, Inc., Calhoun,
Georgia (consumer finance)
Vote Required
To be elected, a director nominee must receive more affirmative votes,
represented in person or by proxy at the annual meeting, than any other nominee
for the same seat on the board of directors.
In the election of directors, North Georgia National shareholders may
choose to cumulate their votes. This means that the total number of votes cast
by each holder of common stock is determined by multiplying the number of shares
he or she owns by the number of directors to be elected. A shareholder may cast
all of his or her total number of votes for a single nominee for director, or
may distribute his or her votes in any manner among two or more of the director
nominees.
Recommendation
North Georgia National's board of directors unanimously recommends that
you vote FOR the election of the director nominees listed in this proxy
statement/prospectus.
54
<PAGE>
SHAREHOLDER PROPOSALS
Proposals of shareholders of North Georgia Community (if the
reorganization is completed) or of North Georgia National (if the reorganization
is not completed) to be presented at the 2001 annual meeting of shareholders
must be received by North Georgia Community or North Georgia National at its
principal executive offices _________ __, 200_ to be included in the proxy
material for that annual meeting.
A shareholder must notify either North Georgia Community or North Georgia
National before __________ __, 200__ of a proposal for the 2001 annual meeting
that will be presented other than by inclusion in the proxy materials for the
meeting. If we do not receive such notice, proxies solicited by management will
be voted in the discretion of the proxy holders.
EXPERTS
The financial report of North Georgia National Bank at December 31, 1999
set forth in this proxy statement/prospectus has been included in reliance on
the report of Mauldin & Jenkins, LLC, independent certified public accountants,
given on the authority of that firm as experts in accounting and auditing.
LEGAL MATTERS
The legality of the shares of North Georgia Community common stock to be
issued in the reorganization, and the tax consequences of the reorganization
will be passed upon by Powell, Goldstein, Frazer & Murphy LLP, Atlanta, Georgia.
OTHER MATTERS
Management of North Georgia National does not know of any matters to be
brought before the annual meeting other than those described above. If any other
matters properly come before the annual meeting, the persons designated as
proxies will vote on such matters in accordance with their best judgment.
WHERE YOU CAN FIND MORE INFORMATION
North Georgia Community has filed with the SEC a registration statement on
Form S-4 to register the shares that it will issue to North Georgia National
shareholders. This proxy statement/prospectus is a part of the registration
statement but does not include all of the information contained in the
registration statement. For further information about North Georgia Community
and the securities offered in this proxy statement/prospectus, you may review
the registration statement.
You may request copies of the registration statement, at prescribed rates,
by sending a written request to the Public Reference Section of the SEC at 450
Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549. In addition, you
may read the registration statement at the public reference rooms at regional
offices of the SEC located in Washington, D.C., New York, New York and Chicago,
Illinois. Please call the SEC at 1-800-SEC-0330 for further information on the
public reference rooms. The SEC also maintains a Web site that contains reports,
proxy and registration statements, and other
55
<PAGE>
information regarding registrants such as North Georgia Community that file
electronically with the SEC. The address of the SEC Web site is
http://www.sec.gov.
We have not authorized anyone to give any information or make any
representation about the reorganization of North Georgia National into a
one-bank holding company structure that differs from, or adds to, the
information in this proxy statement/prospectus or in documents that are filed
with the SEC. Therefore, if anyone gives you different or additional
information, you should not rely on it.
If you are in a jurisdiction where it is unlawful to offer to exchange, or
to ask for offers to exchange, your North Georgia National securities for the
securities offered by this proxy statement/prospectus, or to ask for proxies, or
if you are a person to whom it is unlawful to direct such activities, then the
offer presented by this proxy statement/prospectus does not extend to you.
The information contained in this proxy statement/prospectus speaks only
as of its date unless the information specifically indicates that another date
applies.
56
<PAGE>
FINANCIAL STATEMENTS
F-1
<PAGE>
NORTH GEORGIA NATIONAL BANK
FINANCIAL REPORT
DECEMBER 31, 1999
F-2
<PAGE>
NORTH GEORGIA NATIONAL BANK
FINANCIAL REPORT
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
Page
----
INDEPENDENT AUDITOR'S REPORT........................................... F-4
FINANCIAL STATEMENTS
Balance sheets................................................ F-5
Statements of operations...................................... F-6
Statements of comprehensive loss.............................. F-7
Statements of stockholders' equity (deficit).................. F-8
Statements of cash flows...................................... F-9
Notes to financial statements......................... F-10 - F-25
F-3
<PAGE>
INDEPENDENT AUDITOR'S REPORT
- --------------------------------------------------------------------------------
To the Board of Directors
North Georgia National Bank
Calhoun, Georgia
We have audited the accompanying balance sheets of North Georgia
National Bank as of December 31, 1999 and 1998, and the related statements of
operations, comprehensive loss, stockholders' equity (deficit), and cash flows
for the years then ended. These financial statements are the responsibility of
the Bank's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of North Georgia
National Bank as of December 31, 1999 and 1998, and the results of its
operations and its cash flows for the years then ended, in conformity with
generally accepted accounting principles.
/s/ MAULDIN & JENKINS, LLC
Atlanta, Georgia
January 6, 2000
F-4
<PAGE>
NORTH GEORGIA NATIONAL BANK
BALANCE SHEETS
DECEMBER 31, 1999 AND 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Assets 1999 1998
------------ ------------
<S> <C> <C>
Cash and due from banks $ 1,541,141 $ 6,063,295
Federal funds sold 1,315,000 --
Securities available-for-sale 2,427,745 --
Loans 16,843,563 --
Less allowance for loan losses 200,000 --
------------ ------------
Loans, net 16,643,563 --
Premises and equipment 2,198,942 1,718,617
Other assets 173,207 78,314
------------ ------------
Total assets $ 24,299,598 $ 7,860,226
============ ============
Liabilities and Stockholders' Equity (Deficit)
Deposits
Noninterest-bearing demand $ 1,141,385 $ --
Interest-bearing demand 9,808,960 --
Savings 273,728 --
Time, $100,000 and over 3,432,715 --
Other time 2,258,241 --
------------ ------------
Total deposits 16,915,029 --
Subscribers' deposits -- 6,061,784
Notes payable -- 2,125,704
Other liabilities 116,102 121,576
------------ ------------
Total liabilities 17,031,131 8,309,064
------------ ------------
Commitments and contingent liabilities
Stockholders' equity (deficit)
Common stock, par value $5; 5,000,000 shares authorized;
870,300 and none issued and outstanding, respectively 4,351,500 --
Capital surplus 4,601,658 --
Accumulated deficit (1,613,087) (448,838)
Accumulated other comprehensive loss (71,604) --
------------ ------------
Total stockholders' equity (deficit) 7,268,467 (448,838)
------------ ------------
Total liabilities and stockholders' equity (deficit) $ 24,299,598 $ 7,860,226
============ ============
</TABLE>
See Notes to Financial Statements.
F-5
<PAGE>
NORTH GEORGIA NATIONAL BANK
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1999 AND 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Interest income
Loans $ 532,751 $ --
Taxable securities 190,498 --
Federal funds sold 68,091 --
----------- -----------
Total interest income 791,340 --
----------- -----------
Interest expense
Deposits 266,446 --
Other borrowings 25,416 55,446
----------- -----------
Total interest expense 291,862 55,446
----------- -----------
Net interest income (expense) 499,478 (55,446)
Provision for loan losses 201,050 --
----------- -----------
Net interest income (expense) after provision
for loan losses 298,428 (55,446)
----------- -----------
Other income
Service charges on deposit accounts 80,088 --
Other operating income 102,805 --
----------- -----------
Total other income 182,893 --
----------- -----------
Other expenses
Salaries and employee benefits 867,770 215,453
Equipment and occupancy expenses 178,605 --
Other operating expenses 599,195 120,241
----------- -----------
Total other expenses 1,645,570 335,694
----------- -----------
Loss before income taxes and cumulative
effect of a change in accounting principle (1,164,249) (391,140)
Income tax expense -- --
----------- -----------
Loss before cumulative effect of a
change in accounting principle (1,164,249) (391,140)
Cumulative effect of a change in accounting principle -- 56,572
----------- -----------
Net loss $(1,164,249) $ (447,712)
=========== ===========
Basic and diluted losses per common share before cumulative
effect of a change in accounting principle $ (1.66) $ (0.56)
Cumulative effect of a change in accounting principle -- (0.08)
----------- -----------
Basic and diluted losses per common share $ (1.66) $ (0.64)
=========== ===========
</TABLE>
See Notes to Financial Statements.
F-6
<PAGE>
NORTH GEORGIA NATIONAL BANK
STATEMENTS OF COMPREHENSIVE LOSS
YEARS ENDED DECEMBER 31, 1999 AND 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Net loss $(1,164,249) $ (447,712)
Other comprehensive loss:
Unrealized holding losses on securities
available-for-sale arising during period (71,604) --
----------- -----------
Comprehensive loss $(1,235,853) $ (447,712)
=========== ===========
</TABLE>
See Notes to Financial Statements.
F-7
<PAGE>
NORTH GEORGIA NATIONAL BANK
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
YEARS ENDED DECEMBER 31, 1999 AND 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Accumulated
Common Stock Other Total
------------------------- Capital Accumulated Comprehensive Stockholders'
Shares Par Value Surplus Deficit Loss Equity (Deficit)
----------- ----------- ----------- ----------- ----------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31,
1997 -- $ -- $ -- $ (1,126) $ -- $ (1,126)
Net loss -- -- -- (447,712) -- (447,712)
----------- ----------- ----------- ----------- ----------- -----------
Balance, December 31,
1998 -- -- -- (448,838) -- (448,838)
Net loss -- -- -- (1,164,249) -- (1,164,249)
Issuance of common
stock 870,300 4,351,500 4,651,100 -- -- 9,002,600
Stock issue costs -- -- (49,442) -- -- (49,442)
Other comprehensive
loss -- -- -- -- (71,604) (71,604)
----------- ----------- ----------- ----------- ----------- -----------
Balance, December 31,
1999 870,300 $ 4,351,500 $ 4,601,658 $(1,613,087) $ (71,604) $ 7,268,467
=========== =========== =========== =========== =========== ===========
</TABLE>
See Notes to Financial Statements.
F-8
<PAGE>
NORTH GEORGIA NATIONAL BANK
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1999 AND 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss $ (1,164,249) $ (447,712)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation 122,498 --
Write-off of organization costs -- 56,572
Provision for loan losses 201,050 --
Increase in interest receivable (123,764) --
Increase in interest payable 42,363 24,090
Other operating activities (61,966) 62,172
------------ ------------
Net cash used in operating activities (984,068) (304,878)
------------ ------------
INVESTING ACTIVITIES
Purchases of securities available-for-sale (2,499,349) --
Net increase in Federal funds sold (1,315,000) --
Net increase in loans (16,844,613) --
Purchase of premises and equipment (602,823) (1,718,617)
------------ ------------
Net cash used in investing activities (21,261,785) (1,718,617)
------------ ------------
FINANCING ACTIVITIES
Net increase in deposits 16,915,029 --
Proceeds from (repayment of) notes payable (2,125,704) 2,125,704
Repayment of advances from organizers -- (57,698)
Net proceeds from sale of common stock 2,934,374 6,018,784
------------ ------------
Net cash provided by financing activities 17,723,699 8,086,790
------------ ------------
Net increase (decrease) in cash and due from banks (4,522,154) 6,063,295
Cash and due from banks at beginning of year 6,063,295 --
------------ ------------
Cash and due from banks at end of year $ 1,541,141 $ 6,063,295
============ ============
SUPPLEMENTAL DISCLOSURE
Cash paid for interest $ 249,499 $ 31,356
NONCASH TRANSACTIONS
Unrealized losses on securities available-for-sale $ 71,604 $ --
Transfer of subscribers' deposits to common stock $ 6,061,784 $ --
</TABLE>
See Notes to Financial Statements.
F-9
<PAGE>
NORTH GEORGIA NATIONAL BANK
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
North Georgia National Bank (the "Bank") is a commercial bank
located in Calhoun, Gordon County, Georgia. The Bank provides a
full range of banking services in its primary market area of
Gordon County and the surrounding counties. The Bank commenced its
banking operations on February 10, 1999.
Basis of Presentation
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosures of contingent assets and
liabilities as of the balance sheet date and the reported amounts
of revenues and expenses during the reporting period. Actual
results could differ from those estimates. Material estimates that
are particularly susceptible to significant change in the near
term relate to the determination of the allowance for loan losses
and deferred tax assets.
Cash and Due From Banks
Cash on hand, cash items in process of collection, and amounts due
from banks are included in cash and due from banks.
The bank maintains amounts due from banks which, at times, may
exceed Federally insured limits. The Bank has not experienced any
losses in such accounts.
Securities
Securities are classified based on management's intention on the
date of purchase. Securities which management has the intent and
ability to hold to maturity are classified as held-to-maturity and
recorded at amortized cost. All other debt securities are
classified as available-for-sale and recorded at fair value with
net unrealized gains and losses reported in other comprehensive
income (loss). Equity securities without a readily determinable
fair value are classified as available-for-sale and recorded at
cost.
Interest and dividends on securities, including amortization of
premiums and accretion of discounts, are included in interest
income. Realized gains and losses from the sale of securities are
determined using the specific identification method.
F-10
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Loans
Loans are reported at their outstanding principal balances less
unearned fees and the allowance for loan losses. Interest income
is accrued based on the principal balance outstanding.
Nonrefundable loan fees and certain direct loan origination costs
are deferred and recognized in income over the life of the loans.
The allowance for loan losses is maintained at a level that
management believes to be adequate to absorb potential losses in
the loan portfolio. Loan losses are charged against the allowance
when management believes the uncollectibility of a loan is
confirmed. Subsequent recoveries are credited to the allowance.
Management's determination of the adequacy of the allowance is
based on an evaluation of the portfolio, current economic
conditions, volume, growth, composition of the loan portfolio, and
other risks inherent in the portfolio. This evaluation is
inherently subjective as it requires material estimates that are
susceptible to significant change including the amounts and timing
of future cash flows expected to be received on impaired loans. In
addition, regulatory agencies, as an integral part of their
examination process, will periodically review the Bank's allowance
for loan losses, and may require the Bank to record additions to
the allowance based on their judgment about information available
to them at the time of their examinations.
The accrual of interest on loans is discontinued when, in
management's opinion, the borrower may be unable to meet payments
as they become due. When accrual of interest is discontinued, all
unpaid accrued interest is reversed. Interest income is
subsequently recognized only to the extent cash payments are
received.
A loan is impaired when it is probable the Bank will be unable to
collect all principal and interest payments due in accordance with
the contractual terms of the loan agreement. Individually
identified impaired loans are measured based on the present value
of payments expected to be received, using the contractual loan
rate as the discount rate. Alternatively, measurement may be based
on observable market prices or, for loans that are solely
dependent on the collateral for repayment, measurement may be
based on the fair value of the collateral. If the recorded
investment in the impaired loan exceeds the measure of fair value,
a valuation allowance is established as a component of the
allowance for loan losses. Changes to the valuation allowance are
recorded as a component of the provision for loan losses.
F-11
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Premises and Equipment
Land is carried at cost. Premises and equipment are carried at
cost less accumulated depreciation. Depreciation is computed
principally by the straight-line method over the estimated useful
lives of the assets.
Income Taxes
Income tax expense consists of current and deferred taxes. Current
income tax provisions approximate taxes to be paid or refunded for
the applicable year. Deferred income tax assets and liabilities
are determined using the balance sheet method. Under this method,
the net deferred tax asset or liability is determined based on the
tax effects of the differences between the book and tax bases of
the various balance sheet assets and liabilities and gives current
recognition to changes in tax rates and laws.
Recognition of deferred tax balance sheet amounts is based on
management's belief that it is more likely than not that the tax
benefit associated with certain temporary differences, tax
operating loss carryforwards and tax credits will be realized. A
valuation allowance is recorded for those deferred tax items for
which it is more likely than not that realization will not occur
in the near term.
Losses Per Common Share
Basic losses per common share for the year ended December 31, 1999
are computed by dividing net loss by the weighted average number
of shares of common stock outstanding. Diluted losses per common
share for the year ended December 31, 1999 are computed by
dividing net loss by the sum of the weighted-average number of
shares of common stock outstanding and potential common shares.
Potential common shares consist of stock options. Losses per
common share for the year ended December 31, 1998 are computed by
dividing net loss by the number of common shares sold in the
Bank's initial public offering (700,000 shares).
F-12
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Cumulative Effect of a Change in Accounting Principle
In April of 1998, the Accounting Standards Executive Committee
issued Statement of Position ("SOP") 98-5, "Reporting on the Costs
of Start Up Activities". SOP 98-5 requires that costs of start-up
activities and organization costs be expensed as incurred. SOP
98-5 became effective for financial statements for fiscal years
beginning after December 15, 1998. However, early adoption was
encouraged for fiscal years in which financial statements had not
been issued. During 1998, the Bank wrote off $56,572 of
unamortized organization costs upon adoption of SOP 98-5. Prior to
the adoption of SOP 98-5, the Bank had capitalized all
organization costs with the intent of amortizing the costs over a
five year period upon commencement of banking operations.
Comprehensive Income
Statement of Financial Accounting Standards ("SFAS") No. 130,
("Reporting Comprehensive Income"), describes comprehensive income
as the total of all components of comprehensive income, including
net income. Other comprehensive income refers to revenues,
expenses, gains and losses that under generally accepted
accounting principles are included in comprehensive income but
excluded from net income. Currently, the Bank's other
comprehensive income consists of unrealized gains and losses on
available-for-sale securities.
F-13
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued SFAS
No. 133, "Accounting for Derivative Instruments and Hedging
Activities". The effective date of this statement has been
deferred by SFAS No. 137 until fiscal years beginning after June
15, 2000. However, the statement permits early adoption as of the
beginning of any fiscal quarter after its issuance. The Bank
expects to adopt this statement effective January 1, 2001. SFAS
No. 133 requires the Bank to recognize all derivatives as either
assets or liabilities in the balance sheet at fair value. For
derivatives that are not designated as hedges, the gain or loss
must be recognized in earnings in the period of change. For
derivatives that are designated as hedges, changes in the fair
value of the hedged assets, liabilities, or firm commitments must
be recognized in earnings or recognized in other comprehensive
income until the hedged item is recognized in earnings, depending
on the nature of the hedge. The ineffective portion of a
derivative's change in fair value must be recognized in earnings
immediately. Management has not yet determined what effect the
adoption of SFAS No. 133 will have on the Bank's earnings or
financial position.
There are no other recent accounting pronouncements that have had,
or are expected to have, a material effect on the Bank's financial
statements.
NOTE 2. SECURITIES
The amortized cost and fair value of securities are summarized as
follows:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Securities
Available-for-Sale
December 31, 1999:
U. S. Government
and agency securities $ 2,245,849 $ -- $ (71,604) $ 2,174,245
Equity securities 253,500 -- -- 253,500
----------- ----------- ----------- -----------
$ 2,499,349 $ -- $ (71,604) $ 2,427,745
=========== =========== =========== ===========
</TABLE>
F-14
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 2. SECURITIES (Continued)
The amortized cost and fair value of securities as of December 31,
1999 by contractual maturity are shown below. Equity securities are
not included in the maturity categories in the following summary.
Securities
Available-for-Sale
-----------------------
Amortized Fair
Cost Value
---------- ----------
Due from one year to five years $2,245,849 $2,174,245
Equity securities 253,500 253,500
---------- ----------
$2,499,349 $2,427,745
========== ==========
Securities with a carrying value of $715,000 at December 31, 1999
were pledged to secure public deposits and for other purposes.
NOTE 3. LOANS AND ALLOWANCE FOR LOAN LOSSES
The composition of loans at December 31, 1999 is summarized as
follows:
Commercial $ 7,931,267
Real estate - construction 253,411
Real estate - mortgage 5,521,578
Consumer, instalment and other 3,153,970
------------
16,860,226
Unearned fees (16,663)
Allowance for loan losses (200,000)
------------
Loans, net $ 16,643,563
============
F-15
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 3. LOANS AND ALLOWANCE FOR LOAN LOSSES (Continued)
Changes in the allowance for loan losses for the year ended December
31, 1999 are as follows:
Balance, beginning of year $ --
Provision for loan losses 201,050
Loans charged off (1,050)
Recoveries of loans previously charged off --
---------
Balance, end of year $ 200,000
=========
Management has identified no material amounts of impaired loans as
defined by SFAS No. 114, ("Accounting by Creditors for Impairment of
a Loan"), as of December 31, 1999.
The Bank has granted loans to certain directors, executive officers,
and their related entities. The interest rates on these loans were
substantially the same as rates prevailing at the time of the
transaction and repayment terms are customary for the type of loan
involved. Changes in related party loans for the year ended December
31, 1999 are as follows:
Balance, beginning of year $ --
Advances 490,923
Repayments (33,649)
---------
Balance, end of year $ 457,274
=========
NOTE 4. PREMISES AND EQUIPMENT
Premises and equipment are summarized as follows:
December 31,
--------------------------
1999 1998
----------- -----------
Land $ 500,000 $ 500,000
Building and land improvements 989,265 --
Equipment 832,175 --
Construction and equipment
installation in progress -- 1,218,617
----------- -----------
2,321,440 1,718,617
Accumulated depreciation (122,498) --
----------- -----------
$ 2,198,942 $ 1,718,617
=========== ===========
F-16
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 5. DEPOSITS
At December 31, 1999, the scheduled maturities of time deposits are
as follows:
2000 $ 5,606,178
2001 84,778
-----------
$ 5,690,956
===========
At December 31, 1999, the Bank had related party deposits of
$303,832.
NOTE 6. NOTES PAYABLE
Notes payable at December 31, 1998 consisted of lines of credit
totaling $2,500,000 which were used to fund the purchase of premises
and equipment and offering/preopening costs. The notes payable
accrued interest at prime, and were repaid with proceeds from the
Bank's initial public offering.
NOTE 7. EMPLOYEE BENEFIT PLANS
The Bank has a savings incentive retirement plan covering all
employees. Contributions to the plan charged to expense during 1999
and 1998 amounted to $4,114 and $ --, respectively.
The Bank has an incentive stock option plan with 400,000 shares of
common stock reserved for options to key employees. Options may be
granted at prices equal to the fair market value of the shares at
the date of grant and are exercisable as determined by the Bank's
Board of Directors. The options expire ten years from the date of
grant. Other pertinent information related to the options is as
follows:
F-17
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 7. EMPLOYEE BENEFIT PLANS (Continued)
Year Ended
December 31,
-----------------
1999
-----------------
Weighted-
average
Exercise
Number Price
------- ------
Under option, beginning of year -- $ --
Granted 111,000 10.00
Exercised -- --
Terminated -- --
-------
Under option, end of year 111,000 10.00
=======
Exercisable, end of year 76,000
=======
Weighted average remaining contractual life 10
=======
Weighted average fair value of
options granted during the year $ 3.58
=======
As permitted by SFAS No. 123, ("Accounting for Stock-Based
Compensation"), the Bank recognizes compensation cost for
stock-based employee compensation awards in accordance with APB
Opinion No. 25, ("Accounting for Stock Issued to Employees"). The
Bank recognized no compensation for stock-based employee
compensation awards for the year ended December 31, 1999. If the
Bank had recognized compensation cost in accordance with SFAS No.
123, net loss and losses per share would have been increased as
follows:
Year Ended December 31,
-----------------------
1999
-----------------------
Basic
and
Diluted
Losses
Net Loss Per Share
----------- --------
As reported $(1,162,249 $ (1.66)
Stock-based compensation, net
of related tax (179,524) (0.26)
effect
----------- --------
As adjusted $(1,341,773) $ (1.92)
=========== ========
F-18
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 7. EMPLOYEE BENEFIT PLANS (Continued)
The fair value of the options granted during the year was based upon
the Black-Scholes method of valuing options using the following
weighted-average assumptions:
Risk-free interest rate 6.47%
Expected life of the options 7 Years
Expected dividends (as a percent
of the fair value of the stock) 0%
Volatility 0%
NOTE 8. INCOME TAXES
Income tax expense consists of the following:
Years Ended December 31,
------------------------
1999 1998
--------- ---------
Current $(358,265) $ (18,852)
Deferred (29,572) (133,370)
Change in valuation allowance 387,837 152,222
--------- ---------
Income tax expense $ -- $ --
========= =========
The Bank's income tax expense differs from the amounts computed by
applying the Federal income tax statutory rates to income before
income taxes. A reconciliation of the differences is as follows:
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------------------------
1999 1998
---------------------- -------------------
Amount Percent Amount Percent
--------- --------- --------- -------
<S> <C> <C> <C> <C>
Income taxes at statutory rate $(395,845) (34)% $(152,222) (34)%
Other items 8,008 1 -- --
Change in valuation allowance 387,837 33 152,222 34
--------- --------- --------- ------
Income tax expense $ -- -- % $ -- -- %
========= ========= ========= ======
</TABLE>
F-19
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 8. INCOME TAXES (Continued)
The components of deferred income taxes are as follows:
December 31,
----------------------
1999 1998
--------- ---------
Deferred tax assets:
Loan loss reserves $ 27,800 $ --
Preopening and organizational expenses 130,620 133,370
Loan fees 5,665 --
Net operating loss carryforward 377,500 19,235
Other 8,837 --
Securities available-for-sale 24,345 --
--------- ---------
574,767 152,605
Valuation allowance (564,787) (152,605)
--------- ---------
9,980 --
--------- ---------
Deferred tax liabilities; depreciation 9,980 --
--------- ---------
Net deferred taxes $ -- $ --
========= =========
At December 31, 1999, the Bank has available net operating loss
carryforwards of approximately $1,100,000 for Federal income tax
purposes. If unused, the carryforwards will expire beginning in
2013.
NOTE 9. LOSSES PER COMMON SHARE
The following is a reconciliation of net loss and weighted-average
shares outstanding used in determining basic and diluted losses per
common share (LPS):
Year Ended December 31, 1999
-------------------------------------------
Net Weighted-Average Per share
Loss Shares Amount
----------- ---------------- ------
Basic LPS $(1,164,249) 700,466 $(1.66)
======
Effect of Dilutive
Securities
Stock options -- --
----------- -----------
Diluted LPS $(1,164,249) 700,466 $(1.66)
=========== =========== ======
F-20
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 9. LOSSES PER COMMON SHARE (Continued)
Because the exercise price of the stock options approximate the fair
value of the Company's common stock, the stock options have no
dilutive effect.
NOTE 10. COMMITMENTS AND CONTINGENT LIABILITIES
In the normal course of business, the Bank has entered into
off-balance-sheet financial instruments which are not reflected in
the financial statements. These financial instruments include
commitments to extend credit and standby letters of credit. Such
financial instruments are included in the financial statements when
funds are disbursed or the instruments become payable. These
instruments involve, to varying degrees, elements of credit risk in
excess of the amount recognized in the balance sheet.
The Bank's exposure to credit loss in the event of nonperformance by
the other party to the financial instrument for commitments to
extend credit and standby letters of credit is represented by the
contractual amount of those instruments. A summary of the Bank's
commitments at December 31, 1999 is as follows:
Commitments to extend credit $6,258,985
Standby letters of credit 62,535
----------
$6,321,520
==========
Commitments to extend credit generally have fixed expiration dates
or other termination clauses and may require payment of a fee. Since
many of the commitments are expected to expire without being drawn
upon, the total commitment amounts do not necessarily represent
future cash requirements. The credit risk involved in issuing these
financial instruments is essentially the same as that involved in
extending loans to customers. The Bank evaluates each customer's
creditworthiness on a case-by-case basis. The amount of collateral
obtained, if deemed necessary by the Bank upon extension of credit,
is based on management's credit evaluation of the customer.
Collateral held varies but may include real estate and improvements,
marketable securities, accounts receivable, inventory, equipment,
and personal property.
Standby letters of credit are conditional commitments issued by the
Bank to guarantee the performance of a customer to a third party.
Those guarantees are primarily issued to support public and private
borrowing arrangements. The credit risk involved in issuing letters
of credit is essentially the same as that involved in extending
loans to customers. Collateral held varies as specified above and is
required in instances which the Bank deems necessary.
F-21
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 10. COMMITMENTS AND CONTINGENT LIABILITIES (Continued)
In the normal course of business, the Bank is involved in various
legal proceedings. In the opinion of management of the Bank, any
liability resulting from such proceedings would not have a material
effect on the Bank's financial statements.
NOTE 11. CONCENTRATIONS OF CREDIT
The Bank originates primarily commercial, residential, and consumer
loans to customers in Gordon County and surrounding counties. The
ability of the majority of the Company's customers to honor their
contractual loan obligations is dependent on the economy in these
areas. Forty-seven percent of the Company's loan portfolio is
concentrated in commercial loans. The other significant
concentrations of credit by type of loan are set forth in Note 3.
The Bank, as a matter of policy, does not generally extend credit to
any single borrower or group of related borrowers in excess of 15%
of the Bank's capital and surplus as defined by the Office of the
Comptroller of the Currency, or approximately $1,131,000.
NOTE 12. REGULATORY MATTERS
The Bank is subject to certain restrictions on the amount of
dividends that may be declared without prior regulatory approval. At
December 31, 1999, no dividends could be declared without regulatory
approval.
The Bank is subject to various regulatory capital requirements
administered by the federal banking agencies. Failure to meet
minimum capital requirements can initiate certain mandatory, and
possibly additional discretionary actions by regulators that, if
undertaken, could have a direct material effect on the financial
statements. Under capital adequacy guidelines and the regulatory
framework for prompt corrective action, the Bank must meet specific
capital guidelines that involve quantitative measures of the assets,
liabilities, and certain off-balance-sheet items as calculated under
regulatory accounting practices. The capital amounts and
classification are also subject to qualitative judgments by the
regulators about components, risk weightings, and other factors.
Quantitative measures established by regulation to ensure capital
adequacy require the Bank to maintain minimum amounts and ratios of
Total and Tier I capital to risk-weighted assets and of Tier I
capital to average assets. Management believes, as of December 31,
1999, the Bank met all capital adequacy requirements to which it is
subject.
F-22
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 12. REGULATORY MATTERS (Continued)
As of December 31, 1999, the most recent notification from the
Federal Deposit Insurance Corporation categorized the Bank as well
capitalized under the regulatory framework for prompt corrective
action. To be categorized as well capitalized, the Bank must
maintain minimum Total risk-based, Tier I risk-based, and Tier I
leverage ratios as set forth in the following table. There are no
conditions or events since that notification that management
believes have changed the Bank's category.
The Bank's actual capital amounts and ratios as of December 31, 1999
are presented in the following table:
<TABLE>
<CAPTION>
To Be Well
Capitalized
Under
For Capital Prompt
Adequacy Corrective
Actual Purposes Action
Provisions
------------------ -------------- ----------------
Amount Ratio Amount Ratio Amount Ratio
--------- ------- ------- ----- --------- -----
(Dollars in Thousands)
----------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total Capital to Risk
Weighted Assets: $ 7,540 39.62% $1,523 8% $ 1,904 10%
Tier I Capital to Risk
Weighted Assets: $ 7,340 38.57% $ 762 4% $ 1,142 6%
Tier I Capital to Average Assets: $ 7,340 36.08% $ 814 4% $ 1,018 5%
</TABLE>
NOTE 13. COMMON STOCK OFFERING
The Bank is currently involved in a private placement memorandum
offering to sell up to 475,000 shares of its common stock at $12 per
share. As of December 31, 1999, 149,800 shares of stock had been
sold under this offering.
F-23
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 14. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used by the Bank in
estimating its fair value disclosures for financial instruments. In
cases where quoted market prices are not available, fair values are
based on estimates using discounted cash flow models. Those models
are significantly affected by the assumptions used, including the
discount rates and estimates of future cash flows. In that regard,
the derived fair value estimates cannot be substantiated by
comparison to independent markets and, in many cases, could not be
realized in immediate settlement of the instrument. The use of
different methodologies may have a material effect on the estimated
fair value amounts. Also, the fair value estimates presented herein
are based on pertinent information available to management as of
December 31, 1999 and 1998. Such amounts have not been revalued for
purposes of these financial statements since those dates and,
therefore, current estimates of fair value may differ significantly
from the amounts presented herein.
Cash, Due From Banks, and Federal Funds Sold:
The carrying amounts of cash, due from banks, and Federal funds
sold approximate their fair value.
Securities:
Fair values for securities are based on available quoted market
prices. The carrying values of equity securities with no readily
determinable fair value approximate fair values.
Loans:
For variable-rate loans that reprice frequently and have no
significant change in credit risk, fair values are based on
carrying values. For other loans, the fair values are estimated
using discounted cash flow models, using current market interest
rates offered for loans with similar terms to borrowers of similar
credit quality. Fair values for impaired loans are estimated using
discounted cash flow models or based on the fair value of the
underlying collateral.
Deposits:
The carrying amounts of demand deposits, savings deposits, and
variable-rate certificates of deposit approximate their fair
values. Fair values for fixed-rate certificates of deposit are
estimated using discounted cash flow models, using current market
interest rates offered on certificates with similar remaining
maturities.
F-24
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 13. FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)
Notes Payable:
The carrying value of notes payable approximates their fair value.
Accrued Interest:
The carrying amounts of accrued interest approximate their fair
values.
Off-Balance Sheet Instruments:
The fair values of the Bank's off-balance-sheet financial
instruments are based on fees charged to enter into similar
agreements. However, commitments to extend credit and standby
letters of credit do not represent a significant value to the Bank
until such commitments are funded. The Bank has determined that
these instruments do not have a distinguishable fair value and no
fair value has been assigned.
The carrying amounts and estimated fair values of the Bank's
financial instruments were as follows:
<TABLE>
<CAPTION>
December 31, 1999 December 31, 1998
------------------------ -------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
---------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Financial assets:
Cash, due from banks,
and Federal funds sold $ 2,856,141 $ 2,856,141 $ 6,063,295 $ 6,063,295
Securities available-for-sale 2,427,745 2,427,745 -- --
Loans 16,643,563 16,700,000 -- --
Accrued interest receivable 123,764 123,764 -- --
Financial liabilities:
Deposits 16,915,029 16,924,073 -- --
Accrued interest payable 66,453 66,453 24,090 24,090
Notes payable -- -- 2,125,704 2,125,704
</TABLE>
F-25
<PAGE>
APPENDIX A
AGREEMENT AND PLAN OF SHARE EXCHANGE
BETWEEN
NORTH GEORGIA NATIONAL BANK
AND
NORTH GEORGIA COMMUNITY FINANCIAL PARTNERS, INC
DATED AS OF MARCH 3, 2000
A-1
<PAGE>
AGREEMENT AND PLAN OF SHARE EXCHANGE
THIS AGREEMENT AND PLAN OF SHARE EXCHANGE (the "Plan"), made and entered
into as of the 3rd day of March, 2000, between NORTH GEORGIA NATIONAL BANK (the
"Bank"), a national bank organized under the laws of the United States, and
NORTH GEORGIA COMMUNITY FINANCIAL PARTNERS, INC. (the "Company"), a Georgia
corporation.
WITNESSETH
WHEREAS, the Board of Directors of the Bank has determined that it is in
the best interest of the Bank and its Shareholders to reorganize the Bank into a
one-bank holding company structure and, by resolutions duly adopted, has
approved the reorganization and all transactions related to the reorganization;
WHEREAS, the Boards of Directors of the Bank and the Company have
determined that it is in the best interests of the Bank and the Company, and
their respective shareholders, that the reorganization of the Bank be
accomplished by an exchange of all of the outstanding shares of Bank Common
Stock for shares of Company Common Stock (the "Share Exchange") and, by
resolutions duly adopted, have approved and adopted this Plan and directed that
it be submitted to the shareholders of the Bank and the Company for their
approval;
WHEREAS, the principal offices of the Bank and the Company are located at
350 West Belmont Drive, Calhoun, Georgia 30701;
WHEREAS, the authorized capital stock of the Bank consists of 5,000,000
shares of common stock ("Bank Common Stock"), $5.00 par value, of which
902,917 shares are issued and outstanding;
WHEREAS, the authorized capital stock of the Company consists of
12,000,000 shares of stock, including 10,000,000 shares of common stock
("Company Common Stock"), no par value, of which one share is issued and
outstanding, and 2,000,000 shares of preferred stock ("Company Preferred
Stock"), no par value, none of which are issued and outstanding; and
WHEREAS, the Board of Directors of the Company, by resolutions duly
adopted, has approved the issuance of the shares of Company Common Stock which
the shareholders of the Bank will receive upon consummation of the
reorganization and the Share Exchange as herein provided;
NOW, THEREFORE, in consideration of the premises, mutual covenants and
agreements herein contained, and for the purpose of stating the method, terms
and conditions of the transactions provided for herein, the mode of carrying the
same into effect, the manner and basis of exchanging the shares of Bank Common
Stock for Company Common Stock as hereinafter provided, and such other
provisions relating to the transactions as the parties deem necessary or
desirable, the parties hereto agree as follows:
A-2
<PAGE>
SECTION 1
REORGANIZATION
The reorganization of the Bank into a one-bank holding company shall be
accomplished pursuant to the provisions of Section 14-2-1102 of the Georgia
Business Corporations Code. The Company shall acquire all of the outstanding
shares of the Bank through a Share Exchange, thereby effecting the
reorganization of the Bank into a one-bank holding company structure. The
Company will be the acquiring corporation and the Bank will be the entity whose
shares will acquired.
SECTION 2
EFFECTIVE DATE OF THE REORGANIZATION
The Share Exchange and the reorganization of the Bank into a one-bank
holding company structure shall be effective as of the date specified in the
certificate of share exchange to be issued by the Georgia Secretary of State in
accordance with the applicable provisions of Section 14-2-1105 of the Georgia
Business Corporations Code (the "Effective Date of the Reorganization").
Because the Share Exchange will effect the reorganization of the Bank into
a one-bank holding company structure, such Share Exchange and reorganization,
collectively, shall hereinafter be referred to as the "Reorganization."
SECTION 3
LOCATION, ARTICLES AND BYLAWS, MANAGEMENT
AND CAPITAL STRUCTURE OF THE COMPANY AND THE BANK
On the Effective Date of the Reorganization:
(a) The principal office of the Company and the Bank shall be located at
350 West Belmont Drive, Calhoun, Georgia 30701, or such other location where
they are located immediately prior to the Effective Date of the Reorganization.
(b) The Articles of Incorporation and Bylaws of the Company shall be the
same as the Articles of Incorporation and Bylaws of the Company in effect
immediately prior to the Effective Date of the Reorganization.
(c) The directors and officers of the Company shall be the directors and
officers of the Company immediately prior to the Effective Date of the
Reorganization. All such directors and officers of the Company shall serve until
their respective successors are elected or appointed pursuant to the Bylaws of
the Company.
(d) The Articles of Association and Bylaws of the Bank shall be the same
as the Articles of Association and Bylaws of the Bank in effect immediately
prior to the Effective Date of the Reorganization.
A-3
<PAGE>
(e) The directors and officers of the Bank shall be the directors and
officers of the Bank immediately prior to the Effective Date of the
Reorganization. All such directors and officers of the Bank shall serve until
their respective successors are elected or appointed pursuant to the Bylaws of
the Bank.
(f) The capital structure of the Bank shall not be altered or amended by
the Reorganization and shall continue in effect on and after the Effective Date
of the Reorganization.
(g) As of the Effective Date of the Reorganization, the Company shall
assume sponsorship of, and shall be the successor to the Bank with respect to
all of the Bank's rights, duties and obligations under, the North Georgia
National Bank 1999 Stock Incentive Plan (the "Stock Incentive Plan"), and the
number of shares of Company Common Stock reserved under the Stock Incentive Plan
shall be equal to the number of shares of Bank Common Stock reserved under the
Stock Incentive Plan.
SECTION 4
EXISTENCE, RIGHTS, DUTIES, ASSETS
AND LIABILITIES OF THE BANK
(a) As of the Effective Date of the Reorganization, the existence of Bank
as a separate entity shall continue.
(b) As of the Effective Date of the Reorganization, the Bank shall have
the authority to engage only in such businesses and to exercise only such powers
as are then permissible upon the original organization of a national bank under
the law of the United States and as are provided for in the Articles of
Association of the Bank, and the Bank shall be subject to the same prohibitions
and limitations to which it would be subject upon original organization, except
that the Bank may engage in any business and may exercise any right that the
Bank could lawfully have exercised or engaged in immediately prior to the
Effective Date of the Reorganization.
(c) Except as provided in Section 4(d) below, no liability of the Bank or
of any of its shareholders, directors or officers shall be affected by the
Reorganization, nor shall any lien on any property of the Bank be impaired by
the Reorganization. Any claim existing or any action pending by or against the
Bank may be prosecuted to judgment as if the Reorganization had not taken place.
SECTION 5
MANNER AND BASIS OF EXCHANGING SHARES OF BANK COMMON STOCK
The manner and basis of exchanging shares of Bank Common Stock for shares
of Company Common Stock, excluding those shares of Bank Common Stock held by
shareholders who have perfected their dissenters' rights under the applicable
provisions of the Georgia
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Business Corporations Code, O.C.G.A. ss. 14-2-1301 et seq., as modified by the
provisions of Section 6(b) of this Plan (together, the "Dissenters' Rights
Provisions"), shall be as follows:
(a) Exchange Ratio.
(i) Each share of Bank Common Stock outstanding immediately prior to
the Effective Date of the Reorganization shall, by virtue of the
Reorganization and without any action on the part of the holder or holders
thereof, be converted into one share of Company Common Stock.
(ii) Each option to purchase Bank Common Stock outstanding under the
Stock Incentive Plan immediately prior to the Effective Date of the
Reorganization (and which by its terms does not lapse on or before the
Effective Date of the Reorganization) whether or not then exercisable,
shall be converted into and become options to purchase Company Common
Stock and the Company will assume each option in accordance with the terms
of the Stock Incentive Plan and option agreements, except that from and
after the Effective Date of the Reorganization:
o the Company shall be substituted for the Bank as administrator
of the Stock Incentive Plan;
o each option assumed by the Company may be exercised solely for
shares of Company Common Stock, and
o the number of shares of Company Common Stock subject to each
option shall be equal to the number of shares of Bank Common
Stock subject to such option immediately prior to the
Effective Date of the Reorganization.
(b) Rights of Holders of Certificates for Bank Common Stock. As of the
Effective Date of the Reorganization, each certificate theretofore representing
one or more outstanding shares of Bank Common Stock shall be deemed for all
corporate purposes to evidence only the right to receive a certificate
representing an equal number of shares of Company Common Stock in accordance
with this Plan.
(c) Letter of Transmittal. Unless the parties otherwise agree, within
three business days after the Effective Date of the Reorganization, the Bank
shall mail a letter of transmittal to all holders of certificates for Bank
Common Stock. Upon receipt of the letter of transmittal, each holder of a
certificate or certificates theretofore representing shares of Bank Common Stock
shall surrender such certificates to the Bank, as exchange agent, together with
a properly completed and signed letter of transmittal, and shall receive in
exchange therefor, as set forth in (a) above, a certificate representing an
equal number of shares of Company Common Stock, subject to the restrictions and
conditions of this Plan.
(d) Failure to Surrender Bank Common Stock Certificates. Until the holder
surrenders his or her Bank Common Stock certificate or certificates to the Bank
(or suitable arrangements are made to account for any lost, stolen or destroyed
certificates according to the Bank's usual procedures), the holder:
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(i) shall not be issued a certificate representing the shares of
Company Common Stock which such Bank Common Stock certificate may entitle
the holder to receive;
(ii) shall not have any voting rights in respect of the shares of
Company Common Stock which such Bank Common Stock certificate may entitle
the holder to receive; and
(iii) shall not be paid dividends or other distributions in respect
of the shares of Company Common Stock which such Bank Common Stock
certificate may entitle the holder to receive; instead such dividends or
distributions shall be retained, without interest, for the holder's
account until he or she surrenders such Bank Common Stock certificate.
SECTION 6
ACQUISITION OF DISSENTERS' BANK COMMON STOCK
The Bank shall establish an escrow account (the "Escrow Account") and
transfer from its funds, prior to the Effective Date of the Reorganization, cash
sufficient to pay any dissenters as follows:
(a) The Bank shall pay any holder of Bank Common Stock certificates who
fully complies with the Dissenters' Rights Provisions cash from the Escrow
Account, in an amount to be determined under such provisions, for his or her
shares of Bank Common Stock. Any cash remaining in the Escrow Account, after
payment to all holders of Bank Common Stock certificates who fully comply with
the Dissenters' Rights Provisions, shall be returned to the Bank. The shares of
Bank Common Stock so acquired by the Bank shall be cancelled.
(b) Dissenters' Rights Provisions at O.C.G.A. ss.14-2-1331 authorize the
court, under certain circumstances, to assess court costs and counsel fees for
an appraisal proceeding against the dissenters. In lieu of and as substitution
for the provisions of O.C.G.A. ss.14-2-1331, the Bank hereby agrees to pay the
costs of any judicial appraisal that may result from a demand for payment
pursuant to the Dissenters Rights Provisions. The Bank also hereby agrees to pay
the costs of arbitration of any unsettled demand for payment made pursuant to
the Dissenters' Rights Provisions if the appropriate court refuses jurisdiction
of an appraisal proceeding.
SECTION 7
REDEMPTION OF COMPANY COMMON STOCK
As soon as practicable after the Effective Date of the Reorganization, the
Company shall redeem any shares of Company Common Stock which may have been
issued prior to the Effective Date of the Reorganization at a redemption price
equal to the same consideration paid for such shares, so that immediately after
such redemption the then outstanding shares of Company Common Stock shall
consist solely of the shares to be issued by the Holding Company upon the
exchange of shares of Bank Common Stock as provided herein.
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SECTION 8
CONDITIONS PRECEDENT TO CONSUMMATION OF THE REORGANIZATION
This Plan is subject to, and consummation of the Reorganization herein
provided for is conditioned upon, the fulfillment prior to the Effective Date of
the Reorganization of each of the following conditions:
(a) Approval of the Plan by the affirmative vote of the holders of at
least two-thirds of the outstanding voting shares of the Bank;
(b) The number of shares held by persons who have perfected dissenters'
rights of appraisal pursuant to the Dissenters' Rights Provisions shall not be
deemed by the parties hereto to make consummation of this Plan inadvisable;
(c) Procurement of all consents of, filings and registrations with, and
notifications to all regulatory authorities required for consummation of the
transactions contemplated by this Plan, and expiration of all waiting periods
required by law;
(d) Procurement of any action, consent, approval or ruling, governmental
or otherwise, which is, or in the opinion of counsel for the Bank may be,
necessary to permit or enable the Bank, upon and after the Reorganization, to
conduct all or any part of the business and activities conducted by the Bank
prior to the Reorganization; and
(e) The receipt by the Bank of a written opinion of special counsel to the
Bank that for federal income tax purposes, no gain or loss will be recognized by
a Bank shareholder who exchanges his or her Bank Common Stock for Company Common
Stock, as provided by this Plan.
SECTION 9
TERMINATION
In the event that:
(a) The number of shares of Bank Common Stock voted against the
Reorganization shall make consummation of the Reorganization inadvisable in the
opinion of the Board of Directors of the Bank or the Company;
(b) Any action, suit, proceeding or claim has been instituted, made or
threatened relating to the proposed Reorganization which shall make consummation
of the Reorganization inadvisable in the opinion of the Board of Directors of
the Bank or the Company;
(c) Any action, consent, approval, opinion, or ruling required to be
provided by Section 8 of this Plan shall not have been obtained; or
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(d) For any other reason, consummation of the Reorganization is deemed
inadvisable in the opinion of the Board of Directors of the Bank or the Company;
then this Plan may be terminated at any time before consummation of the
Reorganization, by written notice, approved or authorized by the Board of
Directors of the party wishing to terminate, to the other party. Upon
termination by written notice as provided by this Section 9, this Plan shall be
void and of no further effect, and there shall be no liability by reason of this
Plan or the termination hereof on the part of the Bank, the Company or their
directors, officers, employees, agents or shareholders.
SECTION 10
AMENDMENT; WAIVER
(a) At any time before or after approval and adoption hereof by the
respective shareholders of the Bank and the Company, this Plan may be amended by
agreement among the Bank and the Company; provided, however, that after the
approval and adoption of this Plan by the shareholders of the Bank, no amendment
reducing the consideration payable to Bank shareholders pursuant to Section 5(a)
hereof shall be valid without having been approved by the shareholders of the
Bank in the manner required for approval of this Plan.
(b) A waiver by any party hereto of any breach of a term or condition of
this Plan shall not operate as a waiver of any other breach of such term or
condition or of other terms or conditions, nor shall failure to enforce any term
or condition operate as a waiver or release of any other right, in law or in
equity, or claim which any party may have against another party for anything
arising out of, connected with or based upon this Plan. A waiver shall be
effective only if evidenced by a writing signed by the party who is entitled to
the benefit of the term or condition of this Plan which is to be waived. A
waiver of a term or condition on one occasion shall not be deemed to be a waiver
of the same or of any other term or condition on a future occasion.
SECTION 11
BINDING EFFECT; COUNTERPARTS; HEADINGS; GOVERNING LAW
This Plan is binding upon the parties hereto and upon their successors and
assigns. This Plan may be executed simultaneously in any number of counterparts,
each of which shall be deemed an original, but all of which shall constitute one
and the same instrument. The title of this Plan and the headings herein set out
are for convenience or reference only and shall not be deemed a part of this
Plan. This Plan shall be governed by and construed in accordance with the laws
of the State of Georgia.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have caused this Plan of
Reorganization to be executed by their duly authorized officers and their bank
and corporate seals to be affixed hereto all as of the day and year first above
written.
NORTH GEORGIA NATIONAL BANK
[BANK SEAL]
By: /s/ David J. Lance
----------------------------------
David J. Lance
President
ATTEST:
/s/ Rita B. Gray
- -------------------------------
Rita B. Gray
Secretary
NORTH GEORGIA COMMUNITY
FINANCIAL PARTNERS, INC.
[CORPORATION SEAL]
By: /s/ David J. Lance
----------------------------------
David J. Lance
President
ATTEST:
/s/ Thomas M. Kinnamon
- -------------------------------
Thomas M. Kinnamon
Secretary
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APPENDIX B
DISSENTERS' RIGHTS
EXCERPTS FROM
THE GEORGIA BUSINESS CORPORATIONS CODE
RELATING TO DISSENTER'S RIGHTS
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GEORGIA BUSINESS CORPORATIONS CODE
ARTICLE 13
DISSENTERS' RIGHTS
14-2-1301. Definitions
As used in this article, the term:
(1) "Beneficial shareholder" means the person who is a beneficial
owner of shares held in a voting trust or by a nominee as the record
shareholder.
(2) "Corporate action" means the transaction or other action by the
corporation that creates dissenters' rights under Code Section 14-2-1302.
(3) "Corporation" means the issuer of shares held by a dissenter
before the corporate action, or the surviving or acquiring corporation by merger
or share exchange of that issuer.
(4) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under Code Section 14-2-1302 and who exercises that right when
and in the manner required by Code Sections 14-2-1320 through 14-2-1327.
(5) "Fair value," with respect to a dissenter's shares, means the
value of the shares immediately before the effectuation of the corporate action
to which the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action.
(6) "Interest" means interest from the effective date of the
corporate action until the date of payment, at a rate that is fair and equitable
under all the circumstances.
(7) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares to
the extent of the rights granted by a nominee certificate on file with a
corporation.
(8) "Shareholder" means the record shareholder or the beneficial
shareholder. (Code 1981,ss. 14-2-1301, enacted by Ga. L. 1988, p. 1070,ss. 1;
Ga. L. 1993, p. 1231,ss. 16.)
14-2-1302. Right to dissent.
(a) A record shareholder of the corporation is entitled to dissent from,
and obtain payment of the fair value of his or her shares in the event of, any
of the following corporate actions:
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(1) Consummation of a plan of merger to which the corporation is a party:
(A) If approval of the shareholders of the corporation is required
for the merger by Code Section 14-2-1103 or the articles of incorporation
and the shareholder is entitled to vote on the merger; or
(B) If the corporation is a subsidiary that is merged with its
parent under Code Section 14-2-1104;
(2) Consummation of a plan of share exchange to which the corporation is a
party as the corporation whose shares will be acquired, if the shareholder is
entitled to vote on the plan;
(3) Consummation of a sale or exchange of all or substantially all of the
property of the corporation if a shareholder vote is required on the sale or
exchange pursuant to Code Section 14-2-1202, but not including a sale pursuant
to court order or a sale for cash pursuant to a plan by which all or
substantially all of the net proceeds of the sale will be distributed to the
shareholder within one year after the date of sale;
(4) An amendment of the articles of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because it:
(A) Alters or abolishes a preferential right of the shares;
(B) Creates, alters, or abolishes a right in respect of redemption,
including a provision respecting a sinking fund for the redemption or
repurchase, of the shares;
(C) Alters or abolishes a preemptive right of the holder of the
shares to acquire shares or other securities;
(D) Excludes or limits the rights of the shares to vote on any
matter, or to cumulate votes, other than a limitation by dilution through
issuance of shares or other securities with similar voting rights;
(E) Reduces the number of shares owned by the shareholder to a
fraction of a share if the fractional share so created is to be acquired
for cash under Code Section 14-2-604; or
(F) Cancels, redeems, or repurchases all or part of the shares of
the class; or
(5) Any corporate action taken pursuant to a shareholder vote to the
extent that Article 9 of this chapter, the articles of incorporation, bylaws, or
a resolution of the
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board of directors provides that voting or nonvoting shareholders are entitled
to dissent and obtain payment for their shares.
(b) A shareholder entitled to dissent and obtain payment for his or her
shares under this article may not challenge the corporate action creating his or
her entitlement unless the corporate action fails to comply with procedural
requirements of this chapter or the articles of incorporation or bylaws of the
corporation or the vote required to obtain approval of the corporate action was
obtained by fraudulent and deceptive means, regardless of whether the
shareholder has exercised dissenter's rights.
(c) Notwithstanding any other provision of this article, there shall be no
right of dissent in favor of the holder of shares of any class or series which,
at the record date fixed to determine the shareholders entitled to receive
notice of and to vote at a meeting at which a plan of merger or share exchange
or a sale or exchange of property or an amendment of the articles of
incorporation is to be acted on, were either listed on a national securities
exchange or held of record by more than 2,000 shareholders, unless:
(1) In the case of a plan of merger or share exchange, the holders
of shares of the class or series are required under the plan of merger or
share exchange to accept for their shares anything except shares of the
surviving corporation or another publicly held corporation which at the
effective date of the merger or share exchange are either listed on a
national securities exchange or held of record by more than 2000
shareholders, except for scrip or cash payments in lieu of fractional
shares; or
(2) The articles of incorporation or a resolution of the board of
directors approving the transaction provides otherwise.
14-2-1303. Dissent by nominees and beneficial owners.
A record shareholder may assert dissenters' rights as to fewer than all
the shares registered in his or her name only if dissents with respect to all
shares beneficially owned by any one beneficial shareholder and notifies the
corporation in writing of the name and address of each person on whose behalf
asserts dissenters' rights. The rights of a partial dissenter under this Code
section are determined as if the shares as to which dissents and his or her
other shares were registered in the names of different shareholders.
14-2-1320. Notice of dissenters' rights.
(a) If proposed corporate action creating dissenters' rights under Code
Section 14-2-1302 is submitted to a vote at a shareholders' meeting, the meeting
notice must state that shareholders are or may be entitled to assert dissenters'
rights under this article and be accompanied by a copy of this article.
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(b) If corporate action creating dissenters' rights under Code Section
14-2-1302 is taken without a vote of shareholders, the corporation shall notify
in writing all shareholders entitled to assert dissenters' rights that the
action was taken and send them the dissenters' notice described in Code Section
14-2-1322.
14-2-1321. Notice of intent to demand payment.
(a) If proposed corporate action creating dissenters' rights under Code
Section 14-2-1302 is submitted to a vote at a shareholders' meeting, a record
shareholder who wishes to assert dissenters' rights:
(1) Must deliver to the corporation before the vote is taken written
notice of his or her intent to demand payment for his or her shares if the
proposed action is effectuated; and
(2) Must not vote his or her shares in favor of the proposed action.
(b) A record shareholder who does not satisfy the requirements of
subsection (a) of this Code section is not entitled to payment for his or her
shares under this article.
14-2-1322. Dissenters' notice.
(a) If proposed corporate action creating dissenters' rights under Code
Section 14-2-1302 is authorized at a shareholders' meeting, the corporation
shall deliver a written dissenters' notice to all shareholders who satisfied the
requirements of Code Section 14-2-1321.
(b) The dissenters' notice must be sent no later than ten days after the
corporate action was taken and must:
(1) State where the payment demand must be sent and where and when
certificates for certificated shares must be deposited;
(2) Inform holders of uncertificated shares to what extent transfer
of the shares will be restricted after the payment demand is received;
(3) Set a date by which the corporation must receive the payment
demand, which date may not be fewer than 30 nor more than 60 days after
the date the notice required in subsection (a) of this Code section is
delivered; and
(4) Be accompanied by a copy of this article.
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14-2-1323. Duty to demand payment.
(a) A record shareholder sent a dissenters' notice described in Code
Section 14-2-1322 must demand payment and deposit his or her certificates in
accordance with the terms of the notice.
(b) A record shareholder who demands payment and deposits his or her
shares under subsection (a) of this Code section retains all other rights of a
shareholder until these rights are canceled or modified by the taking of the
proposed corporate action.
(c) A record shareholder who does not demand payment or deposit his or her
share certificates where required, each by the date set in the dissenters'
notice, is not entitled to payment for his or her shares under this article.
14-2-1324. Share restrictions.
(a) The corporation may restrict the transfer of uncertificated shares
from the date the demand for their payment is received until the proposed
corporate action is taken or the restrictions released under Code Section
14-2-1326.
(b) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.
14-2-1325. Offer of payment.
(a) Except as provided in Code Section 14-2-1327, within ten days of the
later of the date the proposed corporate action is taken or receipt of a payment
demand, the corporation shall offer to pay each dissenter who complied with Code
Section 14-2-1323 the amount the corporation estimates to be the fair value of
his or her shares, plus accrued interest.
(b) The offer of payment must be accompanied by:
(1) The corporation's balance sheet as of the end of a fiscal year
ending not more than 16 months before the date of payment, an income
statement for that year, a statement of changes in shareholders' equity
for that year, and the latest available interim financial statements, if
any;
(2) A statement of the corporation's estimate of the fair value of
the shares;
(3) An explanation of how the interest was calculated;
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(4) A statement of the dissenter's right to demand payment under
Code Section 14-2-1327; and
(5) A copy of this article.
(c) If the shareholder accepts the corporation's offer by written notice
to the corporation within 30 days after the corporation's offer, payment for his
or her shares shall be made within 60 days after the making of the offer or the
taking of the proposed corporate action, whichever is later.
14-2-1326. Failure to take action.
(a) If the corporation does not take the proposed action within 60 days
after the date set for demanding payment and depositing share certificates, the
corporation shall return the deposited certificates and release the transfer
restrictions imposed on uncertificated shares.
(b) If, after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it must send a new
dissenters' notice under Code Section 14-2-1422 and repeat the payment demand
procedure.
14-2-1327. Procedure if shareholder dissatisfied with payment or offer.
(a) A dissenter may notify the corporation in writing of his or her own
estimate of the fair value of his or her shares and amount of interest due, and
demand payment of his or her estimate of the fair value of his or her shares and
interest due, if:
(1) The dissenter believes that the amount offered under Code
Section 14-2-1325 is less than the fair value of his or her shares or that
the interest due is incorrectly calculated; or
(2) The corporation, having failed to take the proposed action, does
not return the deposited certificates or release the transfer restrictions
imposed on uncertificated shares within 60 days after the date set for
demanding payment.
(b) A dissenter waives his or her right to demand payment under this Code
section unless he notifies the corporation of his or her demand in writing under
subsection (a) of this Code section within 30 days after the corporation made or
offered payment for his or her shares.
(c) If the corporation does not offer payment within the time set forth in
subsection (a) of Code Section 14-2-1325:
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(1) The shareholder may demand the information required under
subsection (b) of Code Section 14-2-1325, and the corporation shall
provide the information to the shareholder within ten days after receipt
of a written demand for the information; and
(2) The shareholder may at any time, subject to the limitations
period of Code Section 14-2-1332, notify the corporation of his or her own
estimate of the fair value of his or her shares and the amount of interest
due and demand payment of his or her estimate of the fair value of his or
her shares and interest due.
14-2-1330. Court action.
(a) If a demand for payment under Code Section 14-2-1327 remains
unsettled, the corporation shall commence a proceeding within 60 days after
receiving the payment demand and petition the court to determine the fair value
of the shares and accrued interest. If the corporation does not commence the
proceeding within the 60 day period, it shall pay each dissenter whose demand
remains unsettled the amount demanded.
(b) The corporation shall commence the proceeding, which shall be a
nonjury equitable valuation proceeding, in the superior court of the county
where a corporation's registered office is located. If the surviving corporation
is a foreign corporation without a registered office in this state, it shall
commence the proceeding in the county in this state where the registered office
of the domestic corporation merged with or whose shares were acquired by the
foreign corporation was located.
(c) The corporation shall make all dissenters, whether or not residents of
this state, whose demands remain unsettled parties to the proceeding, which
shall have the effect of an action quasi in rem against their shares. The
corporation shall serve a copy of the petition in the proceeding upon each
dissenting shareholder who is a resident of this state in the manner provided by
law for the service of a summons and complaint, and upon each nonresident
dissenting shareholder either by registered or certified mail and publication,
or in any other manner permitted by law.
(d) The jurisdiction of the court in which the proceeding is commenced
under subsection (b) of this Code section is plenary and exclusive. The court
may appoint one or more persons as appraisers to receive evidence and recommend
decision on the question of fair value. The appraisers have the powers described
in the order appointing them or in any amendment to it. Except as otherwise
provided in this chapter, Chapter 11 of the Title 9, known as the "Georgia Civil
Practice Act," applies to any proceeding with respect to dissenters' rights
under this chapter.
(e) Each dissenter made a party to the proceeding is entitled to judgment
for the amount which the court finds to be the fair value of his or her shares,
plus interest to the date of judgment.
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14-2-1331. Court costs and counsel fees.
(a) The court in an appraisal proceeding commenced under Code Section
14-2-1330 shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court, but not
including fees and expenses of attorneys and experts for the respective parties.
The court shall assess the costs against the corporation, except that the court
may assess the costs against all or some of the dissenters, in amounts the court
finds equitable, to the extent the court finds the dissenters acted arbitrarily,
vexatiously, or not in good faith in demanding payment under Code Section
14-2-1327.
(b) The court may also assess the fees and expenses of attorneys and
experts for the respective parties, in amounts the court finds equitable:
(1) Against the corporation and in favor of any or all dissenters if
the court finds the corporation did not substantially comply with the
requirements of Code Sections 14-2-1320 through 14-2-1327; or
(2) Against either the corporation or a dissenter, in favor of any
other party, if the court finds that the party against whom the fees and
expenses are assessed acted arbitrarily, vexatiously, or not in good faith
with respect to the rights provided by this article.
(c) If the court finds that the services of attorneys for any dissenter
were of substantial benefit to other dissenters similarly situated, and that the
fees for those services should not be assessed against the corporation, the
court may award to these attorneys reasonable fees to be paid out of the amounts
awarded the dissenters who were benefited.
14-2-1332. Limitation of actions.
No action by any dissenter to enforce dissenters' rights shall be brought
more than three years after the corporate action was taken, regardless of
whether notice of the corporate action and of the right to dissent was given by
the corporation in compliance with the provisions of Code Section 14-2-1320 and
Code Section 14-2-1322.
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APEENDIX C
NORTH GEORGIA NATIONAL BANK
1999 STOCK INCENTIVE PLAN
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NORTH GEORGIA NATIONAL BANK
1999 STOCK INCENTIVE PLAN
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TABLE OF CONTENTS
PAGE
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SECTION 1 DEFINITIONS........................................................4
1.1 DEFINITIONS............................................................4
SECTION 2 THE STOCK INCENTIVE PLAN...........................................7
2.1 PURPOSE OF THE PLAN....................................................7
2.2 STOCK SUBJECT TO THE PLAN..............................................7
2.3 ADMINISTRATION OF THE PLAN.............................................7
2.4 ELIGIBILITY AND LIMITS.................................................8
SECTION 3 TERMS OF STOCK INCENTIVES..........................................8
3.1 GENERAL TERMS AND CONDITIONS...........................................8
3.2 TERMS AND CONDITIONS OF OPTIONS........................................6
(a) Option Price......................................................10
(b) Option Term.......................................................10
(c) Payment............................................................7
(d) Conditions to the Exercise of an Option............................7
(e) Termination of Incentive Stock Option.............................11
(f) Special Provisions for Certain Substitute Options.................11
3.3 TREATMENT OF AWARDS UPON TERMINATION OF SERVICE.......................11
SECTION 4 RESTRICTIONS ON STOCK..............................................8
4.1 ESCROW OF SHARES.......................................................8
4.2 RESTRICTIONS ON TRANSFER..............................................12
SECTION 5 GENERAL PROVISIONS................................................12
5.1 WITHHOLDING............................................................9
5.2 CHANGES IN CAPITALIZATION; MERGER; LIQUIDATION........................13
5.3 CASH AWARDS...........................................................10
5.4 COMPLIANCE WITH CODE..................................................10
5.5 RIGHT TO TERMINATE SERVICE............................................14
5.6 RESTRICTIONS ON DELIVERY AND SALE OF SHARES; LEGENDS..................14
5.7 NON-ALIENATION OF BENEFITS............................................11
5.8 TERMINATION AND AMENDMENT OF THE PLAN.................................11
5.9 CHOICE OF LAW.........................................................11
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NORTH GEORGIA NATIONAL BANK
1999 STOCK INCENTIVE PLAN
SECTION 1 DEFINITIONS
1.1 Definitions. Whenever used herein, the masculine pronoun shall be
deemed to include the feminine, and the singular to include the plural, unless
the context clearly indicates otherwise, and the following capitalized words and
phrases are used herein with the meaning thereafter ascribed:
(a) "Bank" means North Georgia National Bank, a national banking
association being organized under the laws of the United States.
(b) "Board of Directors" means the board of directors of the Bank.
(c) "Cause" has the same meaning as provided in the employment
agreement between the Participant and the Bank on the date of Termination of
Service, or if no such definition or employment agreement exists, "Cause" means
conduct amounting to (1) fraud or dishonesty against the Bank, (2) Participant's
willful misconduct, repeated refusal to follow the reasonable directions of the
Board of Directors or knowing violation of law in the course of performance of
the duties of Participant's service with the Bank, (3) repeated absences from
work without a reasonable excuse, (4) repeated intoxication with alcohol or
drugs while on the Bank's premises during regular business hours, (5) a
conviction or plea of guilty or nolo contendere to a felony or a crime involving
dishonesty, or (6) a breach or violation of the terms of any agreement to which
Participant and the Bank are party.
(d) "Change in Control" means any one of the following events which
may occur after the date the Stock Incentive is granted:
(1) the acquisition by any individual, entity or "group",
within the meaning of Section 13(d)(3) or Section 14(d)(2) of the Securities
Exchange Act of 1934, as amended, (a "Person") of beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Securities Exchange Act of 1934)
of voting securities of the Bank where such acquisition causes any such Person
to own twenty-five percent (25%) or more of the combined voting power of the
then outstanding voting securities then entitled to vote generally in the
election of directors (the "Outstanding Voting Securities"); provided, however,
that for purposes of this Section 1.1(d)(1), the following shall not be deemed
to result in a Change in Control, (i) any acquisition directly from the Bank,
unless such a Person subsequently acquires additional shares of Outstanding
Voting Securities other than from the Bank, in which case any such subsequent
acquisition shall be deemed to be a Change in Control; or (ii) any acquisition
by any employee benefit plan (or related trust) sponsored or maintained by the
Bank;
(2) a merger, consolidation, share exchange, combination,
reorganization or like transaction involving the Bank in which the stockholders
of the Bank immediately prior to such transaction do not own at least fifty
percent (50%) of the value or
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voting power of the issued and outstanding capital stock of the Bank or its
successor immediately after such transaction;
(3) the sale or transfer (other than as security for the
Bank's obligations) of more than fifty percent (50%) of the assets of the Bank
in any one transaction or a series of related transactions occurring within a
one (1) year period in which the Bank or the stockholders of the Bank
immediately prior to the transaction do not own at least fifty percent (50%) of
the value or voting power of the issued and outstanding equity securities of the
acquiror immediately after the transaction;
(4) the sale or transfer of more than fifty percent (50%) of
the value or voting power of the issued and outstanding capital stock of the
Bank by the holders thereof in any one transaction or a series of related
transactions occurring within a one (1) year period in which the Bank or the
stockholders of the Bank immediately prior to the transaction do not own at
least fifty percent (50%) of the value or voting power of the issued and
outstanding equity securities of the acquiror immediately after the transaction;
or
(5) the dissolution or liquidation of the Bank.
(e) "Code" means the Internal Revenue Code of 1986, as amended.
(f) "Committee" means the committee appointed by the Board of
Directors to administer the Plan pursuant to Plan Section 2.3.
(g) "Disability" has the same meaning as provided in the long-term
disability plan or policy maintained or, if applicable, most recently
maintained, by the Bank for the Participant. If no long-term disability plan or
policy was ever maintained on behalf of the Participant or, if the determination
of Disability relates to an Incentive Stock Option, Disability shall mean that
condition described in Code Section 22(e)(3), as amended from time to time. In
the event of a dispute, the determination of Disability shall be made by the
Board of Directors and shall be supported by advice of a physician competent in
the area to which such Disability relates.
(h) "Disposition" means any conveyance, sale, transfer, assignment,
pledge or hypothecation, whether outright or as security, inter vivos or
testamentary, with or without consideration, voluntary or involuntary.
(i) "Fair Market Value" refers to the determination of value of a
share of Stock. If the Stock is actively traded on any national securities
exchange or any Nasdaq quotation or market system, Fair Market Value shall mean
the closing price at which sales of Stock shall have been sold on the most
recent trading date immediately prior to the date of determination, as reported
by any such exchange or system selected by the Committee on which the shares of
Stock are then traded. If the shares of Stock are not actively traded on any
such exchange or system, Fair Market Value shall mean the arithmetic mean of the
bid and asked prices for the shares of Stock on the most recent trading date
within a reasonable period prior to the determination date as reported by such
exchange or system. If there are no bid and asked prices within a reasonable
period or if the shares of Stock are not traded on any exchange or
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system as of the determination date, Fair Market Value shall mean the fair
market value of a share of Stock as determined by the Committee taking into
account such facts and circumstances deemed to be material by the Committee to
the value of the Stock in the hands of the Participant; provided that, for
purposes of granting awards other than Incentive Stock Options, Fair Market
Value of a share of Stock may be determined by the Committee by reference to the
average market value determined over a period certain or as of specified dates,
to a tender offer price for the shares of Stock (if settlement of an award is
triggered by such an event) or to any other reasonable measure of fair market
value and provided further that, for purposes of granting Incentive Stock
Options, Fair Market Value of a share of Stock shall be determined in accordance
with the valuation principles described in the regulations promulgated under
Code Section 422.
(j) "Incentive Stock Option" means an incentive stock option, as
defined in Code Section 422, described in Plan Section 3.2.
(k) "Non-Qualified Stock Option" means a stock option, other than an
option qualifying as an Incentive Stock Option, described in Plan Section 3.2.
(l) "Option" means a Non-Qualified Stock Option or an Incentive
Stock Option.
(m) "Over 10% Owner" means an individual who at the time an
Incentive Stock Option is granted owns Stock possessing more than 10% of the
total combined voting power of the Bank or one of its Parents or Subsidiaries,
determined by applying the attribution rules of Code Section 424(d).
(n) "Parent" means any corporation (other than the Bank) in an
unbroken chain of corporations ending with the Bank if, with respect to
Incentive Stock Options, at the time of granting of the Incentive Stock Option,
each of the corporations other than the Bank owns stock possessing 50% or more
of the total combined voting power of all classes of stock in one of the other
corporations in the chain.
(o) "Participant" means an individual who receives a Stock Incentive
hereunder.
(p) "Plan" means the North Georgia National Bank 1999 Stock
Incentive Plan.
(q) "Stock" means the Bank's common stock, $5.00 par value per
share.
(r) "Stock Incentive Agreement" means an agreement between the Bank
and a Participant or other documentation evidencing an award of a Stock
Incentive.
(s) "Stock Incentives" means, collectively, Incentive Stock Options
and Non-Qualified Stock Options.
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(t) "Subsidiary" means any corporation (other than the Bank) in an
unbroken chain of corporations beginning with the Bank if, with respect to
Incentive Stock Options, at the time of the granting of the Incentive Stock
Option, each of the corporations other than the last corporation in the unbroken
chain owns stock possessing 50% or more of the total combined voting power of
all classes of stock in one of the other corporations in the chain.
(u) "Termination of Service" means the termination of the service
relationship, whether employment or otherwise, between a Participant and the
Bank and any affiliates, regardless of the fact that severance or similar
payments are made to the Participant for any reason, including, but not by way
of limitation, a termination by resignation, discharge, death, Disability or
retirement. The Committee shall, in its absolute discretion, determine the
effect of all matters and questions relating to Termination of Service,
including, but not by way of limitation, the question of whether a leave of
absence constitutes a Termination of Service, or whether a Termination of
Service is for Cause.
SECTION 2 THE STOCK INCENTIVE PLAN
2.1 Purpose of the Plan. The Plan is intended to (a) provide incentives to
officers, employees, directors and organizers of the Bank to stimulate their
efforts toward the continued success of the Bank and to operate and manage the
business in a manner that will provide for the long-term growth and
profitability of the Bank; (b) encourage stock ownership by officers, employees,
directors and organizers by providing them with a means to acquire a proprietary
interest in the Bank by acquiring shares of Stock; and (c) provide a means of
obtaining and rewarding key personnel.
2.2 Stock Subject to the Plan. Subject to adjustment in accordance with
Section 5.2, 400,000 shares of Stock (the "Maximum Plan Shares") are hereby
reserved exclusively for issuance pursuant to Stock Incentives. At no time shall
the Bank have outstanding Stock Incentives and shares of Stock issued in respect
of Stock Incentives in excess of the Maximum Plan Shares. The shares of Stock
attributable to the nonvested, unpaid, unexercised, unconverted or otherwise
unsettled portion of any Stock Incentive that is forfeited or cancelled or
expires or terminates for any reason without becoming vested, paid, exercised,
converted or otherwise settled in full shall again be available for purposes of
the Plan.
2.3 Administration of the Plan. The Plan shall be administered by the
Committee. The Committee shall have full authority in its discretion to
determine the officers, employees, directors and organizers of the Bank to whom
Stock Incentives shall be granted and the terms and provisions of Stock
Incentives subject to the Plan. Subject to the provisions of the Plan, the
Committee shall have full and conclusive authority to interpret the Plan; to
prescribe, amend and rescind rules and regulations relating to the Plan; to
determine the terms and provisions of the respective Stock Incentive Agreements
and to make all other determinations necessary or advisable for the proper
administration of the Plan. The Committee's determinations under the Plan need
not be uniform and may be made by it selectively among persons who receive, or
are eligible to receive, awards under the Plan (whether or not such persons are
similarly situated). The Committee's decisions shall be final and binding on all
Participants.
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The Committee shall consist of at least two members of the Board of
Directors and, during those periods that the Bank is subject to the provisions
of Section 16 of the Securities Exchange Act of 1934, the Board of Directors
shall consider the advisability of whether each such appointee shall qualify as
a "non-employee director", as that term is defined in Rule 16b-3 as then in
effect under the Securities Exchange Act of 1934, and, during those periods that
the Bank has issued equity securities required to be registered under Section 12
of the Securities Exchange Act of 1934, the Board of Directors shall consider
the advisability of whether each such appointee shall separately qualify as an
"outside director", within the meaning of Code Section 162(m) and the
regulations promulgated thereunder. Each member of the Committee shall serve at
the discretion of the Board of Directors and the Board of Directors may from
time to time remove members from or add members to the Committee. Vacancies on
the Committee shall be filled by the Board of Directors.
The Committee shall select one of its members as Chairman and shall hold
meetings at the times and in the places as it may deem advisable. Acts approved
by a majority of the Committee in a meeting at which a quorum is present, or
acts reduced to or approved in writing by a majority of the members of the
Committee, shall be the valid acts of the Committee.
2.4 Eligibility and Limits. Stock Incentives may be granted only to
officers, employees, directors and organizers of the Bank; provided, however,
that an Incentive Stock Option may only be granted to an employee of the Bank.
In the case of Incentive Stock Options, the aggregate Fair Market Value
(determined as of the date an Incentive Stock Option is granted) of stock with
respect to which stock options intended to meet the requirements of Code Section
422 become exercisable for the first time by an individual during any calendar
year under all plans of the Bank and its Parents and Subsidiaries shall not
exceed $100,000; provided further, that if the limitation is exceeded, the
Incentive Stock Option(s) which cause the limitation to be exceeded shall be
treated as Non-Qualified Stock Option(s); except as the terms of the Stock
Incentive Agreement may expressly provide otherwise. To the extent required
under Code Section 162(m) and regulations thereunder for compensation to be
treated as qualified performance-based compensation, subject to adjustment in
accordance with Section 5.2, the maximum number of shares of Stock with respect
to which Options may be granted during any single fiscal year of the Bank to any
employee shall not exceed 75,000.
SECTION 3 TERMS OF STOCK INCENTIVES
3.1 General Terms and Conditions.
(a) The number of shares of Stock as to which a Stock Incentive
shall be granted shall be determined by the Committee in its sole discretion,
subject to the provisions of Section 2.2 as to the total number of shares
available for grants under the Plan. If a Stock Incentive Agreement so provides,
a Participant may be granted a new Option to purchase a number of shares of
Stock equal to the number of previously owned shares of Stock tendered in
payment of the Exercise Price (as defined below) for each share of Stock
purchased pursuant to the terms of the Stock Incentive Agreement.
(b) Each Stock Incentive shall be evidenced by a Stock Incentive
Agreement in such form and containing such terms, conditions and restrictions as
the Committee may
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determine is appropriate. Each Stock Incentive Agreement shall be subject to the
terms of the Plan and any provision in a Stock Incentive Agreement that is
inconsistent with the Plan shall be null and void.
(c) The date a Stock Incentive is granted shall be the date on which
the Committee has approved the terms and conditions of the Stock Incentive
Agreement and has determined the recipient of the Stock Incentive and the number
of shares covered by the Stock Incentive and has taken all such other action
necessary to complete the grant of the Stock Incentive.
(d) The Committee may provide in any Stock Incentive Agreement (or
subsequent to the award of a Stock Incentive but prior to its expiration or
cancellation, as the case may be) that, in the event of a Change in Control, the
Stock Incentive shall or may be cashed out on the basis of any price not greater
than the highest price paid for a share of Stock in any transaction reported by
any market or system selected by the Committee on which the shares of Stock are
then actively traded during a specified period immediately preceding or
including the date of the Change in Control or offered for a share of Stock in
any tender offer occurring during a specified period immediately preceding or
including the date the tender offer commences; provided that, in no case shall
any such specified period exceed three (3) months (the "Change in Control
Price"). For purposes of this Subsection, Options shall be cashed out on the
basis of the excess, if any, of the Change in Control Price (but not more than
the Fair Market Value of the Stock on the date of the cash-out in the case of
Incentive Stock Options) over the Exercise Price with or without regard to
whether the Option may otherwise be exercisable only in part.
(e) Any Stock Incentive may be granted in connection with all or any
portion of a previously or contemporaneously granted Stock Incentive. Exercise
or vesting of a Stock Incentive granted in connection with another Stock
Incentive may result in a pro rata surrender or cancellation of any related
Stock Incentive, as specified in the applicable Stock Incentive Agreement.
(f) Stock Incentives shall not be transferable or assignable except
by will or by the laws of descent and distribution and shall be exercisable,
during the Participant's lifetime, only by the Participant; in the event of the
Disability of the Participant, by the legal representative of the Participant;
or in the event of the death of the participant, by the personal representative
of the Participant's estate or if no personal representative has been appointed,
by the successor in interest determined under the Participant's will.
(g) No Stock Incentive shall have a term that extends beyond the
tenth anniversary of the date the Stock Incentive was granted.
3.2 Terms and Conditions of Options. Each Option granted under the Plan
shall be evidenced by a Stock Incentive Agreement. At the time any Option is
granted, the Committee shall determine whether the Option is to be an Incentive
Stock Option or a Non-Qualified Stock Option, and the Option shall be clearly
identified as to its status as an Incentive Stock Option or a Non-Qualified
Stock Option. At the time any Incentive Stock Option is exercised, the Bank
shall be entitled to place a legend on the certificates representing the shares
of Stock purchased
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pursuant to the Option to clearly identify them as shares of Stock purchased
upon exercise of an Incentive Stock Option. An Incentive Stock Option may only
be granted within ten (10) years from the earlier of the date the Plan is
adopted by the Board of Directors or approved by the Bank's stockholders.
(a) Option Price. Subject to adjustment in accordance with Section
5.2 and the other provisions of this Section 3.2, the exercise price (the
"Exercise Price") per share of Stock purchasable under any Option shall be as
set forth in the applicable Stock Incentive Agreement. With respect to each
grant of an Incentive Stock Option to a Participant who is not an Over 10% Owner
or to each grant of any Option to a Participant who is then a "covered
employee," within the meaning of Code Section 162(m), the Exercise Price per
share shall not be less than the Fair Market Value on the date the Option is
granted. With respect to each grant of an Incentive Stock Option to a
Participant who is an Over 10% Owner, the Exercise Price shall not be less than
110% of the Fair Market Value on the date the Option is granted. With respect to
each grant of a Non-Qualified Stock Option, the Exercise Price per share shall
be no less than 85% of the Fair Market Value.
(b) Option Term. The term of an Option shall be as specified in the
applicable Stock Incentive Agreement; provided, however that any Incentive Stock
Option granted to a Participant who is not an Over 10% Owner shall not be
exercisable after the expiration of ten (10) years after the date the Option is
granted and any Incentive Stock Option granted to an Over 10% Owner shall not be
exercisable after the expiration of five (5) years after the date the Option is
granted.
(c) Payment. Payment for all shares of Stock purchased pursuant to
the exercise of an Option shall be made in any form or manner authorized by the
Committee in the Stock Incentive Agreement or by amendment thereto, including,
but not limited to, cash or, if the Stock Incentive Agreement provides, (1) by
delivery to the Bank of a number of shares of Stock which have been owned by the
holder for at least six (6) months prior to the date of exercise having an
aggregate Fair Market Value of not less than the product of the Exercise Price
multiplied by the number of shares the Participant intends to purchase upon
exercise of the Option on the date of delivery; (2) in a cashless exercise
through a broker; or (3) by having a number of shares of Stock withheld, the
Fair Market Value of which as of the date of exercise is sufficient to satisfy
the Exercise Price. In its discretion, the Committee also may authorize (at the
time an Option is granted or thereafter) Bank financing to assist the
Participant as to payment of the Exercise Price on such terms as may be offered
by the Committee in its discretion. Payment shall be made at the time that the
Option or any part thereof is exercised, and no shares shall be issued or
delivered upon exercise of an Option until full payment has been made by the
Participant. The holder of an Option, as such, shall have none of the rights of
a stockholder.
(d) Conditions to the Exercise of an Option. Each Option granted
under the Plan shall be exercisable by whom, at such time or times, or upon the
occurrence of such event or events, and in such amounts, as the Committee shall
specify in the Stock Incentive Agreement; provided, however, that subsequent to
the grant of an Option, the Committee, at any time before complete termination
of such Option, may accelerate the time or times at which such Option may be
exercised in whole or in part, including, without limitation, upon a Change in
Control and may permit the Participant or any other designated person to
exercise the Option, or
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any portion thereof, for all or part of the remaining Option term
notwithstanding any provision of the Stock Incentive Agreement to the contrary.
(e) Termination of Incentive Stock Option. With respect to an
Incentive Stock Option, in the event of the Termination of Service of a
Participant, the Option or portion thereof held by the Participant which is
unexercised shall expire, terminate, and become unexercisable no later than the
expiration of three (3) months after the date of Termination of Service;
provided, however, that in the case of a holder whose Termination of Service is
due to death or Disability, one (1) year shall be substituted for such three (3)
month period. For purposes of this Subsection (e), Termination of Service of the
Participant shall not be deemed to have occurred if the Participant is employed
by another corporation (or a parent or subsidiary corporation of such other
corporation) which has assumed the Incentive Stock Option of the Participant in
a transaction to which Code Section 424(a) is applicable.
(f) Special Provisions for Certain Substitute Options.
Notwithstanding anything to the contrary in this Section 3.2, any Option issued
in substitution for an option previously issued by another entity, which
substitution occurs in connection with a transaction to which Code Section
424(a) is applicable, may provide for an exercise price computed in accordance
with such Code Section and the regulations thereunder and may contain such other
terms and conditions as the Committee may prescribe to cause such substitute
Option to contain as nearly as possible the same terms and conditions (including
the applicable vesting and termination provisions) as those contained in the
previously issued option being replaced thereby.
3.3 Treatment of Awards Upon Termination of Service. Except as otherwise
provided by Plan Section 3.2(e), any award under this Plan to a Participant who
suffers a Termination of Service may be cancelled, accelerated, paid or
continued, as provided in the Stock Incentive Agreement or, in the absence of
such provision, as the Committee may determine. The portion of any award
exercisable in the event of continuation or the amount of any payment due under
a continued award may be adjusted by the Committee to reflect the Participant's
period of service from the date of grant through the date of the Participant's
Termination of Service or such other factors as the Committee determines are
relevant to its decision to continue the award.
SECTION 4 RESTRICTIONS ON STOCK
4.1 Escrow of Shares. Any certificates representing the shares of Stock
issued under the Plan shall be issued in the Participant's name, but, if the
Stock Incentive Agreement so provides, the shares of Stock shall be held by a
custodian designated by the Committee (the "Custodian"). Each applicable Stock
Incentive Agreement providing for transfer of shares of Stock to the Custodian
shall appoint the Custodian as the attorney-in-fact for the Participant for the
term specified in the applicable Stock Incentive Agreement, with full power and
authority in the Participant's name, place and stead to transfer, assign and
convey to the Bank any shares of Stock held by the Custodian for such
Participant, if the Participant forfeits the shares under the terms of the
applicable Stock Incentive Agreement. During the period that the Custodian holds
the shares subject to this Section, the Participant shall be entitled to all
rights, except as provided in the applicable Stock Incentive Agreement,
applicable to shares of Stock not so held. Any
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dividends declared on shares of Stock held by the Custodian shall, as the
Committee may provide in the applicable Stock Incentive Agreement, be paid
directly to the Participant or, in the alternative, be retained by the Custodian
until the expiration of the term specified in the applicable Stock Incentive
Agreement and shall then be delivered, together with any proceeds, with the
shares of Stock to the Participant or to the Bank, as applicable.
4.2 Restrictions on Transfer. The Participant shall not have the right to
make or permit to exist any Disposition of the shares of Stock issued pursuant
to the Plan except as provided in the Plan or the applicable Stock Incentive
Agreement. Any Disposition of the shares of Stock issued under the Plan by the
Participant not made in accordance with the Plan or the applicable Stock
Incentive Agreement shall be void. The Bank shall not recognize, or have the
duty to recognize, any Disposition not made in accordance with the Plan and the
applicable Stock Incentive Agreement, and the shares so transferred shall
continue to be bound by the Plan and the applicable Stock Incentive Agreement.
SECTION 5 GENERAL PROVISIONS
5.1 Withholding. The Bank shall deduct from all cash distributions under
the Plan any taxes required to be withheld by federal, state or local
government. Whenever the Bank proposes or is required to issue or transfer
shares of Stock under the Plan, the Bank shall have the right to require the
recipient to remit to the Bank an amount sufficient to satisfy any federal,
state and local withholding tax requirements prior to the delivery of any
certificate or certificates for such shares. A Participant may pay the
withholding tax in cash, by tendering shares of Stock which have been owned by
the holder for at least six (6) months prior to the date of exercise or, if the
applicable Stock Incentive Agreement provides, a Participant may elect to have
the number of shares of Stock he is to receive reduced by the smallest number of
whole shares of Stock which, when multiplied by the Fair Market Value of the
shares of Stock determined as of the Tax Date (defined below), is sufficient to
satisfy federal, state and local, if any, withholding taxes arising from
exercise or payment of a Stock Incentive (a "Withholding Election"). A
Participant may make a Withholding Election only if both of the following
conditions are met:
(a) The Withholding Election must be made on or prior to the date on
which the amount of tax required to be withheld is determined (the "Tax Date")
by executing and delivering to the Bank a properly completed notice of
Withholding Election as prescribed by the Committee; and
(b) Any Withholding Election made will be irrevocable; however, the
Committee may, in its sole discretion, disapprove and give no effect to the
Withholding Election.
5.2 Changes in Capitalization; Merger; Liquidation.
(a) The number of shares of Stock reserved for the grant of Options
and the number of shares of Stock reserved for issuance upon the exercise or
payment, as applicable, of each outstanding Option, and the Exercise Price of
each outstanding Option shall be proportionately adjusted for any increase or
decrease in the number of issued shares of Stock resulting from a subdivision or
combination of shares or the payment of an ordinary stock dividend in shares of
Stock to holders of outstanding shares of Stock or any other increase or
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decrease in the number of shares of Stock outstanding effected without receipt
of consideration by the Bank.
(b) In the event of any merger, consolidation, extraordinary
dividend (including a spin-off), reorganization or other change in the corporate
structure of the Bank or its Stock or tender offer for shares of Stock, the
Committee, in its sole discretion, may make such adjustments with respect to
awards and take such other action as it deems necessary or appropriate to
reflect or in anticipation of such merger, consolidation, extraordinary dividend
(including a spin-off), reorganization, other change in corporate structure or
tender offer, including, without limitation, the substitution of new awards, the
termination or adjustment of outstanding awards, the acceleration of awards or
the removal of restrictions on outstanding awards, all as may be provided in the
applicable Stock Incentive Agreement or, if not expressly addressed therein, as
the Committee subsequently may determine in the event of any such merger,
consolidation, extraordinary dividend (including a spin-off), reorganization or
other change in the corporate structure of the Bank or its Stock or tender offer
for shares of Stock. Any adjustment pursuant to this Section 5.2 may provide, in
the Committee's discretion, for the elimination without payment therefor of any
fractional shares that might otherwise become subject to any Stock Incentive.
(c) The existence of the Plan and the Stock Incentives granted
pursuant to the Plan shall not affect in any way the right or power of the Bank
to make or authorize any adjustment, reclassification, reorganization or other
change in its capital or business structure, any merger or consolidation of the
Bank, any issue of debt or equity securities having preferences or priorities as
to the Stock or the rights thereof, the dissolution or liquidation of the Bank,
any sale or transfer of all or any part of its business or assets, or any other
corporate act or proceeding.
5.3 Cash Awards. The Committee may, at any time and in its discretion,
grant to any holder of a Stock Incentive the right to receive, at such times and
in such amounts as determined by the Committee in its discretion, a cash amount
which is intended to reimburse such person for all or a portion of the federal,
state and local income taxes imposed upon such person as a consequence of the
receipt of the Stock Incentive or the exercise of rights thereunder.
5.4 Compliance with Code. All Incentive Stock Options to be granted
hereunder are intended to comply with Code Section 422, and all provisions of
the Plan and all Incentive Stock Options granted hereunder shall be construed in
such manner as to effectuate that intent.
5.5 Right to Terminate Service. Nothing in the Plan or in any Stock
Incentive Agreement shall confer upon any Participant the right to continue as
an officer, employee, director or organizer of the Bank or affect the right of
the Bank to terminate the Participant's service at any time.
5.6 Restrictions on Delivery and Sale of Shares; Legends. Each Stock
Incentive is subject to the condition that if at any time the Committee, in its
discretion, shall determine that the listing, registration or qualification of
the shares covered by such Stock Incentive upon any securities exchange or under
any state or federal law is necessary or desirable as a condition of or in
connection with the granting of such Stock Incentive or the purchase or delivery
of shares
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thereunder, the delivery of any or all shares pursuant to such Stock Incentive
may be withheld unless and until such listing, registration or qualification
shall have been effected. If a registration statement is not in effect under the
Securities Act of 1933 or any applicable state securities laws with respect to
the shares of Stock purchasable or otherwise deliverable under Stock Incentives
then outstanding, the Committee may require, as a condition of exercise of any
Option or as a condition to any other delivery of Stock pursuant to a Stock
Incentive, that the Participant or other recipient of a Stock Incentive
represent, in writing, that the shares received pursuant to the Stock Incentive
are being acquired for investment and not with a view to distribution and agree
that the shares will not be disposed of except pursuant to an effective
registration statement, unless the Bank shall have received an opinion of
counsel that such disposition is exempt from such requirement under the
Securities Act of 1933 and any applicable state securities laws. The Bank may
include on certificates representing shares delivered pursuant to a Stock
Incentive such legends referring to the foregoing representations or
restrictions or any other applicable restrictions on resale as the Bank, in its
discretion, shall deem appropriate.
5.7 Non-alienation of Benefits. Other than as specifically provided with
regard to the death of a Participant, no benefit under the Plan shall be subject
in any manner to anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance or charge; and any attempt to do so shall be void. No such benefit
shall, prior to receipt by the Participant, be in any manner liable for or
subject to the debts, contracts, liabilities, engagements or torts of the
Participant.
5.8 Termination and Amendment of the Plan. The Board of Directors at any
time may amend or terminate the Plan without stockholder approval; provided,
however, that the Board of Directors may condition any amendment on the approval
of stockholders of the Bank if such approval is necessary or advisable with
respect to tax, securities or other applicable laws. No such termination or
amendment without the consent of the holder of a Stock Incentive shall adversely
affect the rights of the Participant under such Stock Incentive.
5.9 Choice of Law. The laws of the State of Georgia shall govern the Plan,
to the extent not preempted by federal law.
IN WITNESS WHEREOF, the Bank has caused this Plan to be executed as of
this 16th day of November, 1999.
NORTH GEORGIA NATIONAL BANK
By:____________________________________
Title:_________________________________
ATTEST:
_______________________________
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Secretary
[SEAL]
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<PAGE>
THIS DOCUMENT HAS BEEN SANITIZED WITH THE DOCCLEAN MACRO!
INCENTIVE STOCK OPTION AWARD
PURSUANT TO THE NORTH GEORGIA NATIONAL BANK
1999 STOCK INCENTIVE PLAN
THIS AWARD is made as of the Grant Date by NORTH GEORGIA NATIONAL BANK
(the "Bank") to _____________ (the "Optionee").
Upon and subject to the Terms and Conditions attached hereto and
incorporated herein by reference, the Bank hereby awards as of the Grant Date to
Optionee an incentive stock option (the "Option"), as described below, to
purchase the Option Shares.
A. Grant Date: _________________________, 199_.
B. Type of Option: Incentive Stock Option.
C. Plan under which granted: North Georgia National Bank 1999 Stock
Incentive Plan.
D. Option Shares: All or any part of _______________ shares of the
Bank's common stock, $5.00 par value per share (the "Common Stock"),
subject to adjustment as provided in the attached Terms and
Conditions.
E. Exercise Price: $________ per share, subject to adjustment as
provided in the attached Terms and Conditions. The Exercise Price
is, in the judgment of the Committee, not less than 100% of the Fair
Market Value of a share of Common Stock on the Grant Date or, in the
case of an Over 10% Owner, not less than 110% of the Fair Market
Value of a share of Common Stock on the Grant Date.
F. Option Period: The Option may be exercised only during the Option
Period which commences on the Grant Date and ends, generally, on the
earlier of (a) the tenth (10th) anniversary of the Grant Date
(unless the Optionee is an Over 10% Owner, in which case the fifth
(5th) anniversary of the Grant Date); or (b) 90 days following the
date the Optionee ceases to be an employee of the Bank (including
any Parent or Subsidiary); provided that the Option may be exercised
as to no more than the vested Option Shares, determined pursuant to
the Vesting Schedule. Note that other limitations to exercising the
Option, as described in the attached Terms and Conditions, may
apply.
G. Vesting Schedule: The Option Shares shall become vested in
accordance with Schedule 1 hereto.
IN WITNESS WHEREOF, the Bank has executed and sealed this Award as of the
Grant Date set forth above.
NORTH GEORGIA NATIONAL BANK
By:_________________________________
Title:______________________________
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<PAGE>
TERMS AND CONDITIONS
TO THE
INCENTIVE STOCK OPTION AWARD
PURSUANT TO THE NORTH GEORGIA NATIONAL BANK
1999 STOCK INCENTIVE PLAN
1. Exercise of Option. Subject to the provisions provided herein or in the
Award made pursuant to the North Georgia National Bank 1999 Stock Incentive
Plan:
(a) the Option may be exercised with respect to all or any portion
of the vested Option Shares at any time during the Option Period by the
delivery to the Bank, at its principal place of business, of a written
notice of exercise in substantially the form attached hereto as Exhibit 1,
which shall be actually delivered to the Bank no earlier than thirty (30)
days and no later than ten (10) days prior to the date upon which Optionee
desires to exercise all or any portion of the Option; and
(b) payment to the Bank of the Exercise Price multiplied by the
number of Option Shares being purchased (the "Purchase Price") as provided
in Section 2.
Upon acceptance of such notice and receipt of payment in full of the Purchase
Price, the Bank shall cause to be issued a certificate representing the Option
Shares purchased.
2. Purchase Price. Payment of the Purchase Price for all Option Shares
purchased pursuant to the exercise of an Option shall be made in cash or
certified check or, alternatively, as follows:
(a) by delivery to the Bank of a number of shares of Common Stock
which have been owned by the Optionee for at least six (6) months prior to
the date of the Option's exercise having an aggregate fair market value,
as determined under the Plan, on the date of exercise either equal to the
Purchase Price or in combination with cash or a certified check to equal
the Purchase Price; or
(b) if and when the Common Stock becomes traded by brokers, whether
on a national securities exchange or otherwise, by receipt of the Purchase
Price in cash from a broker, dealer or other "creditor" as defined by
Regulation T issued by the Board of Governors of the Federal Reserve
System following delivery by the Optionee to the Committee of instructions
in a form acceptable to the Committee regarding delivery to such broker,
dealer or other creditor of that number of Option Shares with respect to
which the Option is exercised.
3. Rights as Shareholder. Until the stock certificates reflecting the
Option Shares accruing to the Optionee upon exercise of the Option are issued to
the Optionee, the Optionee shall have no rights as a shareholder with respect to
such Option Shares. The Bank shall make no adjustment for any dividends or
distributions or other rights on or with respect to Option Shares for which the
record date is prior to the issuance of that stock certificate, except as the
Plan or the attached Award otherwise provides.
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<PAGE>
4. Restriction on Transfer of Option and of Option Shares. The Option
evidenced hereby is nontransferable other than by will or the laws of descent
and distribution and shall be exercisable during the lifetime of the Optionee
only by the Optionee (or in the event of his Disability, by his personal
representative) and after his death, only by his legatee or the executor of his
estate.
5. Changes in Capitalization.
(a) If the number of shares of Common Stock shall be increased or
decreased by reason of a subdivision or combination of shares of Common
Stock, the payment of a stock dividend in shares of Common Stock or any
other increase or decrease in the number of shares of Common Stock
outstanding effected without receipt of consideration by the Bank, an
appropriate adjustment shall be made by the Committee, in a manner
determined in its sole discretion, in the number and kind of Option Shares
and in the Exercise Price.
(b) If the Bank shall be the surviving corporation in any merger or
consolidation, recapitalization, reclassification of shares or similar
reorganization, the Optionee shall be entitled to purchase the number and
class of securities to which a holder of the number of shares of Common
Stock subject to the Option at the time of the transaction would have been
entitled to receive as a result of such transaction, and a corresponding
adjustment, where appropriate, shall be made in the Exercise Price. In the
event of a Change in Control or other corporate transaction pursuant to
which the Bank is not the surviving entity, the Committee may provide for
the assumption of the Option by the surviving entity or the substitution
of a new option, adjusted in a manner similar to that contemplated by the
immediately preceding sentence; however, if the surviving entity does not
agree to the substitution of the Option, the Committee may elect to
terminate the Option Period as of the effective date of the Change in
Control in consideration of the payment to the Optionee of the sum of the
difference between the then aggregate Fair Market Value of the Common
Stock and the aggregate Exercise Price for each vested Option Share which
has not been exercised as of the effective date of the Change in Control.
A dissolution or liquidation of the Bank shall cause the Option to
terminate as to any portion thereof not exercised as of the effective date
of the dissolution or liquidation.
(c) The existence of the Plan and the Option granted pursuant to
this Agreement shall not affect in any way the right or power of the Bank
to make or authorize any adjustment, reclassification, reorganization or
other change in its capital or business structure, any merger or
consolidation of the Bank, any issue of debt or equity securities having
preferences or priorities as to the Common Stock or the rights thereof,
the dissolution or liquidation of the Bank, any sale or transfer of all or
any part of its business or assets, or any other corporate act or
proceeding. Any adjustment pursuant to this Section may provide, in the
Committee's discretion, for the elimination without payment therefor of
any fractional shares that might otherwise become subject to any Option.
6. Special Limitation on Exercise. No purported exercise of the Option
shall be effective without the approval of the Committee, which may be withheld
to the extent that the exercise, either individually or in the aggregate
together with the exercise of other previously exercised stock options and/or
offers and sales pursuant to any prior or contemplated offering of securities,
would, in the sole and absolute judgment of the Committee, require the filing of
a registration statement with the United States Securities and Exchange
Commission or with the securities commission of any state. If a registration
statement is not in effect under the Securities Act
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<PAGE>
of 1933 or any applicable state securities law with respect to shares of Common
Stock purchasable or otherwise deliverable under the Option, the Optionee (a)
shall deliver to the Bank, prior to the exercise of the Option or as a condition
to the delivery of Common Stock pursuant to the exercise of an Option exercise,
such information, representations and warranties as the Bank may reasonably
request in order for the Bank to be able to satisfy itself that the Option
Shares are being acquired in accordance with the terms of an applicable
exemption from the securities registration requirements of applicable federal
and state securities laws and (b) shall agree that the shares of Common Stock so
acquired will not be disposed of except pursuant to an effective registration
statement, unless the Bank shall have received an opinion of counsel that such
disposition is exempt from such requirement under the Securities Act of 1933 and
any applicable state securities law.
7. Legend on Stock Certificates. Certificates evidencing the Option
Shares, to the extent appropriate at the time, shall have noted conspicuously on
the certificates a legend intended to give all persons full notice of the
existence of the conditions, restrictions, rights and obligations set forth
herein and in the Plan.
8. Governing Laws. This Award and the Terms and Conditions shall be
construed, administered and enforced according to the laws of the State of
Georgia.
9. Successors. This Award and the Terms and Conditions shall be binding
upon and inure to the benefit of the heirs, legal representatives, successors
and permitted assigns of the Optionee and the Bank.
10. Notice. Except as otherwise specified herein, all notices and other
communications under this Award shall be in writing and shall be deemed to have
been given if personally delivered or if sent by registered or certified United
States mail, return receipt requested, postage prepaid, addressed to the
proposed recipient at the last known address of the recipient. Any party may
designate any other address to which notices shall be sent by giving notice of
the address to the other parties in the same manner as provided herein.
11. Severability. In the event that any one or more of the provisions or
portion thereof contained in the Award and these Terms and Conditions shall for
any reason be held to be invalid, illegal or unenforceable in any respect, the
same shall not invalidate or otherwise affect any other provisions of the Award
and these Terms and Conditions, and the Award and these Terms and Conditions
shall be construed as if the invalid, illegal or unenforceable provision or
portion thereof had never been contained herein.
12. Entire Agreement. Subject to the terms and conditions of the Plan, the
Award and the Terms and Conditions express the entire understanding of the
parties with respect to the Option.
13. Violation. Any transfer, pledge, sale, assignment, or hypothecation of
the Option or any portion thereof shall be a violation of the terms of the Award
or these Terms and Conditions and shall be void and without effect.
14. Headings and Capitalized Terms. Section headings used herein are for
convenience of reference only and shall not be considered in construing the
Award or these Terms and Conditions. Capitalized terms used, but not defined, in
either the Award or the Terms and Conditions shall be given the meaning ascribed
to them in the Plan.
C-19
<PAGE>
15. Specific Performance. In the event of any actual or threatened default
in, or breach of, any of the terms, conditions and provisions of the Award and
these Terms and Conditions, the party or parties who are thereby aggrieved shall
have the right to specific performance and injunction in addition to any and all
other rights and remedies at law or in equity, and all such rights and remedies
shall be cumulative.
16. No Right to Continued Retention. Neither the establishment of the Plan
nor the award of Option Shares hereunder shall be construed as giving the
Optionee the right to continued employment with the Bank or any affiliate.
17. Qualified Status of Option. In accordance with Section 2.4 of the
Plan, the aggregate Fair Market Value (determined as of the date an Incentive
Stock Option is granted) of the Option Shares which become exercisable for the
first time by an individual during any calendar year shall not exceed $100,000.
If the foregoing limitation is exceeded with respect to any portion of the
Option Shares, that portion of the Option Shares which cause the limitation to
be exceeded shall be treated as granted under a Non-Qualified Stock Option.
C-20
<PAGE>
EXHIBIT 1
NOTICE OF EXERCISE OF
STOCK OPTION TO PURCHASE
COMMON STOCK OF
NORTH GEORGIA NATIONAL BANK
Name_____________________________
Address__________________________
_________________________________
Date_____________________________
North Georgia National Bank
350 West Belmont Drive
Calhoun, Georgia 30701
Attn: Corporate Secretary
Re: Exercise of Incentive Stock Option
Gentlemen:
Subject to acceptance hereof by North Georgia National Bank (the "Bank")
and pursuant to the provisions of the North Georgia National Bank 1999 Stock
Incentive Plan (the "Plan"), I hereby give notice of my election to exercise
options granted to me to purchase ______________ shares of Common Stock of the
Bank under the Incentive Stock Option Award (the "Award") dated as of
____________. The purchase shall take place as of __________, 200__ (the
"Exercise Date").
On or before the Exercise Date, I will pay the applicable purchase price
as follows:
[ ] by delivery of cash or a certified check for $___________ for
the full purchase price payable to the order of North Georgia
National Bank.
[ ] by delivery of cash or a certified check for $___________
representing a portion of the purchase price with the balance
to consist of shares of Common Stock that I have owned for at
least six months and that are represented by a stock
certificate I will surrender to the Bank with my endorsement.
If the number of shares of Common Stock represented by such
stock certificate exceed the number to be applied against the
purchase price, I understand that
C-21
<PAGE>
a new stock certificate will be issued to me reflecting the
excess number of shares.
[ ] by delivery of a stock certificate representing shares of
Common Stock that I have owned for at least six months which I
will surrender to the Bank with my endorsement as payment of
the purchase price. If the number of shares of Common Stock
represented by such certificate exceed the number to be
applied against the purchase price, I understand that a new
certificate will be issued to me reflecting the excess number
of shares.
[ ] by delivery of the purchase price by
_________________________, a broker, dealer or other
"creditor" as defined by Regulation T issued by the Board of
Governors of the Federal Reserve System. I hereby authorize
the Bank to issue a stock certificate for the number of shares
indicated above in the name of said broker, dealer or other
creditor or its nominee pursuant to instructions received by
the Bank and to deliver said stock certificate directly to
that broker, dealer or other creditor (or to such other party
specified in the instructions received by the Bank from the
broker, dealer or other creditor) upon receipt of the purchase
price.
As soon as the stock certificate is registered in my name, please deliver
it to me at the above address.
If the Common Stock being acquired is not registered for issuance to and
resale by the Optionee pursuant to an effective registration statement on Form
S-8 (or successor form) filed under the Securities Act of 1933, as amended (the
"1933 Act"), I hereby represent, warrant, covenant, and agree with the Bank as
follows:
The shares of the Common Stock being acquired by me will be acquired for
my own account without the participation of any other person, with the
intent of holding the Common Stock for investment and without the intent
of participating, directly or indirectly, in a distribution of the Common
Stock and not with a view to, or for resale in connection with, any
distribution of the Common Stock, nor am I aware of the existence of any
distribution of the Common Stock;
I am not acquiring the Common Stock based upon any representation, oral or
written, by any person with respect to the future value of, or income
from, the Common Stock but rather upon an independent examination and
judgment as to the prospects of the Bank;
The Common Stock was not offered to me by means of publicly disseminated
advertisements or sales literature, nor am I aware of any offers made to
other persons by such means;
I am able to bear the economic risks of the investment in the Common
Stock, including the risk of a complete loss of my investment therein;
C-22
<PAGE>
I understand and agree that the Common Stock will be issued and sold to me
without registration under any state law relating to the registration of
securities for sale, and will be issued and sold in reliance on the
exemptions from registration under the 1933 Act, provided by Sections 3(b)
and/or 4(2) thereof and the rules and regulations promulgated thereunder;
The Common Stock cannot be offered for sale, sold or transferred by me
other than pursuant to: (A) an effective registration under the 1933 Act
or in a transaction otherwise in compliance with the 1933 Act; and (B)
evidence satisfactory to the Bank of compliance with the applicable
securities laws of other jurisdictions. The Bank shall be entitled to rely
upon an opinion of counsel satisfactory to it with respect to compliance
with the above laws;
The Bank will be under no obligation to register the Common Stock or to
comply with any exemption available for sale of the Common Stock without
registration or filing, and the information or conditions necessary to
permit routine sales of securities of the Bank under Rule 144 under the
1933 Act are not now available and no assurance has been given that it or
they will become available. The Bank is under no obligation to act in any
manner so as to make Rule 144 available with respect to the Common Stock;
I have and have had complete access to and the opportunity to review and
make copies of all material documents related to the business of the Bank,
including, but not limited to, contracts, financial statements, tax
returns, leases, deeds and other books and records. I have examined such
of these documents as I wished and am familiar with the business and
affairs of the Bank. I realize that the purchase of the Common Stock is a
speculative investment and that any possible profit therefrom is
uncertain;
I have had the opportunity to ask questions of and receive answers from
the Bank and any person acting on its behalf and to obtain all material
information reasonably available with respect to the Bank and its affairs.
I have received all information and data with respect to the Bank which I
have requested and which I have deemed relevant in connection with the
evaluation of the merits and risks of my investment in the Bank;
I have such knowledge and experience in financial and business matters
that I am capable of evaluating the merits and risks of the purchase of
the Common Stock hereunder and I am able to bear the economic risk of such
purchase; and
The agreements, representations, warranties and covenants made by me
herein extend to and apply to all of the Common Stock of the Bank issued
to me pursuant to this Award. Acceptance by me of the certificate
representing such Common Stock shall constitute a confirmation by me that
all such agreements, representations, warranties and covenants made herein
shall be true and correct at that time.
I understand that the certificates representing the shares being purchased
by me in accordance with this notice shall bear a legend referring to the
foregoing covenants, representations and warranties and restrictions on
transfer, and I agree that a legend to that effect may be placed
C-23
<PAGE>
on any certificate which may be issued to me as a substitute for the
certificates being acquired by me in accordance with this notice. I
further understand that capitalized terms used in this Notice of Exercise
without definition shall have the meanings given to them in the Plan.
Very truly yours,
______________________________
AGREED TO AND ACCEPTED:
NORTH GEORGIA NATIONAL BANK
By:___________________________
Title:________________________
Number of Shares
Exercised:____________________
Number of Shares
Remaining:____________________ Date:________________________
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SCHEDULE 1
VESTING SCHEDULE
INCENTIVE STOCK OPTION AWARD
ISSUED PURSUANT TO THE
NORTH GEORGIA NATIONAL BANK
1999 STOCK INCENTIVE PLAN
A. The Option Shares shall become vested Option Shares following completion
of the years of service as an employee of the Bank or any Parent or
Subsidiary as indicated in the schedule below.
Percentage of Option Shares Years of Service
Which are Vested Shares after the Grant Date
20% 1
40% 2
60% 3
80% 4
100% 5
B. Notwithstanding the foregoing Vesting Schedule, the Option will become
fully vested upon the occurrence of a Change in Control.
C. For purposes of the Vesting Schedule, Optionee shall be granted a year of
service for each twelve-consecutive-month period following the Grant Date
and during which Optionee continues, at all times, as an employee of the
Bank or any Parent or Subsidiary.
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<PAGE>
THIS DOCUMENT HAS BEEN SANITIZED WITH THE DOCCLEAN MACRO!
NONQUALIFIED STOCK OPTION AWARD
PURSUANT TO THE NORTH GEORGIA NATIONAL BANK
1999 STOCK INCENTIVE PLAN
THIS AWARD is made as of the Grant Date by NORTH GEORGIA NATIONAL BANK
(the "Bank") to ______________________ (the "Optionee").
Upon and subject to the Terms and Conditions attached hereto and
incorporated herein by reference, the Bank hereby awards as of the Grant Date to
Optionee a nonqualified stock option (the "Option"), as described below, to
purchase the Option Shares.
A. Grant Date: _________________________, 199_.
B. Type of Option: Nonqualified Stock Option.
C. Plan under which granted: North Georgia National Bank 1999 Stock
Incentive Plan.
D. Option Shares: All or any part of _______________ shares of the
Bank's common stock, $5.00 par value per share (the "Common Stock"),
subject to adjustment as provided in the attached Terms and
Conditions.
E. Exercise Price: $________ per share, subject to adjustment as
provided in the attached Terms and Conditions.
F. Option Period: The Option may be exercised only during the Option
Period which commences on the Grant Date and ends, generally, on the
earlier of (a) the tenth (10th) anniversary of the Grant Date; or
(b) 90 days following the date the Optionee ceases to be an employee
of the Bank (including any affiliate); provided that the Option may
be exercised as to no more than the vested Option Shares, determined
pursuant to the Vesting Schedule. Note that other limitations to
exercising the Option, as described in the attached Terms and
Conditions, may apply.
G. Vesting Schedule: The Option Shares shall become vested in
accordance with Schedule 1 hereto.
IN WITNESS WHEREOF, the Bank has executed and sealed this Award as of the
Grant Date set forth above.
NORTH GEORGIA NATIONAL BANK
By:________________________________
Title:_____________________________
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<PAGE>
TERMS AND CONDITIONS
TO THE
NONQUALIFIED STOCK OPTION AWARD
PURSUANT TO THE NORTH GEORGIA NATIONAL BANK
1999 STOCK INCENTIVE PLAN
1. Exercise of Option. Subject to the provisions provided herein or in the
Award made pursuant to the North Georgia National Bank 1999 Stock Incentive
Plan:
(a) the Option may be exercised with respect to all or any portion
of the vested Option Shares at any time during the Option Period by the
delivery to the Bank, at its principal place of business, of a written
notice of exercise in substantially the form attached hereto as Exhibit 1,
which shall be actually delivered to the Bank no earlier than thirty (30)
days and no later than ten (10) days prior to the date upon which Optionee
desires to exercise all or any portion of the Option; and
(b) payment to the Bank of the Exercise Price multiplied by the
number of Option Shares being purchased (the "Purchase Price") as provided
in Section 2.
Upon acceptance of such notice and receipt of payment in full of the Purchase
Price and tax withholding liability, the Bank shall cause to be issued a
certificate representing the Option Shares purchased.
2. Purchase Price. Payment of the Purchase Price for all Option Shares
purchased pursuant to the exercise of an Option shall be made in cash or
certified check or, alternatively, as follows:
(a) by delivery to the Bank of a number of shares of Common Stock
which have been owned by the Optionee for at least six (6) months prior to
the date of the Option's exercise having an aggregate fair market value,
as determined under the Plan, on the date of exercise either equal to the
Purchase Price or in combination with cash or a certified check to equal
the Purchase Price; or
(b) if and when the Common Stock becomes traded by brokers, whether
on a national securities exchange or otherwise, by receipt of the Purchase
Price in cash from a broker, dealer or other "creditor" as defined by
Regulation T issued by the Board of Governors of the Federal Reserve
System following delivery by the Optionee to the Committee of instructions
in a form acceptable to the Committee regarding delivery to such broker,
dealer or other creditor of that number of Option Shares with respect to
which the Option is exercised.
3. Withholding. The Optionee must satisfy any federal, state and local
withholding taxes imposed by reason of the exercise of the Option
either by paying to the Bank the full amount of the withholding
obligation in cash; by tendering shares of Common Stock which have
been owned by the Optionee for at least six (6) months prior to the
date of exercise having a Fair Market Value equal to the withholding
obligation; by electing, irrevocably and in writing in substantially
the form attached
C-27
<PAGE>
hereto as Exhibit 2 (a "Withholding Election"), to have the actual
number of shares of Common Stock issuable upon exercise reduced by
the smallest number of whole shares of Common Stock which, when
multiplied by the Fair Market Value of the Common Stock as of the
date the Option is exercised, is sufficient to satisfy the amount of
the withholding tax; or by any combination of the above. The
Optionee may make a Withholding Election only if the following
conditions are met:
(a) the Withholding Election is made on or prior to the date on
which the amount of tax required to be withheld is determined by executing
and delivering to the Bank a properly completed Withholding Election; and
(b) any Withholding Election made will be irrevocable; however, the
Committee may, in its sole discretion, disapprove and give no effect to
any Withholding Election.
4. Rights as Shareholder. Until the stock certificates reflecting the
Option Shares accruing to the Optionee upon exercise of the Option
are issued to the Optionee, the Optionee shall have no rights as a
shareholder with respect to such Option Shares. The Bank shall make
no adjustment for any dividends or distributions or other rights on
or with respect to Option Shares for which the record date is prior
to the issuance of that stock certificate, except as the Plan or the
attached Award otherwise provides.
5. Restriction on Transfer of Option and of Option Shares. The Option
evidenced hereby is nontransferable other than by will or the laws of descent
and distribution and shall be exercisable during the lifetime of the Optionee
only by the Optionee (or in the event of his Disability, by his personal
representative) and after his death, only by his legatee or the executor of his
estate.
6. Changes in Capitalization.
(a) If the number of shares of Common Stock shall be increased or
decreased by reason of a subdivision or combination of shares of Common
Stock, the payment of a stock dividend in shares of Common Stock or any
other increase or decrease in the number of shares of Common Stock
outstanding effected without receipt of consideration by the Bank, an
appropriate adjustment shall be made by the Committee, in a manner
determined in its sole discretion, in the number and kind of Option Shares
and in the Exercise Price.
(b) If the Bank shall be the surviving corporation in any merger or
consolidation, recapitalization, reclassification of shares or similar
reorganization, the Optionee shall be entitled to purchase the number and
class of securities to which a holder of the number of shares of Common
Stock subject to the Option at the time of the transaction would have been
entitled to receive as a result of such transaction, and a corresponding
adjustment, where appropriate, shall be made in the Exercise Price. In the
event of a Change in Control or other corporate transaction pursuant to
which the Bank is not the surviving entity, the Committee may provide for
the assumption of the Option by the surviving entity or the substitution
of a new option, adjusted in a manner similar to that contemplated by the
immediately preceding sentence; however, if the surviving entity does not
agree to the substitution of the Option, the Committee may elect to
terminate the Option Period as of the effective date of the Change in
Control in consideration of the payment to the Optionee of the sum of the
difference between the then aggregate Fair Market Value of the Common
Stock and the aggregate Exercise Price for each vested Option Share which
has not been exercised as of the effective date of the
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<PAGE>
Change in Control. A dissolution or liquidation of the Bank shall cause
the Option to terminate as to any portion thereof not exercised as of the
effective date of the dissolution or liquidation.
(c) The existence of the Plan and the Option granted pursuant to
this Agreement shall not affect in any way the right or power of the Bank
to make or authorize any adjustment, reclassification, reorganization or
other change in its capital or business structure, any merger or
consolidation of the Bank, any issue of debt or equity securities having
preferences or priorities as to the Common Stock or the rights thereof,
the dissolution or liquidation of the Bank, any sale or transfer of all or
any part of its business or assets, or any other corporate act or
proceeding. Any adjustment pursuant to this Section may provide, in the
Committee's discretion, for the elimination without payment therefor of
any fractional shares that might otherwise become subject to any Option.
7. Special Limitation on Exercise. No purported exercise of the Option
shall be effective without the approval of the Committee, which may be withheld
to the extent that the exercise, either individually or in the aggregate
together with the exercise of other previously exercised stock options and/or
offers and sales pursuant to any prior or contemplated offering of securities,
would, in the sole and absolute judgment of the Committee, require the filing of
a registration statement with the United States Securities and Exchange
Commission or with the securities commission of any state. If a registration
statement is not in effect under the Securities Act of 1933 or any applicable
state securities law with respect to shares of Common Stock purchasable or
otherwise deliverable under the Option, the Optionee (a) shall deliver to the
Bank, prior to the exercise of the Option or as a condition to the delivery of
Common Stock pursuant to the exercise of an Option exercise, such information,
representations and warranties as the Bank may reasonably request in order for
the Bank to be able to satisfy itself that the Option Shares are being acquired
in accordance with the terms of an applicable exemption from the securities
registration requirements of applicable federal and state securities laws and
(b) shall agree that the shares of Common Stock so acquired will not be disposed
of except pursuant to an effective registration statement, unless the Bank shall
have received an opinion of counsel that such disposition is exempt from such
requirement under the Securities Act of 1933 and any applicable state securities
law.
8. Legend on Stock Certificates. Certificates evidencing the Option
Shares, to the extent appropriate at the time, shall have noted conspicuously on
the certificates a legend intended to give all persons full notice of the
existence of the conditions, restrictions, rights and obligations set forth
herein and in the Plan.
9. Governing Laws. This Award and the Terms and Conditions shall be
construed, administered and enforced according to the laws of the State of
Georgia.
10. Successors. This Award and the Terms and Conditions shall be binding
upon and inure to the benefit of the heirs, legal representatives, successors
and permitted assigns of the Optionee and the Bank.
11. Notice. Except as otherwise specified herein, all notices and other
communications under this Award shall be in writing and shall be deemed to have
been given if personally delivered or if sent by registered or certified United
States mail, return receipt requested, postage prepaid, addressed to the
proposed recipient at the last known address of the recipient. Any party may
C-29
<PAGE>
designate any other address to which notices shall be sent by giving notice of
the address to the other parties in the same manner as provided herein.
12. Severability. In the event that any one or more of the provisions or
portion thereof contained in the Award and these Terms and Conditions shall for
any reason be held to be invalid, illegal or unenforceable in any respect, the
same shall not invalidate or otherwise affect any other provisions of the Award
and these Terms and Conditions, and the Award and these Terms and Conditions
shall be construed as if the invalid, illegal or unenforceable provision or
portion thereof had never been contained herein.
13. Entire Agreement. Subject to the terms and conditions of the Plan, the
Award and the Terms and Conditions express the entire understanding of the
parties with respect to the Option.
14. Violation. Any transfer, pledge, sale, assignment, or hypothecation of
the Option or any portion thereof shall be a violation of the terms of the Award
or these Terms and Conditions and shall be void and without effect.
15. Headings and Capitalized Terms. Section headings used herein are for
convenience of reference only and shall not be considered in construing the
Award or these Terms and Conditions. Capitalized terms used, but not defined, in
either the Award or the Terms and Conditions shall be given the meaning ascribed
to them in the Plan.
16. Specific Performance. In the event of any actual or threatened default
in, or breach of, any of the terms, conditions and provisions of the Award and
these Terms and Conditions, the party or parties who are thereby aggrieved shall
have the right to specific performance and injunction in addition to any and all
other rights and remedies at law or in equity, and all such rights and remedies
shall be cumulative.
17. No Right to Continued Retention. Neither the establishment of the Plan
nor the award of Option Shares hereunder shall be construed as giving the
Optionee the right to continued employment with the Bank or any affiliate.
C-30
<PAGE>
EXHIBIT 1
NOTICE OF EXERCISE OF
STOCK OPTION TO PURCHASE
COMMON STOCK OF
NORTH GEORGIA NATIONAL BANK
Name__________________________
Address_______________________
______________________________
Date__________________________
North Georgia National Bank
350 West Belmont Drive
Calhoun, Georgia 30701
Attn: Corporate Secretary
Re: Exercise of Nonqualified Stock Option
Gentlemen:
Subject to acceptance hereof by North Georgia National Bank (the "Bank")
and pursuant to the provisions of the North Georgia National Bank 1999 Stock
Incentive Plan (the "Plan"), I hereby give notice of my election to exercise
options granted to me to purchase ______________ shares of Common Stock of the
Bank under the Nonqualified Stock Option Award (the "Award") dated as of
____________. The purchase shall take place as of __________, 200__ (the
"Exercise Date").
On or before the Exercise Date, I will pay the applicable purchase price
as follows:
[ ] by delivery of cash or a certified check for $___________ for
the full purchase price payable to the order of North Georgia
National Bank.
[ ] by delivery of cash or a certified check for $___________
representing a portion of the purchase price with the balance
to consist of shares of Common Stock that I have owned for at
least six months and that are represented by a stock
certificate I will surrender to the Bank with my endorsement.
If the number of shares of Common Stock represented by such
stock certificate exceed the number to be applied against the
purchase
C-31
<PAGE>
price, I understand that a new stock certificate will be
issued to me reflecting the excess number of shares.
[ ] by delivery of a stock certificate representing shares of
Common Stock that I have owned for at least six months which I
will surrender to the Bank with my endorsement as payment of
the purchase price. If the number of shares of Common Stock
represented by such certificate exceed the number to be
applied against the purchase price, I understand that a new
certificate will be issued to me reflecting the excess number
of shares.
[ ] by delivery of the purchase price by
_________________________, a broker, dealer or other
"creditor" as defined by Regulation T issued by the Board of
Governors of the Federal Reserve System. I hereby authorize
the Bank to issue a stock certificate for the number of shares
indicated above in the name of said broker, dealer or other
creditor or its nominee pursuant to instructions received by
the Bank and to deliver said stock certificate directly to
that broker, dealer or other creditor (or to such other party
specified in the instructions received by the Bank from the
broker, dealer or other creditor) upon receipt of the purchase
price.
The required federal, state, and local income tax withholding obligations,
if any, on the exercise of the Award shall also be paid on or before the
Exercise Date in cash or with previously owned shares of Common Stock, as
provided in the Award, or in the manner provided in the Withholding Election
previously tendered or to be tendered to the Bank no later than the Exercise
Date.
As soon as the stock certificate is registered in my name, please deliver
it to me at the above address.
If the Common Stock being acquired is not registered for issuance to and
resale by the Optionee pursuant to an effective registration statement on Form
S-8 (or successor form) filed under the Securities Act of 1933, as amended (the
"1933 Act"), I hereby represent, warrant, covenant, and agree with the Bank as
follows:
The shares of the Common Stock being acquired by me will be acquired for
my own account without the participation of any other person, with the
intent of holding the Common Stock for investment and without the intent
of participating, directly or indirectly, in a distribution of the Common
Stock and not with a view to, or for resale in connection with, any
distribution of the Common Stock, nor am I aware of the existence of any
distribution of the Common Stock;
I am not acquiring the Common Stock based upon any representation, oral or
written, by any person with respect to the future value of, or income
from, the Common Stock but rather upon an independent examination and
judgment as to the prospects of the Bank;
C-32
<PAGE>
The Common Stock was not offered to me by means of publicly disseminated
advertisements or sales literature, nor am I aware of any offers made to
other persons by such means;
I am able to bear the economic risks of the investment in the Common
Stock, including the risk of a complete loss of my investment therein;
I understand and agree that the Common Stock will be issued and sold to me
without registration under any state law relating to the registration of
securities for sale, and will be issued and sold in reliance on the
exemptions from registration under the 1933 Act, provided by Sections 3(b)
and/or 4(2) thereof and the rules and regulations promulgated thereunder;
The Common Stock cannot be offered for sale, sold or transferred by me
other than pursuant to: (A) an effective registration under the 1933 Act
or in a transaction otherwise in compliance with the 1933 Act; and (B)
evidence satisfactory to the Bank of compliance with the applicable
securities laws of other jurisdictions. The Bank shall be entitled to rely
upon an opinion of counsel satisfactory to it with respect to compliance
with the above laws;
The Bank will be under no obligation to register the Common Stock or to
comply with any exemption available for sale of the Common Stock without
registration or filing, and the information or conditions necessary to
permit routine sales of securities of the Bank under Rule 144 under the
1933 Act are not now available and no assurance has been given that it or
they will become available. The Bank is under no obligation to act in any
manner so as to make Rule 144 available with respect to the Common Stock;
I have and have had complete access to and the opportunity to review and
make copies of all material documents related to the business of the Bank,
including, but not limited to, contracts, financial statements, tax
returns, leases, deeds and other books and records. I have examined such
of these documents as I wished and am familiar with the business and
affairs of the Bank. I realize that the purchase of the Common Stock is a
speculative investment and that any possible profit therefrom is
uncertain;
I have had the opportunity to ask questions of and receive answers from
the Bank and any person acting on its behalf and to obtain all material
information reasonably available with respect to the Bank and its affairs.
I have received all information and data with respect to the Bank which I
have requested and which I have deemed relevant in connection with the
evaluation of the merits and risks of my investment in the Bank;
I have such knowledge and experience in financial and business matters
that I am capable of evaluating the merits and risks of the purchase of
the Common Stock hereunder and I am able to bear the economic risk of such
purchase; and
The agreements, representations, warranties and covenants made by me
herein extend to and apply to all of the Common Stock of the Bank issued
to me pursuant to this Award.
C-33
<PAGE>
Acceptance by me of the certificate representing such Common Stock shall
constitute a confirmation by me that all such agreements, representations,
warranties and covenants made herein shall be true and correct at that
time.
I understand that the certificates representing the shares being purchased
by me in accordance with this notice shall bear a legend referring to the
foregoing covenants, representations and warranties and restrictions on
transfer, and I agree that a legend to that effect may be placed on any
certificate which may be issued to me as a substitute for the certificates
being acquired by me in accordance with this notice. I further understand
that capitalized terms used in this Notice of Exercise without definition
shall have the meanings given to them in the Plan.
Very truly yours,
_______________________________
AGREED TO AND ACCEPTED:
NORTH GEORGIA NATIONAL BANK
By:___________________________
Title:________________________
Number of Shares
Exercised:____________________
Number of Shares
Remaining: ___________________ Date:________________________
C-34
<PAGE>
EXHIBIT 2
NOTICE OF WITHHOLDING ELECTION
NORTH GEORGIA NATIONAL BANK
1999 STOCK INCENTIVE PLAN
TO: NORTH GEORGIA NATIONAL BANK
Attn: Corporate Secretary
FROM: __________________
RE: Withholding Election
This election relates to the Option identified in Paragraph 3 below.
I hereby certify that:
(1) My correct name and social security number and my current address are
set forth at the end of this document.
(2) I am (check one, whichever is applicable).
[] the original recipient of the Option.
[] the legal representative of the estate of the original
recipient of the Option.
[] a legatee of the original recipient of the Option.
[] the legal guardian of the original recipient of the Option.
(3) The Option pursuant to which this election relates was issued under
the North Georgia National Bank 1999 Stock Incentive Plan in the name of
__________________ for the purchase of a total of _______ shares of Common
Stock. This election relates to _____________ shares of Common Stock issuable
upon exercise of the Option (the "Stock"), provided that the numbers set forth
above shall be deemed changed as appropriate to reflect the applicable Plan
provisions.
(4) In connection with any exercise of the Option with respect to Stock, I
hereby elect to have certain shares issuable pursuant to the exercise withheld
by the Bank for the purpose of having the value of the shares applied to pay
federal, state and local, if any, taxes arising from the exercise. The shares to
be withheld shall have, as of the Tax Date applicable to the exercise, a fair
market value equal to the minimum statutory tax withholding requirement under
federal, state and local law in connection with the exercise.
C-35
<PAGE>
(5) This Withholding Election is made no later than the Tax Date and is
otherwise timely made pursuant to the Plan.
(6) I understand that this Withholding Election may not be revised,
amended or revoked by me.
(8) The Plan has been made available to me by the Bank, I have read and
understand the Plan and I have no reason to believe that any of the conditions
therein to the making of this Withholding Election have not been met.
Capitalized terms used in this Notice of Withholding Election shall have the
meanings given to them in the Plan.
Dated: ____________________
___________________________________
Signature
___________________________________
Name (printed)
___________________________________
Street Address
___________________________________
City, State, Zip Code
C-36
<PAGE>
SCHEDULE 1
VESTING SCHEDULE
NONQUALIFIED STOCK OPTION AWARD
ISSUED PURSUANT TO THE
NORTH GEORGIA NATIONAL BANK
1999 STOCK INCENTIVE PLAN
A. The Option Shares shall become vested Option Shares following completion
of the years of service as an employee of the Bank or any affiliate as
indicated in the schedule below.
Percentage of Option Shares Years of Service
Which are Vested Shares after the Grant Date
----------------------- --------------------
D. Notwithstanding the foregoing Vesting Schedule, the Option will become
fully vested upon the occurrence of a Change in Control.
E. For purposes of the Vesting Schedule, Optionee shall be granted a year of
service for each twelve-consecutive-month period following the Grant Date
and during which Optionee continues, at all times, as an employee of the
Bank or any affiliate.
C-37
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers
Consistent with the applicable provisions of the laws of Georgia, the
registrant's bylaws provide that the registrant shall have the power to
indemnify its directors and officers against expenses (including attorneys'
fees) and liabilities arising from actual or threatened actions, suits or
proceedings, whether or not settled, to which they become subject by reason of
having served in such role if such director or officer acted in good faith and
in a manner he or she reasonably believed to be in or not opposed to the best
interests of the registrant and, with respect to a criminal action or
proceeding, had no reasonable cause to believe his or her conduct was unlawful.
Advances against expenses shall be made so long as the person seeking
indemnification agrees to refund the advances if it is ultimately determined
that he or she is not entitled to indemnification. A determination of whether
indemnification of a director or officer is proper because he met the applicable
standard of conduct shall be made (1) by the board of directors of the
registrant, (2) in specified circumstances, by independent legal counsel in a
written opinion or (3) by the affirmative vote of a majority of the shares
entitled to vote.
In addition, Article 9 of the registrant's articles of incorporation,
subject to exceptions, eliminates the potential personal liability of a director
for monetary damages to the registrant and to the shareholders of the registrant
for breach of a duty as a director. There is no elimination of liability for (1)
a breach of duty involving appropriation of a business opportunity of the
registrant, (2) an act or omission involving intentional misconduct or a knowing
violation of law, (3) a transaction from which the director derives an improper
material tangible personal benefit or (4) as to any payment of a dividend or
approval of a stock repurchase that is illegal under the Georgia Business
Corporations Code. The articles of incorporation do not eliminate or limit the
right of the registrant or its shareholders to seek injunctive or other
equitable relief not involving monetary damages.
Item 21. Exhibits and Financial Statement Schedules
(a) Exhibits
Exhibit
Number Description of Exhibits
- ------ -----------------------
2.1 Agreement and Plan of Share Exchange, dated as of March 3, 2000,
between North Georgia National Bank and North Georgia Community
Financial Partners, Inc. (included as Appendix A to the proxy
statement/prospectus and incorporated by reference herein).
3.1 Articles of Incorporation of North Georgia Community.
3.2 Bylaws of North Georgia Community.
4.1 Instruments Defining Rights of Security Holders. See Articles of
Incorporation at Exhibit 3.1 above, and Bylaws at Exhibit 3.2
above.
<PAGE>
Exhibit
Number Description of Exhibits
- ------ -----------------------
5.1 Opinion of Powell, Goldstein, Frazer & Murphy LLP (including
consent).
8.1 Opinion of Powell, Goldstein, Frazer & Murphy LLP regarding
federal income tax matters (including consent).
10.1* Employment Agreement dated September 22, 1999, between North
Georgia National Bank and David J. Lance.
10.2* Addendum to Employment Agreement, dated November 16, 1999,
between North Georgia National Bank and David J. Lance.
10.3* North Georgia National Bank 1999 Stock Incentive Plan (included as
Appendix C to the proxy statement/prospectus and incorporated by
reference herein).
21.1 Subsidiaries of the registrant.
23.1 Consents of Powell, Goldstein, Frazer & Murphy LLP (included in
Exhibits 5 and 8).
23.2 Consent of Mauldin & Jenkins, LLC (with respect to financial
statements of North Georgia National Bank).
24 Power of Attorney (appears on the signature page to this
registration statement).
27.1 Financial Data Schedule
99.1 North Georgia National Bank Form of Proxy.
*The indicated exhibit is a compensatory plan required to be filed as an
exhibit to this registration statement on Form S-4.
Item 22. Undertakings
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in
the aggregate, represent a fundamental change in the information set
forth in the registration statement. Notwithstanding the foregoing,
any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that which
was registered) and any deviation from the low or high and
<PAGE>
of the estimated maximum offering range may be reflected in the form
of prospectus filed with the Commission pursuant to Rule 424(b) if,
in the aggregate, the changes in volume and price represent no more
than 20 percent change in the maximum aggregate offering price set
forth in the "Calculation of Registration Fee" table in the
effective registration statement.
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
(b) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the registrant's articles of incorporation
or bylaws, or otherwise, the registrant has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act of 1933 and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred or
paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act of 1933 and will be governed by the
final adjudication of such issue.
(c) The undersigned registrant hereby undertakes to respond to requests
for information that is incorporated by reference into the prospectus pursuant
to Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
(d) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this amendment to the registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Calhoun,
State of Georgia, on April 13, 2000.
NORTH GEORGIA COMMUNITY FINANCIAL
PARTNERS, INC.
By: /s/ David J. Lance
-----------------------------------
David J. Lance
President
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints David J. Lance, as true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution
for him and in his name, place and stead, in any and all capacities, to sign any
and all amendments (including post-effective amendments) to the Registration
Statement, and to file the same, with all exhibits thereto, and other documents
in connection therewith, including any Registration Statement filed pursuant to
Rule 462(b) of the Securities Act of 1933, as amended, with the Securities and
Exchange Commission, granting unto said attorney-in-fact and agent, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully and to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
which said attorney-in-fact and agent, or his substitute or substitutes, may
lawfully do, or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this amendment
to the registration statement has been signed by the following persons in the
capacities indicated on April 13, 2000.
Signature Title
/s/ Thomas M. Kinnamon Secretary and Director
---------------------------
Thomas M. Kinnamon
/s/ David J. Lance President and Director
--------------------------- (principal executive officer)
David J. Lance (principal financial officer)
(principal accounting officer)
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description of Exhibits
- ------ -----------------------
2.1 Agreement and Plan of Share Exchange, dated as of March 3, 2000,
between North Georgia National Bank and North Georgia Community
Financial Partners, Inc. (included as Appendix A to the proxy
statement/prospectus and incorporated by reference herein).
3.1 Articles of Incorporation of North Georgia Community.
3.2 Bylaws of North Georgia Community.
4.1 Instruments Defining Rights of Security Holders. See Articles of
Incorporation at Exhibit 3.1 above, and Bylaws at Exhibit 3.2
above.
5.1 Opinion of Powell, Goldstein, Frazer & Murphy LLP (including
consent).
8.1 Opinion of Powell, Goldstein, Frazer & Murphy LLP regarding
federal income tax matters (including consent).
10.1* Employment Agreement dated September 22, 1999, between North
Georgia National Bank and David J. Lance.
10.2* Addendum to Employment Agreement, dated November 16, 1999,
between North Georgia National Bank and David J. Lance.
10.3* North Georgia National Bank 1999 Stock Incentive Plan (included as
Appendix C to the proxy statement/prospectus and incorporated by
reference herein).
21.1 Subsidiaries of the registrant.
23.1 Consents of Powell, Goldstein, Frazer & Murphy LLP (included in
Exhibits 5 and 8).
23.2 Consent of Mauldin & Jenkins, LLC (with respect to financial
statements of North Georgia National Bank).
24 Power of Attorney (appears on the signature page to this
registration statement).
27.1 Financial Data Schedule
99.1 North Georgia National Bank Form of Proxy.
*The indicated exhibit is a compensatory plan required to be filed as an
exhibit to this registration statement on Form S-4.
<PAGE>
Exhibit 3.1
ARTICLES OF INCORPORATION
OF
NORTH GEORGIA COMMUNITY FINANCIAL PARTNERS, INC.
Article 1. Name
The name of the Corporation is: "North Georgia Community Financial
Partners, Inc."
Article 2. Capital Stock
(a) The total number of shares of capital stock which the Corporation is
authorized to issue is twelve million (12,000,000) shares, divided into ten
million (10,000,000) shares of common stock, no par value (the "Common Stock"),
and two million (2,000,000) shares of preferred stock, no par value (the
"Preferred Stock").
(b) The Board of Directors of the Corporation is authorized, subject to
limitations prescribed by law and the provisions of this Article, to provide for
the issuance of the shares of Preferred Stock in series, and by filing a
certificate pursuant to the applicable law of the State of Georgia to establish
from time to time the number of shares to be included in each such series, and
to fix the designation, powers, preferences, and relative rights of the shares
of each such series and the qualifications, or restrictions thereof. The
authority of the Board of Directors with respect to each series shall include,
but not be limited to, determination of the following:
(i) The number of shares constituting that series and the
distinctive designation of that series;
(ii) The dividend rate on the shares of that series, whether
dividends shall be cumulative, and, if so, from which date or
dates, and the relative rights of priority, if any, of
payments of dividends on shares of that series;
(iii) Whether that series shall have voting rights, in addition to
the voting rights provided by law, and, if so, the terms of
such voting rights;
(iv) Whether that series shall have conversion privileges, and, if
so, the terms and conditions of such conversion, including
provisions for adjustment of the conversion rate in such
events as the Board of Directors shall determine;
(v) Whether or not the shares of that series shall be redeemable,
and, if so, the terms and conditions of such redemption,
including the date or dates upon or after which they shall be
redeemable, and the amount per share payable in case of
redemption, which amount may vary under different conditions
and at different redemption rates;
<PAGE>
(vi) Whether that series shall have a sinking fund for the
redemption or purchase of shares of that series, and, if so,
the terms and amount of such sinking fund;
(vii) The rights of the shares of that series in the event of
voluntary or involuntary liquidation, dissolution or
winding-up of the Corporation, and the relative rights of
priority, if any, of payment of shares of that series; and
(viii) Any other relative rights, preferences and limitations of
that series.
Article 3. Registered Office; Registered Agent
The name and address of the initial Registered Agent and the Registered
Office of the Corporation are:
David J. Lance, President
North Georgia National Bank
350 West Belmont Drive
Calhoun, Georgia 30701
Article 4. Incorporator
The name and address of the incorporator are:
David J. Lance, President
North Georgia National Bank
350 West Belmont Drive
Calhoun, Georgia 30701
Article 5. Principal Office
The mailing address of the initial principal office of the Corporation is:
P.O. Box 965
Calhoun, Georgia 30703-0965
-2-
<PAGE>
Article 6. Board of Directors
(a) The initial Board of Directors shall consist of two members who shall
be and whose addresses are:
Name Address
---- -------
David J. Lance 350 West Belmont Drive
Calhoun, Georgia 30701
Thomas M. Kinnamon 350 West Belmont Drive
Calhoun, Georgia 30701
(b) When and if the Board of Directors consists of six (6) or more
members, the Board of Directors shall be divided into three (3) classes, Class
I, Class II and Class III, which shall be as nearly equal in number as possible.
Each director in Class I shall be elected to an initial term of one (1) year,
each director in Class II shall be elected to an initial term of two (2) years,
each director in Class III shall be elected to an initial term of three (3)
years, and each director shall serve until the election and qualification of his
or her successor or until his or her earlier resignation, death or removal from
office. Upon the expiration of the initial terms of office for each Class of
directors, the directors of each Class shall be elected for terms of three (3)
years, to serve until the election and qualification of their successors or
until their earlier resignation, death or removal from office.
(c) Unless two-thirds (2/3) of the directors then in office shall approve
the proposed change, this Article 6 may be amended or rescinded only by the
affirmative vote of the holders of at least two-thirds (2/3) of the issued and
outstanding shares of the Corporation entitled to vote in an election of
directors, at any regular or special meeting of the shareholders, and notice of
the proposed change must be contained in the notice of the meeting.
Article 7. Bylaws; Number of Directors
(a) Except as provided in paragraph (b) of this Article 7, the Board of
Directors shall have the right to adopt, amend or repeal the bylaws of the
Corporation by the affirmative vote of a majority of all directors then in
office, and the shareholders shall have such right by the affirmative vote of a
majority of the issued and outstanding shares of the Corporation entitled to
vote in an election of directors.
(b) Notwithstanding paragraph (a) of this Article 7, any amendment of the
bylaws of the Corporation establishing or changing the number of directors shall
require the affirmative vote of two-thirds (2/3) of all directors then in office
or the affirmative vote of the holders of two-thirds (2/3) of the issued and
outstanding shares of the Corporation entitled to vote in an election of
directors, at any regular or special meeting of the shareholders, and notice of
the proposed change must be contained in the notice of the meeting.
-3-
<PAGE>
Article 8. Removal of Directors
(a) At any shareholders' meeting with respect to which notice of such
purpose has been given, the entire Board of Directors or any individual director
may be removed without cause only by the affirmative vote of the holders of at
least two-thirds (2/3) of the issued and outstanding shares of the Corporation
entitled to vote in an election of directors.
(b) At any shareholders' meeting with respect to which notice of such
purpose has been given, the entire Board of Directors or any individual director
may be removed with cause only by the affirmative vote of the holders of at
least a majority of the issued and outstanding shares of the Corporation
entitled to vote in an election of directors.
(c) For purposes of this Article 8, a director of the Corporation may be
removed for cause if (i) the director has been convicted of a felony; (ii) any
bank regulatory authority having jurisdiction over the Corporation requests or
demands the removal; or (iii) at least two-thirds (2/3) of the directors of the
Corporation then in office, excluding the director to be removed, determine that
the director's conduct has been inimical to the best interests of the
Corporation.
(d) Unless two-thirds (2/3) of the directors then in office shall approve
the proposed change, this Article 8 may be amended or rescinded only by the
affirmative vote of the holders of at least two-thirds (2/3) of the issued and
outstanding shares of the Corporation entitled to vote in an election of
directors, at any regular or special meeting of the shareholders, and notice of
the proposed change must be contained in the notice of the meeting.
Article 9. Liability of Directors
(a) A director of the Corporation shall not be personally liable to the
Corporation or its shareholders for monetary damages, for breach of any duty as
a director, except for liability for:
(i) any appropriation, in violation of his or her duties, of any
business opportunity of the Corporation;
(ii) acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law;
(iii) the types of liability set forth in Section 14-2-832 of the
Georgia Business Corporation Code dealing with unlawful
distributions of corporate assets to shareholders; or
(iv) any transaction from which the director derived an improper
material tangible personal benefit.
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<PAGE>
(b) Any repeal or modification of this Article by the shareholders of the
Corporation shall be prospective only and shall not adversely affect any right
or protection of a director of the Corporation existing at the time of such
repeal or modification.
(c) Unless two-thirds (2/3) of the directors then in office shall approve
the proposed change, this Article 9 may be amended or rescinded only by the
affirmative vote of the holders of at least two-thirds (2/3) of the issued and
outstanding shares of the Corporation entitled to vote thereon, at any regular
or special meeting of the shareholders, and notice of the proposed change must
be contained in the notice of the meeting.
Article 10. Shareholder Action by Written Consent
Any action required by law or by the Bylaws of the Corporation to be taken
at a meeting of the shareholders of the Corporation, and any action which may be
taken at such a meeting, may be taken without a meeting, if written consent,
setting forth the action so taken, is signed by persons entitled to vote at a
meeting those shares having sufficient voting power to cast not less than the
minimum number of votes that would be necessary to authorize or take such action
at a meeting at which all shares entitled to vote were present and voted. Notice
of such action without a meeting by less than unanimous written consent shall be
given within ten (10) days after taking such action to those shareholders of
record on the date when the written consent is first executed and whose shares
were not represented on the written consent
Article 11. Indemnification
The Corporation shall, to the fullest extent permitted by the provisions
of the Georgia Business Corporation Code, as the same may be amended and
supplemented, indemnify any and all persons whom it shall have power to
indemnify under the Code from and against any and all of the expenses,
liabilities, or other matters referred to in or covered by the Code. Any
indemnification effected under this provision shall not be deemed exclusive of
rights to which those indemnified may be entitled under any Bylaw, vote of
shareholders or disinterested directors, or otherwise, both as to action in
their official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be a director,
officer, employee, or agent and shall inure to the benefit of the heirs,
executors, and administrators of such a person.
Article 12. Certain Business Transactions
(a) In any case in which the Georgia Business Corporation Code or other
applicable law requires shareholder approval of any merger or share exchange of
the Corporation with or into any other corporation, or any sale, lease, exchange
or other disposition of all or substantially all of the assets of the
Corporation to any other corporation, person or other entity, such approval
shall require either:
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<PAGE>
(i) the affirmative vote of two-thirds (2/3) of the directors of
the Corporation then in office and the affirmative vote of a
majority of the issued and outstanding shares of the
corporation entitled to vote; or
(ii) the affirmative vote of a majority of the directors of the
Corporation then in office and the affirmative vote of the
holders of at least two-thirds (2/3) of the issued and
outstanding shares of the Corporation entitled to vote.
(b) The Board of Directors shall have the power to determine for the
purposes of this Article 12, on the basis of information known to
the Corporation, whether any sale, lease or exchange or other
disposition of part of the assets of the Corporation involves
substantially all of the assets of the Corporation.
(c) Unless two-thirds (2/3) of the directors then in office shall approve
the proposed change, this Article 12 may be amended or rescinded only by the
affirmative vote of the holders of at least two-thirds (2/3) of the issued and
outstanding shares of the Corporation entitled to vote thereon, at any regular
or special meeting of the shareholders, and notice of the proposed change must
be contained in the notice of the meeting.
Article 13. Factors Considered in Business Transaction
(a) The Board of Directors, when evaluating any offer of another party (i)
to make a tender offer or exchange offer for any equity security of the
Corporation, (ii) to merge or consolidate any other corporation with the
Corporation, or (iii) to purchase or otherwise acquire all or substantially all
of the assets of the Corporation, shall, in determining what is in the best
interests of the Corporation and its shareholders, give due consideration to all
relevant factors, including without limitation: (A) the short-term and long-term
social and economic effects on the employees, customers, shareholders and other
constituents of the Corporation and its subsidiaries, and on the communities
within which the Corporation and its subsidiaries operate (it being understood
that any subsidiary bank of the Corporation is charged with providing support to
and being involved in the communities it serves); and (B) the consideration
being offered by the other party in relation to the then-current value of the
Corporation in a freely negotiated transaction and in relation to the Board of
Directors' then-estimate of the future value of the Corporation as an
independent entity.
(b) Unless two-thirds (2/3) of the directors then in office shall approve
the proposed change, this Article 13 may be amended or rescinded only by the
affirmative vote of the holders of at least two-thirds (2/3) of the issued and
outstanding shares of the Corporation entitled to vote thereon, at any regular
or special meeting of the shareholders, and notice of the proposed change must
be contained in the notice of the meeting.
Article 14. Savings Clause
Should any provision of these Articles of Incorporation, or any clause
hereof, be held to be invalid, illegal or unenforceable, in whole or in part,
the remaining provisions and clauses of these Articles of Incorporation shall
remain valid and fully enforceable.
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<PAGE>
IN WITNESS WHEREOF, the undersigned has executed these Articles of
Incorporation, this 18th day of February, 2000.
NORTH GEORGIA COMMUNITY FINANCIAL
PARTNERS, INC.
/s/ Maureen A. FitzGerald
------------------------------------------------
Maureen A. FitzGerald, Attorney for Incorporator
POWELL, GOLDSTEIN, FRAZER & MURPHY LLP
Sixteenth Floor
191 Peachtree Street, N.E.
Atlanta, Georgia 30303
(404) 572-6600
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<PAGE>
Exhibit 3.2
BYLAWS
OF
NORTH GEORGIA COMMUNITY
FINANCIAL PARTNERS, INC.
1
<PAGE>
BYLAWS
NORTH GEORGIA COMMUNITY
FINANCIAL PARTNERS, INC.
INDEX
PAGE
----
ARTICLE ONE - OFFICES................................................... 1
ARTICLE TWO - SHAREHOLDERS' MEETINGS.................................... 1
2.1 Annual Meeting.................................................1
2.2 Special Meetings............................................. 1
2.3 Place........................................................ 1
2.4 Notice....................................................... 1
2.5 Quorum....................................................... 1
2.6 Proxies; Required Vote....................................... 2
2.7 Presiding Officer and Secretary .............................. 2
2.8 Shareholder List ............................................. 2
2.9 Action in Lieu of Meeting ................................... 2
ARTICLE THREE - DIRECTORS .............................................. 2
3.1 Management .................................................. 2
3.2 Number of Directors ......................................... 2
3.3 Vacancies .................................................. 3
3.4 Election of Directors ....................................... 3
3.5 Nominations of Directors .................................... 3
3.6 Removal ..................................................... 4
i
<PAGE>
3.7 Resignation ................................................. 4
3.8 Compensation ................................................ 4
3.9 Honorary and Advisory Directors ............................. 4
ARTICLE FOUR - COMMITTEES ............................................... 5
4.1 Executive Committee ......................................... 5
4.2 Other Committees ............................................ 6
4.3 Removal ..................................................... 6
ARTICLE FIVE - MEETINGS OF THE BOARD OF DIRECTORS ...................... 6
5.1 Time and Place .............................................. 6
5.2 Regular Meetings ............................................ 6
5.3 Special Meetings ............................................ 6
5.4 Content and Waiver of Notice ................................ 6
5.5 Quorum; Participation by Telephone .......................... 6
5.6 Action in Lieu of Meeting ................................... 7
5.7 Interested Directors and Officers ........................... 7
ARTICLE SIX - OFFICERS, AGENTS AND EMPLOYEES ........................... 7
6.1 General Provisions .......................................... 7
6.2 Powers and Duties of the Chairman of the Board and the
President ................................................... 8
6.3 Powers and Duties of Vice Presidents ........................ 8
6.4 Powers and Duties of the Secretary .......................... 8
6.5 Powers and Duties of the Treasurer ........................... 9
6.6 Appointment, Powers and Duties of Assistant Secretaries ..... 9
ii
<PAGE>
6.7 Appointment, Powers and Duties of Assistant Treasurers ...... 9
6.8 Delegation of Duties ........................................ 9
ARTICLE SEVEN - CAPITAL STOCK ........................................... 9
7.1 Certificates ................................................ 9
7.2 Shareholder List ........................................... 10
7.3 Transfer of Shares ......................................... 10
7.4 Record Dates ............................................... 10
7.5 Registered Owner ........................................... 10
7.6 Transfer Agent and Registrars .............................. 11
7.7 Lost Certificates ......................................... 11
7.8 Fractional Shares or Scrip ................................. 11
ARTICLE EIGHT - BOOKS AND RECORDS; SEAL; ANNUAL STATEMENTS ........... 11
8.1 Inspection of Books and Records ............................ 11
8.2 Seal ....................................................... 12
8.3 Annual Statements .......................................... 12
ARTICLE NINE - INDEMNIFICATION ........................................ 12
9.1 Authority to Indemnify ..................................... 12
9.2 Mandatory Indemnification .................................. 13
9.3 Advances for Expenses ...................................... 13
9.4 Court-ordered Indemnification and Advances for Expenses .... 13
9.5 Determination of Indemnification ........................... 13
iii
<PAGE>
9.6 Authorization of Indemnification ........................... 14
9.7 Other Rights .............................................. 14
9.8 Insurance .................................................. 14
9.9 Continuation of Expenses ................................... 14
ARTICLE TEN - NOTICES: WAIVERS OF NOTICE ............................. 14
10.1 Notices ..................................................... 14
10.2 Waivers of Notice ........................................... 15
ARTICLE ELEVEN - EMERGENCY POWERS ..................................... 15
11.1 Bylaws ...................................................... 15
11.2 Lines of Succession ......................................... 15
11.3 Head Office ................................................. 15
11.4 Period of Effectiveness .................................... 15
11.5 Notices ..................................................... 15
11.6 Officers as Directors Pro Tempore ........................... 15
11.7 Liability of Officers, Directors and Agents ................. 16
ARTICLE TWELVE - CHECKS, NOTES, DRAFTS, ETC. .......................... 16
ARTICLE THIRTEEN - AMENDMENTS ......................................... 16
iv
<PAGE>
BYLAWS
OF
NORTH GEORGIA COMMUNITY
FINANCIAL PARTNERS, INC.
ARTICLE ONE
OFFICES
The Corporation shall at all times maintain its principal office in
Calhoun, Georgia, its registered office in the State of Georgia and its
registered agent at that address, but it may have other offices located within
or outside the State of Georgia as the Board of Directors may determine.
ARTICLE TWO
SHAREHOLDERS' MEETINGS
2.1 Annual Meeting. A meeting of shareholders of the Corporation shall be
held annually, within six (6) months after the end of each fiscal year of the
Corporation. The annual meeting shall be held at such time and place, and on
such date, as the Directors shall determine from time to time and as shall be
specified in the notice of the meeting.
2.2 Special Meetings. Special meetings of the shareholders may be called
at any time by the Corporation's Board of Directors, its President, or by the
Corporation upon the written request of any one or more shareholders owning an
aggregate of not less than twenty-five percent (25%) of the outstanding capital
stock of the Corporation. Special meetings shall be held at such a time and
place and on such date as shall be specified in the notice of the meeting.
2.3 Place. Annual or special meetings of shareholders may be held within
or without the State of Georgia.
2.4 Notice. Notice of annual or special shareholders meetings stating the
place, day and hour of the meeting shall be given in writing not less than ten
(10) nor more than sixty (60) days before the date of the meeting, either mailed
to the last known address or personally given to each shareholder. Notice of any
special meeting of shareholders shall state the purpose or purposes for which
the meeting is called. The notice of any meeting at which amendments to or
restatements of the Articles of Incorporation, merger or share exchange of the
Corporation, or the disposition of corporate assets requiring shareholder
approval are to be considered shall state such purpose, and shall further comply
with all requirements of law. Notice of a meeting may be waived by an instrument
in writing executed before or after the meeting. The waiver need not specify the
purpose of the meeting or the business transacted, unless one of the purposes of
the meeting concerns a plan of merger or share exchange, in which event the
waiver shall comply with the further requirements of law concerning such
waivers. Attendance at such meeting in person or by proxy shall constitute a
waiver of notice thereof.
2.5 Quorum. At all meetings of shareholders a majority of the outstanding
shares of stock shall constitute a quorum for the transaction of business, and
no resolution or business shall be transacted without the favorable vote of the
holders of a majority of the shares represented at the
<PAGE>
meeting and entitled to vote. A lesser number may adjourn from day to day, and
shall announce the time and place to which the meeting is adjourned.
2.6 Proxies; Required Vote. At every meeting of the shareholders,
including meetings of shareholders for the election of Directors, any
shareholder having the right to vote shall be entitled to vote in person or by
proxy, but no proxy shall be voted after eleven months from its date, unless
said proxy provides for a longer period. Each shareholder shall have one vote
for each share of stock having voting power, registered in his or her name on
the books of the Corporation. If a quorum is present, the affirmative vote of
the majority of the shares represented at the meeting and entitled to vote on
the subject matter shall be the act of the shareholders, except as otherwise
provided by law, by the Articles of Incorporation or by these Bylaws.
2.7 Presiding Officer and Secretary. At every meeting of shareholders, the
Chairman or the President, or if such officers shall not be present then the
person appointed by one of them, shall preside. The Secretary or an Assistant
Secretary, or if such officers shall not be present, the appointee of the
presiding officer of the meeting, shall act as secretary of the meeting.
2.8 Shareholder List. The officer or agent having charge of the stock
transfer books of the Corporation shall produce for inspection of any
shareholder at, and continuously during, every meeting of the shareholders, a
complete alphabetical list of shareholders showing the address and share
holdings of each shareholder. If the record of shareholders readily shows such
information, it may be produced in lieu of such a list.
2.9 Action in Lieu of Meeting. Any action to be taken at a meeting of the
shareholders of the Corporation, or any action that may be taken at a meeting of
the shareholders, may be taken without a meeting if a consent in writing setting
forth the action so taken shall be signed by those persons who would be entitled
to vote at a meeting those shares having voting power to cast not less than the
minimum number (or numbers, in the case of voting by class) of votes that would
be necessary to authorize or take such action at a meeting at which all shares
entitled to vote were present and voted.
ARTICLE THREE
DIRECTORS
3.1 Management. Subject to these Bylaws, or any lawful agreement between
the shareholders, the full and entire management of the affairs and business of
the Corporation shall be vested in the Board of Directors, which shall have and
may exercise all of the powers that may be exercised or performed by the
Corporation.
3.2 Number of Directors. The Board of Directors shall consist of not less
than one (1) nor more than twenty-five (25) members. The number of Directors may
be fixed or changed from time to time, within the minimum and maximum, by the
shareholders by the affirmative vote of two-thirds of the issued and outstanding
shares of the Corporation entitled to vote in an election of Directors, or by
the Board of Directors by the affirmative vote of two-thirds of all Directors
then in office.
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<PAGE>
3.3 Vacancies. The Directors, even though less than a quorum, may fill any
vacancy on the Board of Directors, including a vacancy created by an increase in
the number of Directors. Such appointment by the Directors shall continue until
the expiration of the term of the Director whose place has become vacant, or, in
the case of an increase in the number of Directors, until the next meeting of
the shareholders.
3.4 Election of Directors.
(a) Until the Board of Directors consists of six (6) or more members, the
Board of Directors shall be elected annually to serve a term of one (1) year;
and each Director shall serve until the election and qualification of his or her
successor or until his or her earlier resignation, death or removal from office.
No person shall be eligible to stand for election as a Director, nor may be
elected as a Director, if such person is seventy (70) years of age or greater at
the time of such election.
(b) When and if the Board of Directors consists of six (6) or more
members, the Board of Directors shall be divided into three (3) classes, Class
I, Class II and Class III, which shall be nearly equal in number as possible.
Each Director in Class I shall be elected to an initial term of one (1) year,
each Director in Class II shall be elected to an initial term of two (2) years
and each Director in Class III shall be elected to an initial term of three (3)
years, and each Director shall serve until the election and qualification of his
or her successor or until his or her earlier resignation, death or removal from
office. Upon the expiration of the initial terms of office for each Class of
Directors, the Directors of each Class shall be elected for terms of three (3)
years, to serve until the election and qualification of their successors or
until their earlier resignation, death or removal from office. No person shall
be eligible to stand for election as a Director, nor may be elected as a
Director, if such person is seventy (70) years of age or greater at the time of
such election.
3.5 Nomination of Directors.
(a) Only persons who are nominated in accordance with the
procedures set forth in these Bylaws shall be eligible for election as
Directors. Nominations of persons for election to the Board of Directors of the
Corporation may be made at any meeting of shareholders at which Directors are to
be elected only (i) by or at the direction of the Board of Directors or (ii) by
any shareholder of the Corporation entitled to vote for the election of
Directors at the meeting who complies with the notice procedures set forth in
this Section. The Board of Directors shall act as a nominating committee to
select the management nominees for election as Directors.
(b) Nominations, other than those management nominees made by or
at the direction of the Board of Directors, shall be made by timely notice in
writing to the Secretary of the Corporation. To be timely, a shareholder's
notice shall be delivered or mailed to and received at the principal executive
offices of the Corporation not less than 30 days prior to the date of the
meeting; provided, however, that in the event that less than 40 days' notice or
prior public disclosure of the date of the meeting is given or made to
shareholders, notice by the shareholder to be timely must be so received not
later than the close of business on the 10th day following the day on which such
notice of the date of the meeting is mailed or such public disclosure was made.
Such shareholder's notice shall set forth (i) as to each person whom the
shareholder proposes to nominate for election or reelection as a Director, all
information relating to such person as required to be disclosed in solicitation
of proxies for
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<PAGE>
election of Directors pursuant to Regulation 14A under the Securities and
Exchange Act of 1934, as amended (including such person's written consent to
being named in a proxy statement as a nominee and to serving as a Director if
elected); and (ii) as to the shareholder giving the notice (A) the name and
address, as they appear on the books of the Corporation, of such shareholder and
(B) the class and number of shares of the Corporation's capital stock that are
beneficially owned by such shareholder. At the request of the Board of Directors
any person nominated by the Board of Directors for election as a Director shall
furnish to the Secretary of the Corporation that information required to be set
forth in a shareholder's notice of nomination which pertains to the nominee. No
person shall be eligible for election as a Director of the Corporation unless
nominated in accordance with the provisions of this Section. The officer
presiding at the meeting shall, if the facts so warrant, determine and declare
to the meeting that a nomination was not made in accordance with the provisions
of this Section and the defective nomination shall be disregarded.
3.6 Removal. Any Director may be removed from office, at a meeting with
respect to which notice of such purpose is given, with cause, only upon the
affirmative vote of the holders of a majority of the issued and outstanding
shares of the Corporation. Any Director may be removed from office, at a meeting
with respect to which notice of such purpose is given, without cause, only upon
the affirmative vote of two-thirds of the holders of a majority of the issued
and outstanding shares of the Corporation.
3.7 Resignation. Any Director may resign at any time either orally at any
meeting of the Board of Directors or by so advising the Chairman of the Board or
the President or by giving written notice to the Corporation. A Director who
resigns may postpone the effectiveness of his or her resignation to a future
date or upon the occurrence of a future event specified in a written tender of
resignation. If no time of effectiveness is specified therein, a resignation
shall be effective upon tender. A vacancy shall be deemed to exist at the time a
resignation is tendered, and the Board of Directors or the shareholders may,
then or thereafter, elect a successor to take office when the resignation by its
terms becomes effective.
3.8 Compensation. Directors may be allowed such compensation for their
services as Directors as may from time to time be fixed by resolution of the
Board of Directors.
3.9 Honorary and Advisory Directors. When a Director of the Corporation
retires under the retirement policies of the Corporation as established from
time to time by the Board of Directors, the Board of Directors may appoint such
retiring Director to be an Honorary Director, Director Emeritus, or member of an
advisory board established by the Board of Directors. The Board of Directors of
the Corporation also may appoint any individual an Honorary Director, Director
Emeritus, or member of any advisory board established by the Board of Directors.
Any individual appointed an Honorary Director, Director Emeritus, or member of
an advisory board as provided by this Section 3.9 may be compensated as provided
in Section 3.8, but such individual may not vote at any meeting of the Board of
Directors or be counted in determining a quorum as provided in Section 5.5 and
shall not have any responsibility or be subject to any liability imposed upon a
Director, or otherwise be deemed a Director.
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<PAGE>
ARTICLE FOUR
COMMITTEES
4.1 Executive Committee. (a) The Board of Directors may, by resolution
adopted by a majority of the entire Board, designate an Executive Committee
consisting of one or more Directors. Each Executive Committee member shall hold
office until the first meeting of the Board of Directors after the annual
meeting of shareholders and until the member's successor is elected and
qualified, or until the member's death, resignation or removal, or until the
member shall cease to be a Director.
(b) During the intervals between the meetings of the Board of
Directors, the Executive Committee may exercise all the authority of the Board
of Directors; provided, however, that the Executive Committee shall not have the
power to amend or repeal any resolution of the Board of Directors that by its
terms shall not be subject to amendment or repeal by the Executive Committee,
and the Executive Committee shall not have the authority of the Board of
Directors in reference to (i) the amendment of the Articles of Incorporation or
Bylaws of the Corporation; (ii) the adoption of a plan of merger or
consolidation; (iii) the sale, lease, exchange or other disposition of all or
substantially all the property and assets of the Corporation; or (iv) a
voluntary dissolution of the Corporation or the revocation of any such voluntary
dissolution.
(c) The Executive Committee shall meet from time to time on call
of the Chairman of the Board or the President or of any two or more members of
the Executive Committee. Meetings of the Executive Committee may be held at such
place or places, within or without the State of Georgia, as the Executive
Committee shall determine or as may be specified or fixed in the respective
notices or waivers of such meetings. The Executive Committee may fix its own
rules of procedure, including provision for notice of its meetings. It shall
keep a record of its proceedings and shall report these proceedings to the Board
of Directors at the meeting thereof held next after they have been taken, and
all such proceedings shall be subject to revision or alteration by the Board of
Directors except to the extent that action shall have been taken pursuant to or
in reliance upon such proceedings prior to any such revision or alteration.
(d) The Executive Committee shall act by majority vote of its
members; provided, however, that contracts or transactions of and by the
Corporation in which officers or Directors of the Corporation are interested
shall require the affirmative vote of a majority of the disinterested members of
the Executive Committee at a meeting of the Executive Committee at which the
material facts as to the interest and as to the contract or transaction are
disclosed or known to the members of the Executive Committee prior to the vote.
(e) Members of the Executive Committee may participate in
committee proceedings by means of conference telephone or similar communications
equipment by means of which all persons participating in the proceedings can
hear each other, and such participation shall constitute presence in person at
such proceedings.
(f) The Board of Directors, by resolution adopted in accordance
with paragraph (a) of this section, may designate one or more Directors as
alternate members of the Executive Committee who may act in the place and stead
of any absent member or members at any meeting of said committee.
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<PAGE>
4.2 Other Committees. The Board of Directors, by resolution adopted by a
majority of the entire Board, may designate one or more additional committees,
each committee to consist of one or more of the Directors of the Corporation,
which shall have such name or names and shall have and may exercise such powers
of the Board of Directors, except the powers denied to the Executive Committee,
as may be determined from time to time by the Board of Directors. Such
committees shall provide for their own rules of procedure, subject to the same
restrictions thereon as provided above for the Executive Committee.
4.3 Removal. The Board of Directors shall have power at any time to remove
any member of any committee, with or without cause, and to fill vacancies in and
to dissolve any such committee.
ARTICLE FIVE
MEETINGS OF THE BOARD OF DIRECTORS
5.1 Time and Place. Meetings of the Board of Directors may be held at any
place either within or without the State of Georgia.
5.2 Regular Meetings. Regular meetings of the Board of Directors may be
held without notice at such time and place, within or without the State of
Georgia, as shall be determined by the Board of Directors from time to time.
5.3 Special Meetings. Special meetings of the Board of Directors may be
called by the Chairman of the Board or the President on not less than one (1)
day's notice by mail, telegram, cablegram, personal delivery or telephone to
each Director and shall be called by the Chairman of the Board or the President
in like manner and on like notice on the written request of any two or more
Directors. Any such special meeting shall be held at such time and place, within
or without the State of Georgia, as shall be stated in the notice of the
meeting.
5.4 Content and Waiver of Notice. No notice of any meeting of the Board of
Directors need state the purposes thereof. Notice of any meeting may be waived
by an instrument in writing executed before or after the meeting. Attendance in
person at any such meeting shall constitute a waiver of notice thereof unless
the director at the beginning of the meeting (or promptly upon his or her
arrival) objects to holding the meeting or transacting business at the meeting
and does not thereafter vote for or assent to action taken at the meeting.
5.5 Quorum; Participation by Telephone. At all meetings of the Board of
Directors, the presence of a majority of the authorized number of Directors
shall be necessary and sufficient to constitute a quorum for the transaction of
business. Directors may participate in any meeting by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and participation in a meeting
by means of such communications equipment shall constitute the presence in
person at such meeting. Except as may be otherwise specifically provided by law,
the Articles of Incorporation or these Bylaws, all resolutions adopted and all
business transacted by the Board of Directors shall require the affirmative vote
of a majority of the Directors present at the meeting. In the absence of a
quorum, a majority of the Directors present at any meeting may adjourn the
meeting from time to time until a quorum is present.
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<PAGE>
Notice of any adjourned meeting need only be given by announcement at the
meeting at which the adjournment is taken.
5.6 Action in Lieu of Meeting. Any action required or permitted to be
taken at any meeting of the Board of Directors or of any committee thereof may
be taken without a meeting if a written consent thereto is signed by all members
of the Board of Directors or of such committee, as the case may be, and such
written consent is filed with the minutes of the proceedings of the Board of
Directors and upon compliance with any further requirements of law pertaining to
such consents.
5.7 Interested Directors and Officers. An interested Director or officer
is one who is a party to a contract or transaction with the Corporation or who
is an officer or Director of, or has a financial interest in, another
corporation, partnership or association which is a party to a contract or
transaction with the Corporation. Contracts and transactions between the
Corporation and one or more interested Directors or officers shall not be void
or voidable solely because of the involvement or vote of such interested persons
as long as (a) the contract or transaction is approved in good faith by the
Board of Directors or appropriate committee by the affirmative vote of a
majority of disinterested Directors, even if the disinterested Directors be less
than a quorum, at a meeting of the Board or committee at which the material
facts as to the interested person or persons and the contract or transaction are
disclosed or known to the Board or committee prior to the vote; or (b) the
contract or transaction is approved in good faith by the shareholders after the
material facts as to the interested person or persons and the contract or
transaction have been disclosed to them; or (c) the contract or transaction is
fair as to the Corporation as of the time it is authorized, approved or ratified
by the Board, committee or shareholders. Interested Directors may be counted in
determining the presence of a quorum at a meeting of the Board or committee
which authorizes the contract or transaction.
ARTICLE SIX
OFFICERS, AGENTS AND EMPLOYEES
6.1 General Provisions. The officers of the Corporation shall be a
President and a Secretary, and may include a Treasurer, Chairman of the Board,
one or more Vice Presidents, one or more Assistant Secretaries, and one or more
Assistant Treasurers. The officers shall be elected by the Board of Directors at
the first meeting of the Board of Directors after the annual meeting of the
shareholders in each year or shall be appointed as provided in these Bylaws. The
Board of Directors may elect other officers, agents and employees, who shall
have such authority and perform such duties as may be prescribed by the Board of
Directors. All officers shall hold office until the meeting of the Board of
Directors following the next annual meeting of the shareholders after their
election or appointment and until their successors shall have been elected or
appointed and shall have qualified. Any two or more offices may be held by the
same person. Any officer, agent or employee of the Corporation may be removed by
the Board of Directors with or without cause. Removal without cause shall be
without prejudice to such person's contract rights, if any, but the election or
appointment of any person as an officer, agent or employee of the Corporation
shall not of itself create contract rights. The compensation of officers, agents
and employees elected by the Board of Directors shall be fixed by the Board of
Directors or by a committee thereof, and this power may also be delegated to any
officer, agent or employee as to persons under his or her direction or control.
The Board of Directors may require any officer, agent or employee to give
security for the faithful performance of his or her duties.
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6.2 Powers and Duties of the Chairman of the Board and the President. The
powers and duties of the Chairman of the Board and the President, subject to the
supervision and control of the Board of Directors, shall be those usually
appertaining to their respective offices and whatever other powers and duties
are prescribed by these Bylaws or by the Board of Directors.
(a) The Chairman of the Board shall preside at all meetings of the
Board of Directors and at all meetings of the shareholders. The Chairman of the
Board shall perform such other duties as the Board of Directors may from time to
time direct, but shall not participate in any major policy-making functions of
the Corporation other than in his or her capacity as a director.
(b) The President shall, unless otherwise provided by the Board of
Directors, be the chief executive officer of the Corporation. The President
shall have general charge of the business and affairs of the Corporation and
shall keep the Board of Directors fully advised. The President shall employ and
discharge employees and agents of the Corporation, except such as shall be
elected by the Board of Directors, and he or she may delegate these powers. The
President shall have such powers and perform such duties as generally pertain to
the office of the President, as well as such further powers and duties as may be
prescribed by the Board of Directors. The President may vote the shares or other
securities of any other domestic or foreign corporation of any type or kind
which may at any time be owned by the Corporation, may execute any shareholders'
or other consents in respect thereof and may in his or her discretion delegate
such powers by executing proxies, or otherwise, on behalf of the Corporation.
The Board of Directors, by resolution from time to time, may confer like powers
upon any other person or persons.
6.3 Powers and Duties of Vice Presidents. Each Vice President shall have
such powers and perform such duties as the Board of Directors or the President
may prescribe and shall perform such other duties as may be prescribed by these
Bylaws. In the absence or inability to act of the President, unless the Board of
Directors shall otherwise provide, the Vice President who has served in that
capacity for the longest time and who shall be present and able to act, shall
perform all duties and may exercise any of the powers of the President. The
performance of any such duty by a Vice President shall be conclusive evidence of
his or her power to act.
6.4 Powers and Duties of the Secretary. The Secretary shall have charge of
the minutes of all proceedings of the shareholders and of the Board of Directors
and shall keep the minutes of all their meetings at which he or she is present.
Except as otherwise provided by these Bylaws, the Secretary shall attend to the
giving of all notices to shareholders and Directors. He or she shall have charge
of the seal of the Corporation, shall attend to its use on all documents the
execution of which on behalf of the Corporation under its seal is duly
authorized and shall attest the same by his or her signature whenever required.
The Secretary shall have charge of the record of shareholders of the
Corporation, of all written requests by shareholders that notices be mailed to
them at an address other than their addresses on the record of shareholders, and
of such other books and papers as the Board of Directors may direct. Subject to
the control of the Board of Directors, the Secretary shall have all such powers
and duties as generally are incident to the position of Secretary or as may be
assigned to the Secretary by the President or the Board of Directors.
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6.5 Powers and Duties of the Treasurer. The Treasurer shall have charge of
all funds and securities of the Corporation, shall endorse the same for deposit
or collection when necessary and deposit the same to the credit of the
Corporation in such banks or depositaries as the Board of Directors may
authorize. The Treasurer may endorse all commercial documents requiring
endorsements for or on behalf of the Corporation and may sign all receipts and
all commercial documents requiring endorsements for or on behalf of the
Corporation and may sign all receipts and vouchers for payments made to the
Corporation. The Treasurer shall have all such powers and duties as generally
are incident to the position of Treasurer or as may be assigned to the Treasurer
by the President or by the Board of Directors.
6.6 Appointment, Powers and Duties of Assistant Secretaries. Assistant
Secretaries may be appointed by the President or elected by the Board of
Directors. In the absence or inability of the Secretary to act, any Assistant
Secretary may perform all the duties and exercise all the powers of the
Secretary. The performance of any such duty shall be conclusive evidence of the
Assistant Secretary's power to act. An Assistant Secretary shall also perform
such other duties as the Secretary or the Board of Directors may assign to him
or her.
6.7 Appointment, Powers and Duties of Assistant Treasurers. Assistant
Treasurers may be appointed by the President or elected by the Board of
Directors. In the absence or inability of the Treasurer to act, an Assistant
Treasurer may perform all the duties and exercise all the powers of the
Treasurer. The performance of any such duty shall be conclusive evidence of the
Assistant Treasurer's power to act. An Assistant Treasurer shall also perform
such other duties as the Treasurer or the Board of Directors may assign to him
or her.
6.8 Delegation of Duties. In case of the absence of any officer of the
Corporation, or for any other reason that the Board of Directors may deem
sufficient, the Board of Directors (or in the case of Assistant Secretaries or
Assistant Treasurers only, the President) may confer for the time being the
powers and duties, or any of them, of such officer upon any other officer or
elect or appoint any new officer to fill a vacancy created by death,
resignation, retirement or termination of any officer. In such latter event such
new officer shall serve until the next annual election of officers.
ARTICLE SEVEN
CAPITAL STOCK
7.1 Certificates. (a) The interest of each shareholder shall be evidenced
by a certificate or certificates representing shares of the Corporation which
shall be in such form as the Board of Directors may from time to time adopt and
shall be numbered and shall be entered in the books of the Corporation as they
are issued. Each certificate representing shares shall set forth upon the face
thereof the following:
(i) the name of this Corporation;
(ii) that the Corporation is organized under the laws of the State
of Georgia;
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(iii) the name or names of the person or persons to whom the
certificate is issued;
(iv) the number and class of shares, and the designation of the
series, if any, which the certificate represents; and
(v) if any shares represented by the certificate are nonvoting
shares, a statement or notation to that effect; and, if the shares represented
by the certificate are subordinate to shares of any other class or series with
respect to dividends or amounts payable on liquidation, the certificate shall
further set forth on either the face or back thereof a clear and concise
statement to that effect.
(b) Each certificate shall be signed by the President or a Vice
President and the Secretary or an Assistant Secretary and may be sealed with the
seal of the Corporation or a facsimile thereof. If a certificate is
countersigned by a transfer agent or registered by a registrar, other than the
Corporation itself or an employee of the Corporation, the signature of any such
officer of the Corporation may be a facsimile. In case any officer or officers
who shall have signed, or whose facsimile signature or signatures shall have
been used on, any such certificate or certificates shall cease to be such
officer or officers of the Corporation, whether because of death, resignation or
otherwise, before such certificate or certificates shall have been delivered by
the Corporation, such certificate or certificates may nevertheless be delivered
as though the person or persons who signed such certificate or certificates or
whose facsimile signatures shall have been used thereon had not ceased to be
such officer or officers.
7.2 Shareholder List. The Corporation shall keep or cause to be kept a
record of the shareholders of the Corporation which readily shows, in
alphabetical order or by alphabetical index, and by classes or series of stock,
if any, the names of the shareholders entitled to vote, with the address of and
the number of shares held by each. Said record shall be presented and kept open
at all meetings of the shareholders.
7.3 Transfer of Shares. Transfers of stock shall be made on the books of
the Corporation only by the person named in the certificate, or by power of
attorney lawfully constituted in writing, and upon surrender of the certificate,
or in the case of a certificate alleged to have been lost, stolen or destroyed,
upon compliance with the provisions of Section 7.7 of these Bylaws.
7.4 Record Dates. For the purpose of determining shareholders entitled to
notice of or to vote at any meeting of shareholders or any adjournment thereof,
or entitled to receive payment of any dividend, or in order to make a
determination of shareholders for any other proper purpose, the Board of
Directors may fix in advance a date as the record date for any such
determination of shareholders, such date to be not more than seventy (70) days
and, in case of a meeting of shareholders, not less than ten (10) days, prior to
the date on which the particular action requiring such determination of
shareholders is to be taken.
7.5 Registered Owner. The Corporation shall be entitled to treat the
holder of record of any share of stock of the Corporation as the person entitled
to vote such share, to receive any dividend or other distribution with respect
to such share, and for all other purposes and accordingly shall not be
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bound to recognize any equitable or other claim or interest in such share on the
part of any other person, whether or not it shall have express or other notice
thereof, except as otherwise provided by law.
7.6 Transfer Agent and Registrars. The Board of Directors may appoint one
or more transfer agents and one or more registrars and may require each stock
certificate to bear the signature or signatures of a transfer agent or a
registrar or both.
7.7 Lost Certificates. Any person claiming a certificate of stock to be
lost, stolen or destroyed shall make an affidavit or affirmation of the fact in
such manner as the Board of Directors may require and, if the Directors so
require, shall give the Corporation a bond of indemnity in form and amount and
with one or more sureties satisfactory to the Board of Directors, whereupon an
appropriate new certificate may be issued in lieu of the certificate alleged to
have been lost, stolen or destroyed.
7.8 Fractional Shares or Scrip. The Corporation may, when and if
authorized so to do by its Board of Directors, issue certificates for fractional
shares or scrip in order to effect share transfers, share distributions or
reclassifications, mergers, consolidations or reorganizations. Holders of
fractional shares shall be entitled, in proportion to their fractional holdings,
to exercise voting rights, receive dividends and participate in any of the
assets of the Corporation in the event of liquidation. Holders of scrip shall
not, unless expressly authorized by the Board of Directors, be entitled to
exercise any rights of a shareholder of the Corporation, including voting
rights, dividend rights or the right to participate in any assets of the
Corporation in the event of liquidation. In lieu of issuing fractional shares or
scrip, the Corporation may pay in cash the fair value of fractional interests as
determined by the Board of Directors; and the Board of Directors may adopt
resolutions regarding rights with respect to fractional shares or scrip as it
may deem appropriate, including without limitation the right for persons
entitled to receive fractional shares to sell such fractional shares or purchase
such additional fractional shares as may be needed to acquire one full share, or
sell such fractional shares or scrip for the account of such persons.
ARTICLE EIGHT
BOOKS AND RECORDS; SEAL; ANNUAL STATEMENTS
8.1 Inspection of Books and Records. (a) Any person who shall be the
holder of record of, or authorized in writing by the holders of record of, at
least two percent (2%) of the outstanding shares of any class or series of the
Corporation, upon written demand stating the purpose thereof, shall have the
right to examine in person or by agent or attorney, at any reasonable time or
times, for any proper purpose, the books and records of account, minutes and
record of shareholders and to make extracts therefrom.
(b) A shareholder may inspect and copy the records described in the
immediately preceding paragraph only if (i) his or her demand is made in good
faith and for a proper purpose that is reasonably relevant to his or her
legitimate interest as a shareholder; (ii) the shareholder describes with
reasonable particularity his or her purpose and the records he or she desires to
inspect; (iii) the records are directly connected with the stated purpose; and
(iv) the records are to be used only for that purpose.
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(c) If the Secretary or a majority of the Corporation's Board of
Directors or Executive Committee members find that the request is proper, the
Secretary shall promptly notify the shareholder of the time and place at which
the inspection may be conducted.
(d) If said request is found by the Secretary, the Board of
Directors or the Executive Committee to be improper, the Secretary shall so
notify the requesting shareholder on or prior to the date on which the
shareholder requested to conduct the inspection. The Secretary shall specify in
said notice the basis for the rejection of the shareholder's request.
(e) The Secretary, the Board of Directors and the Executive
Committee shall at all times be entitled to rely on the corporate records in
making any determination hereunder.
8.2 Seal. The corporate seal shall be in such form as the Board of
Directors may from time to time determine. In the event it is inconvenient to
use such a seal at any time, the signature of the Corporation followed by the
word "Seal" enclosed in parentheses or scroll shall be deemed the seal of the
Corporation.
8.3 Annual Statements. Not later than four (4) months after the close of
each fiscal year, and in any case prior to the next annual meeting of
shareholders, the Corporation shall prepare:
(a) A balance sheet showing in reasonable detail the financial
condition of the Corporation as of the close of its fiscal year, and
(b) A profit and loss statement showing the results of its
operations during its fiscal year. Upon written request, the Corporation
promptly shall mail to any shareholder of record a copy of its most recent
balance sheet and profit and loss statement.
ARTICLE NINE
INDEMNIFICATION
9.1 Authority to Indemnify. The Corporation shall indemnify or obligate
itself to indemnify an individual made a party to a proceeding because he or she
is or was a director or officer of the Corporation, and may indemnify or
obligate itself to indemnify an individual made a party to a proceeding because
he or she is or was an employee or agent of the Corporation (or, in either case,
was serving at the request of the Corporation as a director, officer or employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise) for reasonable expenses, judgments, fines, penalties and amounts
paid in settlement (including attorneys' fees), incurred in connection with the
proceeding if the individual acted in manner he or she believed in good faith to
be in or not opposed to the best interests of the Corporation and, in the case
of any criminal proceeding, he or she had no reasonable cause to believe his or
her conduct was unlawful. The termination of a proceeding by judgment, order,
settlement, or conviction, or upon a plea of nolo contendere or its equivalent
is not, of itself, determinative that the director, officer, employee or agent
did not meet the standard of conduct set forth above. Indemnification permitted
under this action in connection with a proceeding by or in the right of the
Corporation is limited to reasonable expenses incurred in connection with the
proceeding.
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9.2 Mandatory Indemnification. If the Corporation is obligated to
indemnify or has elected to indemnify an individual, pursuant to Section 9.1,
and to the extent that the individual has been successful, on the merits or
otherwise, in the defense of any proceeding to which he or she was a party, or
in defense of any claim, issue, or matter therein, because he or she is or was a
director, officer, employee or agent of the Corporation, the Corporation shall
indemnify the director, officer, employee or agent against reasonable expenses
incurred by him or her in connection therewith.
9.3 Advance for Expenses. If the Corporation is obligated to indemnify or
has elected to indemnify an individual, the Corporation shall pay for or
reimburse the reasonable expenses incurred by a director, officer, employee or
agent of the Corporation who is a party to a proceeding in advance of final
disposition of the proceeding if (a) he or she furnishes the Corporation written
affirmation of his or her good faith belief that he or she has met the standard
of conduct set forth in Section 9.1 of this section, and (b) he or she furnishes
the Corporation a written undertaking, executed personally or on his or her
behalf, to repay any advances if it is ultimately determined that he or she is
not entitled to indemnification. The undertaking required by this section must
be an unlimited general obligation but need not be secured and may be accepted
without reference to financial ability to make repayment.
9.4 Court-ordered Indemnification and Advances for Expenses. A director,
officer, employee or agent of the Corporation who is a party to a proceeding may
apply for indemnification or advances for expenses to the court conducting the
proceeding or to another court of competent jurisdiction.
9.5 Determination of Indemnification. Except as provided in Section 9.2
and except as may be ordered by the court, the Corporation may not indemnify a
director, officer, employee or agent under Section 9.1 unless authorized
thereunder and a determination has been made in the specific case that
indemnification of the director, officer, employee or agent is permissible in
the circumstances because he or she has met the standard of conduct set forth in
Section 9.1. The determination shall be made:
(a) By the board of directors by majority vote of a quorum
consisting of directors not at the time parties to the proceedings;
(b) If a quorum cannot be obtained, by majority vote of a committee
duly designated by the board of directors (in which designation directors who
are parties may participate), consisting solely of two or more directors not at
the time parties to the proceeding;
(c) By special legal counsel:
(i) Selected by the board of directors or its committee in the
manner prescribed in paragraph (a) or (b) of this section; or
(ii) If a quorum of the board of directors cannot be obtained
and a committee cannot be designated, selected by majority vote of the full
board of directors (in which selection directors who are parties may
participate); or
(d) By the shareholders, but shares owned by or voted under the
control of directors who are at the time parties to the proceeding may not be
voted on the determination.
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9.6 Authorization of Indemnification. Authorization of indemnification or
an obligation to indemnify and evaluation as the reasonableness of expenses
shall be made in the same manner as the determination that indemnification is
permissible, except that if the determination is made by special legal counsel,
authorization of indemnification and evaluation as to reasonableness of expenses
shall be made by those entitled under subsection (c) of Section 9.5 to select
counsel.
9.7 Other Rights. The indemnification and advancement of expenses provided
by or granted pursuant to this Article Nine shall not be deemed exclusive of any
other rights, in respect of indemnification or otherwise, to which those seeking
indemnification or advancement of expenses may be entitled under any bylaw,
resolution, agreement or contract either specifically or in general terms
approved by the affirmative vote of the holders of a majority of the shares
entitled to vote thereon taken at a meeting the notice of which specified that
such bylaw, resolution or agreement would be placed before the stockholders,
both as to action by a director, trustee, officer, employee or agent in his or
her official capacity and as to action in another capacity while holding such
office or position; except that no such other rights, in respect to
indemnification or otherwise, may be provided or granted to a director, trustee,
officer, employee, or agent pursuant to this Section 9.7 by the Corporation for
liability for (a) any appropriation, in violation of his or her duties, of any
business opportunity of the Corporation; (b) acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of law; (c) the
types of liability set forth in Section 14-2-832 of the Georgia Business
Corporation Code dealing with illegal or unauthorized distributions of corporate
assets, whether as dividends or in liquidation of the Corporation or otherwise;
or (d) any transaction from which the director derived an improper material
tangible personal benefit.
9.8 Insurance. The Corporation may purchase and maintain insurance on
behalf of an individual who is or was a director, officer, employee, or agent of
the Corporation or who, while a director, officer, employee, or agent of the
Corporation, is or was serving at the request of the Corporation as a director,
officer, partner, trustee, employee, or agent of another foreign or domestic
corporation, partnership, joint venture, trust, employee benefit plan, or other
enterprise against liability asserted against or incurred by him or her in that
capacity or arising from his or her status as a director, officer, employee, or
agent whether or not the Corporation would have power to indemnify him or her
against the same liability under this Article Nine.
9.9 Continuation of Expenses. The indemnification and advancement of
expenses provided by or granted pursuant to this Article Nine shall continue as
to a person who has ceased to be a director, trustee, officer, employee, or
agent and shall inure to the benefit of the heirs, executors, and administrators
of such a person.
ARTICLE TEN
NOTICES: WAIVERS OF NOTICE
10.1 Notices. Except as otherwise specifically provided in these Bylaws,
whenever under the provisions of these Bylaws notice is required to be given to
any shareholder, Director or officer, it shall not be construed to mean personal
notice, but such notice may be given by personal notice, by telegram or
cablegram, or by mail by depositing the same in the post office or letter box in
a postage prepaid
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sealed wrapper, addressed to such shareholder, Director or officer at such
address as appears on the books of the Corporation, and such notice shall be
deemed to be given at the time when the same shall be thus sent or mailed.
10.2 Waivers of Notice. Except as otherwise provided in these Bylaws, when
any notice is required to be given by law, by the Articles of Incorporation or
by these Bylaws, a written waiver thereof, signed by the person entitled to
notice, whether before or after the time stated therein, shall be deemed
equivalent to notice. In the case of a shareholder, such waiver of notice may be
signed by the shareholder's attorney or proxy duly appointed in writing.
ARTICLE ELEVEN
EMERGENCY POWERS
11.1 Bylaws. The Board of Directors may adopt emergency Bylaws, subject to
repeal or change by action of the shareholders, which shall, notwithstanding any
provision of law, the Articles of Incorporation or these Bylaws, be operative
during any emergency in the conduct of the business of the Corporation resulting
from an attack on the United States or on a locality in which the Corporation
conducts its business or customarily holds meeting of its Board of Directors or
its shareholders, or during any nuclear or atomic disaster, or during the
existence of any catastrophe, or other similar emergency condition, as a result
of which a quorum of the Board of Directors or a standing committee thereof
cannot readily be convened for action. The emergency Bylaws may make any
provision that may be practical and necessary for the circumstances of the
emergency.
11.2 Lines of Succession. The Board of Directors, either before or during
any such emergency, may provide, and from time to time modify, lines of
succession in the event that during such an emergency any or all officers or
agents of the Corporation shall for any reason be rendered incapable of
discharging their duties.
11.3 Head Office. The Board of Directors, either before or during any such
emergency, may (effective during the emergency) change the head office or
designate several alternative head offices or regional offices, or authorize the
officers to do so.
11.4 Period of Effectiveness. To the extent not inconsistent with any
emergency Bylaws so adopted, these Bylaws shall remain in effect during any such
emergency and upon its termination, the emergency Bylaws shall cease to be
operative.
11.5 Notices. Unless otherwise provided in emergency Bylaws, notice of any
meeting of the Board of Directors during any such emergency may be given only to
such of the Directors as it may be feasible to reach at the time, and by such
means as may be feasible at the time, including publication, radio or
television.
11.6 Officers as Directors Pro Tempore. To the extent required to
constitute a quorum at any meeting of the Board of Directors during any such
emergency, the officers of the Corporation who are present shall, unless
otherwise provided in emergency Bylaws, be deemed, in order of rank and within
the same rank in order of seniority, Directors for such meeting.
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11.7 Liability of Officers, Directors and Agents. No officer, Director,
agent or employee acting in accordance with any emergency bylaw shall be liable
except for willful misconduct. No officer, Director, agent or employee shall be
liable for any action taken by him or her in good faith in such an emergency in
furtherance of the ordinary business affairs of the Corporation even though not
authorized by the Bylaws then in effect.
ARTICLE TWELVE
CHECKS, NOTES, DRAFTS, ETC.
Checks, notes, drafts, acceptances, bills of exchange and other orders or
obligations for the payment of money shall be signed by such officer or officers
or person or persons as the Board of Directors by resolution shall from time to
time designate.
ARTICLE THIRTEEN
AMENDMENTS
The Bylaws of the Corporation may be altered or amended and new Bylaws may
be adopted by the shareholders at any annual or special meeting of the
shareholders or by the Board of Directors at any regular or special meeting of
the Board of Directors; provided, however, that, if such action is to be taken
at a meeting of the shareholders, notice of the general nature of the proposed
change in the Bylaws shall be given in the notice of meeting. The shareholders
may provide by resolution that any bylaw provision repealed, amended, adopted,
or altered by them may not be repealed, amended, adopted or altered by the Board
of Directors. Except as otherwise provided in the Articles of Incorporation,
action by the shareholders with respect to Bylaws shall be taken by an
affirmative vote of a majority of all shares entitled to elect Directors, and
action by the Board of Directors with respect to Bylaws shall be taken by an
affirmative vote of a majority of all Directors then holding office.
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Exhibit 5.1
April 13, 2000
North Georgia Community Financial Partners, Inc.
350 West Belmont Drive
Calhoun, Georgia 30701
Ladies and Gentlemen:
We are acting as special counsel to North Georgia Community Financial
Partners, Inc. (the "Company"), a Georgia corporation, and in such capacity we
are familiar with certain corporate actions taken by the Company in connection
with an Agreement and Plan of Share Exchange (the "Plan"), dated March 3, 2000,
between the Company and North Georgia National Bank (the "Bank"). If the Plan
is implemented, the Bank will become a wholly-owned subsidiary of the Company.
The Plan provides, subject to the exercise of dissenters' rights, that each
of the Bank's issued and outstanding shares of common stock, $5 par value, will
be converted into one share of common stock, no par value, of the Company.
We have examined the Plan and such other documents as we have reasonably
deemed necessary to furnish this opinion. In our examination, we have assumed
the genuineness of all signatures, the authenticity of all documents submitted
to us as original documents, and the conformity to the original documents of all
documents submitted to us as certified and photostatic copies. As to questions
of fact material and relevant to our opinion, where such facts were not
independently verified by us, we have relied, to the extent we deemed such
reliance proper, upon certificates and representations of officers and
representatives of the Company and appropriate federal, state and local
officials.
Based upon the foregoing and upon our examination of such documents and
matters of law as we have deemed relevant, we are of the opinion that the shares
of Company common stock to be issued pursuant to the Plan are duly authorized
and, when issued as contemplated by the Plan, will be validly issued, fully paid
and nonassessable.
We hereby consent to the reference to our firm under the heading "Legal
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Matters" in the Registration Statement on Form S-4 filed by the Company with the
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Securities and Exchange Commission under the Securities Act of 1933 and to the
inclusion of this opinion as an exhibit thereto.
Very truly yours,
/s/ POWELL, GOLDSTEIN, FRAZER & MURPHY LLP
<PAGE>
Exhibit 8.1
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April 12, 2000
North Georgia National Bank
350 West Belmont Drive
Calhoun, Georgia 30701
North Georgia Community Financial Partners, Inc.
350 West Belmont Drive
Calhoun, Georgia 30701
Ladies and Gentlemen:
You have requested our opinion with respect to certain federal income tax
consequences of the reorganization (the "Reorganization") contemplated by that
certain Agreement and Plan of Share Exchange dated as of March 3, 2000 (the
"Agreement") by and among North Georgia National Bank, a national bank organized
and existing under the laws of the United States (the "Bank") and North Georgia
Community Financial Partners, Inc., a corporation organized and existing under
the laws of the state of Georgia (the "Company"). For purposes of rendering
this opinion, we have reviewed and relied on the Agreement, the certificate
attached hereto, and such other documents as we have considered appropriate.
Unless otherwise indicated, terms used in this opinion have the same meaning as
in the Agreement.
For purposes of this opinion, we have assumed that the Reorganization will
be consummated at the Effective Date of the Reorganization pursuant to the terms
and conditions set forth in the Agreement. In addition, we have assumed with
your permission that the facts and representations certified to us in writing by
the Bank and the Company which are set forth in the certificate attached hereto,
apply as of the Effective Date of the Reorganization. A copy of such
certificate is attached hereto and incorporated herein by reference. We have
neither investigated nor verified the accuracy of any of the facts that have
been certified to us, upon which this opinion is based.
This opinion is based also on the Internal Revenue Code of 1986, as amended
(the "Code"), Treasury Regulations, Internal Revenue Service rulings, judicial
decisions, and other applicable authority, all as in effect on the date of this
opinion. The legal authorities on which this opinion is based may be changed at
any time. Any such changes may be retroactively applied and could modify the
opinions expressed herein. This opinion does not address any tax considerations
under foreign, state, or local laws, or the tax considerations to certain Bank
shareholders in light of their particular circumstances, including, persons who
are not United States persons, dealers in securities, tax-exempt entities,
shareholders who do not hold Bank common stock as "capital assets" within the
meaning of Code Section 1221, and shareholders who acquired their shares of Bank
common stock pursuant to the exercise of Bank options or otherwise as
compensation.
<PAGE>
Powell, Goldstein, Frazer & Murphy LLP
April 12, 2000
Page 2 of 2
Based upon and subject to the foregoing, we are of the opinion that the
Reorganization will constitute a reorganization within the meaning of Code
Section 368(a)(1)(B), and that the following are certain federal income tax
consequences that will result:
(a) No gain or loss will be recognized for federal income tax purposes by Bank
shareholders upon the exchange of their shares of Bank common stock for
Company common stock.
(b) The basis of the shares of Company common stock to be received by Bank
shareholders will be the same as the basis of Bank common stock surrendered
in exchange therefor.
(c) The holding period of the Company common stock to be received by each Bank
shareholder will include the period during which the shares of Bank common
stock surrendered in exchange therefor were held.
(d) Bank shareholders who receive solely cash pursuant to their statutory right
to dissent will be treated as having received such payment in redemption of
their Bank common stock, as provided in Section 302(a) of the Internal
Revenue Code. Generally, any gain or loss recognized by any such Bank
shareholder will be capital gain or loss, provided (i) the Bank common
stock constitutes a capital asset in the hands of such shareholder, and
(ii) the requirements of Code Section 302(b)(1), (2), or (3) are met. Each
affected Bank shareholder should consult such shareholder's own tax advisor
for the tax effect of such redemption (i.e., exchange treatment or
dividend).
(e) No gain or loss will be recognized for federal income tax purposes by Bank
or Company as a consequence of the Reorganization.
This opinion is being rendered solely to the parties to whom it is
addressed and may be relied upon by them and the shareholders of Bank. This
opinion may not be relied upon by any other party without the express written
permission of our Firm.
Very truly yours,
/s/ POWELL, GOLDSTEIN, FRAZER & MURPHY LLP
<PAGE>
April 11, 2000
Powell, Goldstein, Frazer & Murphy LLP
191 Peachtree Street NE
16th Floor
Atlanta, GA 30303
Re: Reorganization Pursuant to the Agreement and Plan of Share Exchange
dated as of March 3, 2000 by and between North Georgia National Bank and
North Georgia Community Financial Partners, Inc.
Ladies and Gentlemen:
The undersigned hereby certifies to Powell, Goldstein, Frazer & Murphy
LLP ("PGF&M"), counsel to North Georgia National Bank, a national bank organized
and existing under the laws of the United States (the "Bank") and North Georgia
Community Financial Partners, Inc., a corporation organized and existing under
the laws of the state of Georgia (the "Company"), that the facts as set forth
below with respect to the reorganization (the "Reorganization") contemplated by
that certain Agreement and Plan of Share Exchange dated as of March 3, 2000 (the
"Agreement") by and between Bank and Company are true, correct and complete in
all material respects as of the date hereof. All capitalized terms used herein
and not otherwise defined or limited herein shall have the meaning ascribed to
such terms in the Agreement.
1. The undersigned are authorized representatives of Bank
and Company, and in such capacity have personal knowledge of the matters herein
set forth, based in part on consultation with other officers or employees of
Bank and Company in a position to have knowledge of the relevant facts, and are
authorized to give this Certificate on behalf of Bank and Company.
2. In the Reorganization, shares of Bank stock will be exchanged solely for
Company stock.
3. Company will own shares of Bank stock constituting Control, as defined
below, of Bank immediately after the Reorganization.
4. The fair market value of the Company stock to be received by each Bank
shareholder in the Reorganization will equal the fair market value of the shares
of Bank stock surrendered by each such shareholder in the Reorganization.
5. To the best knowledge of Company and Bank, neither Company nor any "related
person" of Company (as such term is defined by Treasury Regulation Section
1.368-1(e)(3)) has acquired any of the stock of Bank in contemplation of the
Reorganization, nor will acquire, purchase or redeem any of the Company stock to
be issued to the Bank shareholders in connection with the Reorganization.
6. Bank has no plan or intention to issue additional shares of its stock,
through the exercise of options or warrants or otherwise, that would result in
Company owning less than 80% of the total
<PAGE>
Powell, Goldstein, Frazer & Murphy LLP
April 11, 2000
Page 2 of 3
combined voting power of all classes of stock entitled to be voted and at least
80% of the total number of shares of all other classes of stock of Bank (such
percentages being referred to herein as "Control" within the meaning of Section
368(c) of the Code.)
7. Company and Bank will pay their respective expenses, if any, incurred in
connection with the Reorganization.
8. Bank will, in exchange for a dissenting shareholder's Bank stock, pay from
its funds, and not from the funds of Company, the amount due to such Bank
shareholder who exercises such shareholder's right to dissent to the
Reorganization and that fully complies with the Dissenters' Rights Provisions.
9. There is no intercorporate indebtedness existing between Company and Bank
and there will be no indebtedness created in favor of Company as a result of the
Reorganization.
10. On the date of the Reorganization, no liabilities of Bank or any other
person will be transferred to or assumed by Company as part of the
Reorganization and none of the shares of Bank to be surrendered by Bank
shareholders in exchange for Company stock in the Reorganization will be subject
to any liabilities.
11. No stock or securities will be issued for services rendered to or for the
benefit of Bank in connection with the Reorganization and no stock or securities
will be issued for indebtedness of Company or interest on indebtedness of
Company.
12. The transfer of Bank stock is not the result of the solicitation by a
promoter, broker, or investment house.
13. All transfers of Bank stock pursuant to the Reorganization will occur on
approximately the same date.
14. Company is not under the jurisdiction of a court in a Title 11 or similar
case within the meaning of Section 368(a)(3)(A) of the Code.
15. Bank is not an investment company within the meaning of Section
368(a)(2)(F)(iii) and (iv) of the Code.
[Remainder of this page intentionally left blank]
<PAGE>
Powell, Goldstein, Frazer & Murphy LLP
April 11, 2000
Page 3 of 3
NORTH GEORGIA NATIONAL BANK
By: /s/David J. Lance
-----------------
David J. Lance
President
NORTH GEORGIA COMMUNITY FINANCIAL PARTNERS, INC.
By: /s/ David J. Lance
------------------
David J. Lance
President
<PAGE>
Exhibit 10.1
Employment Agreement
This EMPLOYMENT AGREEMENT is made, entered into, and is effective as of
this 22 day of September, 1999, (hereinafter referred to as the "Effective
Date"), by and between NORTH GEORGIA NATIONAL BANK, a National Banking
Association with principal offices located in Calhoun, Georgia, (hereinafter
referred to as the "Bank"), and DAVID J. LANCE (hereinafter referred to as the
"Executive").
WHEREAS, the Bank presently desires to employ the Executive in the
capacity of Chief Executive Officer, and
WHEREAS, the Executive possesses considerable experience and an intimate
knowledge of the banking business; and
WHEREAS, the Bank recognizes that the Executive's contributions will be
substantial and meritorious and, as such, the Executive has demonstrated unique
qualifications to act in an executive capacity for the Bank; and
WHEREAS, the Bank is desirous of enticing the Executive from the position
where he is presently employed and of assuring the continued employment of the
Executive in the above stated capacities for the Bank, and the Executive is
desirous of having such assurance;
NOW THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements of the parties set forth in the Agreement, and of other
good and valuable consideration the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, intending to be legally bound, agree as
follows:
Article 1. Term of Employment.
The Bank hereby agrees to employ the Executive and the Executive hereby
agrees to continue to serve the Bank, in accordance with the terms and
conditions set forth herein, for an initial period of three (3) years,
commencing as of the Effective Date of this Agreement as indicated above.
Upon each new day of the three (3) year period of employment from the
Effective Date until the Executive's sixty-fifth (65th) birthday, the term of
this Agreement automatically
Page 1 of 22
<PAGE>
shall be extended for one (1) additional day, to be added to the end of the
then-existing three (3) year term. Accordingly, at all times prior to (i) the
Executive's attaining age sixty-five (65) and (ii) a notice of employment
termination (or an actual termination), the term of this Agreement shall be
three (3) full years. However, either party may terminate this Agreement by
giving the other party a 90-day written notice of intent not to renew, as
further set forth in Article 6.
Additionally, the automatic extensions of the term of this Agreement shall
immediately be suspended upon an employment termination by reason of Death,
Disability, (as defined in ss. 6.2) or Retirement (as defined in ss. 6.1), or an
employment termination made voluntarily by the Executive (other than for Good
Reason as defined in ss. 6.6), or involuntarily for Cause (as defined in ss.
6.5). The provisions applicable to such suspensions of the term of this
Agreement are set forth in those sections pertaining to each of such types of
employment terminations.
In the event the Executive gives notice of employment termination, the
term of this Agreement shall expire upon the ninetieth (90th) day following the
delivery to the Bank of such notice of employment termination. Except as
otherwise provided in the following paragraph with respect to a voluntary
termination for Good Reason (defined in ss. 6.6 herein), a voluntary employment
termination by the Executive shall result in the termination of the rights and
obligations of the parties under this Agreement; provided, however, that the
terms and provisions of Article 9 shall continue to apply.
In the event the Bank desires to involuntarily terminate the employment of
the Executive (for purposes of this Agreement, a voluntary employment
termination by the Executive for Good Reason shall be treated as an involuntary
termination of the Executive's employment without Cause), the Bank shall deliver
to the Executive a notice of employment termination, and the following
provisions shall apply:
(a) In the event the involuntary termination is for Cause (defined in
ss. 6.5 herein), the term of this Agreement shall terminate on the
ninetieth (90th) day following the delivery to the Executive of such
notice of termination. Such a termination for Cause shall result in
the termination of all rights and obligations of the parties under
this Agreement provided, however, that the terms and provisions of
Article 9 shall continue to apply, and ss. 6.5 shall apply until
payments required hereunder have been made.
(b) In the event the involuntary termination is without Cause, the
Executive shall be entitled to receive the severance benefits set
forth in ss. 6.4 herein; provided,
Page 2 of 22
<PAGE>
however, that the terms and provisions of Article 9 shall continue
to apply and ss. 6.4 shall apply until payments required thereunder
have been made.
Article 2. Position and Responsibilities.
During the term of this Agreement, to Executive agrees to serve as Chief
Executive Officer of the Bank, and as a member of the Bank's Board of Directors
if so elected, and at a future higher level position, is so designated by the
Board. In Executive's capacity as Chief Executive Officer of the Bank, the
Executive shall report directly to the Chairman of the Board of Directors and
shall be in primary control and command of the Bank and have management
responsibility for all portions of the organization's operating line, as well as
staff units. The Executive shall have the same status, privileges, and
responsibilities normally inherent in such capacities in financial institutions
of similar size and character to the Bank.
During the term of this agreement the Executive may be promoted to a
higher level position such as Chairman of the Board. In such event, the
Executive shall have the same status, privileges, compensation, benefits, and
responsibilities normally inherent in such capacities in financial institutions
of similar size and character to the Bank.
Article 3. Standard of Care.
During the term of this Agreement the Executive agrees to devote
substantially all of Executive's full time, attention, and energies to the
Bank's business and shall not be engaged in any other business activity, whether
or not such business activity is pursued for gain, profit, or other pecuniary
advantage without the prior knowledge and causes of the Board. However, the
Executive may serve as a director of other companies so long as such service is
not injurious to the Bank, and provided that such service is approved by the
Board of the Bank as may be required under the by-laws of the Bank. The
Executive covenants, warrant, and represents that the Executive shall do the
following:
(a) Devote his full and best efforts to the fulfillment of his
employment obligations with the Bank; and
(b) Exercise the highest degree of loyalty and the highest standards of
conduct in the performance of his duties.
This Article 3 shall not be construed as preventing the Executive from
investing assets in such form or manner so long as such investment will not
require Executive's
Page 3 of 22
<PAGE>
services in the daily operations of the affairs of the companies in which such
investments are made.
Article 4. Compensation.
As remuneration for all services to be rendered by the Executive during
the term of this Agreement, and as consideration for complying with the
covenants herein, the Bank shall pay and provide to the Executive the following:
4.1 Base Salary:
The Bank shall pay the Executive a Base Salary in an amount which shall be
established from time to time by the Board of Directors of the Bank or the
Board's designee; provided, however, that such Base Salary shall not be less
than one hundred fifty thousand dollars ($150,000.00) per year and if
subsequently increased shall not be less than such increased amount (hereinafter
referred to as "Base Salary"). This Base Salary shall be paid to the Executive
pursuant to regular payroll practices and procedures of the Bank throughout the
year.
The annual Base Salary shall be reviewed at least annually following the
Effective Date of this Agreement and for so long as this Agreement is in force,
to ascertain in the judgement of the Board or the Board's designee, the amount
by which such Base Salary should be increased, based primarily on the
performance of the Executive during the year. Each year, the Base Salary shall
be increased by an amount equal to the percent of change in the Consumer Price
Index (CPI) as indicated by "The Consumer Price Index for All Urban Consumers
(CPI-U) for the U.S. City Average for All Items," published by the U.S.
Department of Labor, Bureau of Labor Statistics (BLS) in the preceding year
(January 1 to December 31) ended just prior to the anniversary review date.
Beginning in the Year 2001 and thereafter, the Base Salary increase shall always
be at least three percent (3%) annually. When so increased, the Base Salary as
stated above shall, likewise, be increased for all purposes of this Agreement.
4.2 Annual Bonus:
In addition to his Base Salary, the Executive shall be entitled to receive
an annual cash bonus (hereinafter referred to as the "Bonus") from the Bank
under an Executive Incentive Plan.
Both the Bank and the Executive acknowledge and understand that such
Executive
Page 4 of 22
<PAGE>
Incentive Plan may be amended from time to time by the Bank. However, in no
event shall the Bonus paid by the Bank to the Executive be less than two percent
(2%) of the before-tax profits of the Bank, as determined by the annual
accounting report prepared for the Board of Directors. Any earned annual Bonus
shall be paid each year on or before March 15th.
4.3 Signing Bonus:
Within fifteen days of the Effective Date of this Agreement, the Bank
shall pay to the Executive a one time, lump sum Signing Bonus in the amount of
seventy thousand dollars ($70,000.00).
4.4 Long-Term Incentives:
During the term of this Agreement the Executive shall be entitled to
participate in any and all long-term incentive programs of the Bank at a level
that is commensurate with Executive's position with the Bank. In the event of a
sale or transfer of the Bank during to term of this Agreement, then the
Executive shall receive from the Bank one percent (1%) of the total sale price
of the Bank from such transaction. For purposes of the Agreement to terms sale
and transfer shall mean to sale of substantially all of the Bank's assets, a
change of control of the Bank, a sale of more than twenty-five percent (25%) of
the Bank's stock, or any merger or consolidation of the Bank with or into any
other entity from which the Bank or its shareholders realize cash or marketable
securities.
4.5 Deferred Compensation:
The Bank hereby promises, warrants, and agrees that, within six (6) months
of the Effective Date of this Agreement, it will implement a Deferred
Compensation package for the Executive in the form of an Excess Benefit Plan
which will maximize the annual defined contribution limit established by the IRS
in each year for the Executive. The specific terms and provisions of such Excess
Benefit Plan shall be stipulated by a separate Agreement and Plan Document.
4.6 Retirement Benefits:
The Bank shall provide to the Executive participation in all Bank
qualified defined benefit and defined contribution retirement plans that are
provided to other Bank employees and to other similarly situated Bank
executives, subject to the eligibility, contributions, and participation
requirements and limitations of such plans. The obligations of the Bank pursuant
to this ss. 4.6 shall survive the termination of this Agreement.
Page 5 of 22
<PAGE>
In addition to such other contributions the Bank may make to defined
benefit plans and/or defined contribution plans on behalf of the Executive, in
the event that the Bank's annual profit sharing contribution shall ever be less
than four percent (4%) for all Bank employees, then and in such event, the Bank
shall make up the difference to the Executive by way of a contribution to a
Deferred Compensation Agreement which the Bank shall establish and maintain for
the Benefit of the Executive.
4.7 Employee Benefits:
The Bank shall provide to the Executive all benefits to which other
executives and employees of the Bank are entitled to receive, as commensurate
with the Executive's position, subject to the eligibility requirements and other
provisions of such plans or arrangements. Such benefits shall include, but not
limited to, group term life insurance, and short-term comprehensive health and
major medical insurance, dental and vision insurance, and long-term disability.
In addition to those other benefits which other executives and employees
of the Bank may be entitled to receive, the Bank shall provide to the Executive
the following:
(a) Within the first calendar quarter of the year 2000, the Bank shall
pay the full, up-front, and total premium for a Split-Dollar Life
Insurance Policy of $600,000.00 on behalf of the Executive under
which the Bank shall add an endorsement to the policy providing that
the full cash value of the policy shall belong to the Executive and
that the total death benefits of the policy shall be distributed to
the designated beneficiary(ies) of the Executive upon his death so
long as the Bank is reimbursed for the premiums paid on the policy
out of proceeds of the death benefits;
(b) Four weeks Vacation during each calendar year;
(c) Fully vested stock options of 75,000 shares of bank stock issued at
$10.00 per share for the duration of this Agreement. Within thirty
(30) days of the Effective Date of this Agreement, the Bank agrees
to execute a separate Stock Option Agreement relating the more
specific terms of the stock transfer as either an Incentive Stock
Option (ISO) Plan or a Non-Qualified Stock Plan. While the type of
Stock Option Agreement shall remain at the discretion of the Board,
the Board agrees to give careful consideration and preference
towards an ISO Plan on behalf of the Executive. In the event that
the Board decides not to sponsor an ISO Plan, then the Bank shall
make up the difference in the
Page 6 of 22
<PAGE>
cost of additional tax liability to the Executive, either through
cash or additional shares of stock to the him; and
(d) Fully vested stock option for six (6) months from the Effective Date
of this Agreement to purchase 25,000 shares of bank from the current
shareholders at $10.00 per share.
4.8 Perquisites:
The Bank shall provide to the Executive, at the Bank's cost, all
perquisites to which other similarly situated executives of the Bank are
entitled to receive and such other perquisites which are suitable to the
character of the Executive's position with the Bank and adequate for the
performance of his duties hereunder.
In addition to those other benefits which other executives and employees
of the Bank may be entitled to receive, the Bank shall provide to the Executive
the following:
(a) Full and complete use of a Chevrolet Suburban automobile (or such
other comparable vehicle of similar model and value as the Executive
may select), including all gas, maintenance, insurance, and all
other costs or expense of operation;
(b) Fully paid and maintained memberships (including purchase and/or
transfer fees as applicable) to the following clubs and
organizations:
(1) The Farm Country Club;
(2) Ocean Forest Country Club;
Each such membership shall be in the name of the Executive as the
solely named owner of the individual membership, and the ownership
rights and privileges of such memberships shall survive the
termination of this Agreement for any reason or reasons. The amount
for which the Bank will be responsible as to the purchase and/or
transfer fees for such memberships shall not exceed $100,000.00
If during the three consecutive years following the Effective Date
of this Agreement, the Executive voluntarily terminates this
Agreement pursuant to ss. 6.3, then the Executive shall reimburse
the Bank for a portion of these membership purchase and/or transfer
fees according to the following schedule:
Page 7 of 22
<PAGE>
(i) reimbursement of 100% of membership purchase and/or
transfer fees paid by the Bank should the Executive
voluntarily terminate this Agreement during the first
twelve (12) month period following the Effective Date;
(ii) reimbursement of two-thirds (2/3) of membership purchase
and/or transfer fees paid by the Bank should the
Executive voluntarily terminate this Agreement during
the second twelve (12) month period following the
Effective Date; or
(iii) reimbursement of one-third (1/3) of membership purchase
and/or transfer fees paid by the Bank should the
Executive voluntarily terminate this Agreement during
the third twelve (12) month period following the
Effective Date
The Executive shall not be responsible for reimbursement of any
membership purchase and/or transfer fees paid by the Bank in the
event this Agreement continues for more than three full years beyond
the Effective Date. Should the Executive become responsible for any
such reimbursements to the Bank, then the Executive shall make such
reimbursements to the Bank in three (3) equal annual payments, the
first of which shall be due six (6) months following the date on
which the Executive voluntarily terminates this Agreement and this
first due date shall establish the anniversary dates on which the
remaining two (2) reimbursement installment payments shall be due;
(c) Fully paid and maintained memberships (including purchase and/or
transfer fees as applicable) to the following clubs and
organizations:
(1) Young Presidents Organization;
(2) Commerce Club; and
(3) Any other clubs or organizations which may be added upon
approval of the Board
Each such membership shall be in the name of the Executive as the
solely named owner of the individual membership, and the ownership
rights and privileges of such memberships shall survive the
termination of this Agreement for any reason or reasons;
(d) Fully paid annual physical medical examination, including the costs
for travel,
Page 8 of 22
<PAGE>
hotel, and all meals for a minimum of three (3) nights stay, for the
Executive and his spouse provided by a medical practitioner as
chosen by the Executive and at any location within the United States
as chosen by the executive, including but not limited to the
Greenbrier Hotel. Should the Executive, at his option and
discretion, not go for this annual physical in any given year, then
the Bank shall not be considered to have violated the terms of this
paragraph;
(e) Fully paid attendance, including but not limited to the costs for
travel, hotel, and all meals, for the Executive and the spouse of
the Executive for the following conferences:
(1) Georgia Banker's Association (GBA); and
(2) Young Presidents Organization (YPO); or a comparable
organization.
4.9 Right to Change Plans:
By reason of this Article 4, the Bank shall not be obligated to
perpetually maintain, or refrain from changing, amending, or discontinuing any
benefit plan, program, or perquisite, so long as such changes are similarly
applicable to the Executive and all other participants under such plan or
program. The Bank shall always give the Executive advance written notice of in
change, amendment, or discontinuation to any such plan, program, or perquisite.
If the benefit to the Executive is diminished by such change, amendment, or
discontinuation, then the Bank shall compensate the Executive for such by way of
the dollar amount and value by which such benefit is reduced.
Article 5. Expenses.
The Bank shall pay or reimburse the Executive for all ordinary and
necessary expenses, in a reasonable amount, which the Executive incurs in
performing his duties under this Agreement including, but not limited to,
travel, entertainment, professional dues and subscriptions, and all dues, fees,
and expenses associated with membership in various professional, business, and
civic associations and societies in which the Executive's participation is in
the best interest of the Bank.
Article 6. Employment Terminations.
6.1 Termination Due to Retirement or Death:
In the event the Executive's employment is terminated while this Agreement
is in
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<PAGE>
force by reason of early or normal retirement (as defined under the then
established rules of the Bank's tax-qualified retirement plan, hereinafter
referred to as "Retirement"), or death, then and in such event, the Executive's
benefits shall be determined in accordance with the Banks retirement, survivors'
benefits, insurance, and other applicable programs of the Bank then in effect.
Upon the effective date of such termination, the Banks obligation under this
Agreement to pay and provide to the Executive the elements of pay described in
ss. ss. 4.1, 4.2, and 4.3 shall immediately expire.
However, the Executive shall receive all other rights and benefits that he
is vested in, pursuant to other plans and programs of the Bank. In addition,
subject to any conflicting terms of any short-term incentive program which would
provide for greater benefits following such termination, the Bank shall pay to
the Executive (or the Executives beneficiaries or estate, as applicable), a pro
rata share of Executive's Bonus for the fiscal year in which employment
termination occurs, based on base bonus opportunity (as defined in the Executive
Incentive Plan) for such fiscal year. This pro rata Bonus amount shall be
determined as a function of the number of days in such fiscal year prior to the
date of employment termination in relation to the total number of days in such
fiscal year. The pro rata Bonus shall be paid within thirty (30) days of the end
of the year in which the Effective Date of employment termination occurs.
Also, all un-vested stock awards (including, but not limited to, any stock
options and restricted stock) will vest in full on the date of termination Death
or Retirement.
6.2 Termination Due to Disability:
In the event that the Executive becomes Disabled (as defined below) during
the term of this Agreement and is, therefore, unable to perform his or her
duties as set forth herein for more than one hundred eighty (180) total calendar
days during any period of twelve (12) consecutive months, the Bank shall have
the right to terminate the Executive's active employment as provided in this
Agreement. The Board shall deliver written notice to the Executive of the Bank's
intent to terminate the Executive's employment for Disability at least ninety
(90) calendar days prior to the effective date of such termination. Such written
termination may be given to the Executive during the one hundred eighty (180)
day Disability period so long as the notice is prospective and provides that
termination shall not occur should the Executive recover and return to
employment at the Bank. A termination of employment for Disability shall become
effective upon the end of the ninety (90) day notice period, specified above.
Upon such effective date, the Bank's obligation to pay and provide to the
Executive the elements of pay described in ss. ss. 4.1, 4.2, and 4.3 shall
immediately expire.
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<PAGE>
However, the Executive shall receive all rights and benefits that he is
vested in, pursuant to other plans and programs of the Bank. In addition,
subject to any conflicting terms of any short-term incentive program which would
provide for greater benefits following such termination, the Bank shall pay to
the Executive a pro rata share of his Bonus for the fiscal year in which
employment termination occurs, based on base bonus opportunity for such fiscal
year. This pro rata Bonus amount shall be determined as a function of the number
of days in such fiscal year prior to the effective date of termination for
Disability, in relation to the total number of days in such fiscal year. The pro
rata Bonus shall be paid within thirty (30) days of the end of the year in which
the Effective Date of termination for Disability occurs.
Also, all un-vested stock awards (including, but not limited to, any stock
options and restricted stock) will vest in full at the date of termination for
Disability.
The term "Disability" shall mean, for all purposes of this Agreement, the
incapacity of the Executive, due to injury, illness, disease, or bodily or
mantel infirmity, to engage in the performance of substantially all of the usual
duties of employment with the Bank as contemplated by Article 2 herein, such
Disability to be determined by competent medical advice from one (1) or more
individual doctors, qualified to give such professional medical advice. The
Executive consents to be examined by such individual(s) who are qualified to
give such professional medical advice.
It is expressly understood that the Disability of the Executive for a
period of one hundred eighty (180) calendar days or less in the aggregate during
any period of twelve (12) consecutive months, in the absence of any reasonable
expectation that the Disability will exist for more than such a period of time,
shall not constitute a failure by Executive to perform his or her duties
hereunder and shall not be deemed a breach or default, and the Executive shall
receive full compensation for any such period or fix any other temporary illness
or incapacity during the term of this Agreement.
6.3 Voluntary Termination by the Executive:
The Executive may terminate this Agreement at any time by giving the Board
of Directors of the Bank written notice of intent to terminate, delivered at
least ninety (90) calendar days prior to the effective date of such termination.
This ss. 6.3 shall not apply if the Executive terminates employment because of
Retirement.
The Bank shall pay the Executive a full Base Salary, at the rate then in
effect as provided in ss. 4.1 herein, through the effective date of termination,
plus all other benefits to
Page 11 of 22
<PAGE>
which the Executive has a vested right at that time (for this purpose, the
Executive shall not be paid any Bonus with respect to the fiscal year in which
voluntary termination under this ss. 6.3 occurs). In the event that the
voluntary termination is for Good Reason, the terms of ss. 6.6 herein shall
govern the parties' rights and obligations hereunder.
6.4 Involuntary Termination by the Bank without Cause:
At any time during the term of this Agreement the Board may terminate the
Executive's employment as provided under this Agreement for reasons other than
Death, Disability, Retirement, or for Cause, by notifying the Executive in
writing of the Bank's intent to terminate, at least ninety (90) calendar days
prior to the effective date of such termination.
Subject to the terms of Article 7 herein, following the expiration of the
ninety (90) day notice period, the Bank shall pay to the Executive a lump-sum
cash payment equal to the present value of the sum of the following amounts:
(a) The Base Salary which would have been paid to the Executive
throughout the remaining year of the term of this Agreement;
(b) The annual bonus amount in the year of employment termination,
calculated at the higher of the base bonus opportunity or
anticipated actual, multiplied by the remaining years of the term of
this Agreement;
(c) The annualized long-term incentive award for the year in which
termination occurs, at the higher of the targeted level of award or
anticipated actual, multiplied by the remaining years of the term of
this Agreement; and
(d) The amount of the Executive's annual club dues bonus in the year of
termination, multiplied by the remaining years of the term of this
Agreement.
For purposes of making the present value calculations described above, the
Bank shall treat such payments as if they were made at the point in time when
each such payment is scheduled to have been made.
In addition, the Bank shall make a prorated payment of the Executive's
base bonus for the bonus year in which termination occurs. Payment of the base
bonus shall be made in cash, in one lump sum, at the same time the payments
described above are made.
Page 12 of 22
<PAGE>
Also, all un-vested stock awards (including, but not limited to, any stock
options and restricted stock) will vest on the date of termination.
Subject to the terms of Article 7 herein, the Bank shall continue the
Executive's health and welfare benefit coverage for the entire three (3) year
period following employment termination, at the same cost, and on the same terms
as existed immediately prior to employment termination. The Bank and the
Executive thereafter shall have no further obligations under this Agreement.
Notwithstanding the foregoing, in the event the Executive obtains Comparable
Employment as defined in Article 7 hereof, the Bank's obligation to continue the
Executive's health and welfare benefit coverage pursuant to this ss. 6.4 shall
immediately cease.
Further, the provisions of ss. 4.4 pertaining to the Executive receiving
one percent (1%) of the total sale price of the Bank shall survive the
termination of the Executive if such termination should be without cause by the
Bank and should the sale or change of control of the Bank occur within three (3)
years of the date of termination by the Bank without cause. In such an event,
the Executive's right to one percent (1%) of the total sale price of the Bank
shall remain and continue in full force and affect for the then current three
(3) year period of this Agreement beyond the date of termination of the
Executive by the Bank without cause.
Also, the Bank shall transfer to the Executive title to the Executive's
Bank car, without cost to the Executive, and shall pay to the Executive a lump
sum cash payment in an amount necessary to fully gross-up the income tax effect
of said transfer.
6.5 Termination for Cause:
Nothing in this Agreement shall be construed to prevent the Board from
terminating the Executive's employment under this Agreement for "Cause."
"Cause" shall be defined as the conviction of the Executive for the
commission of an act of fraud, embezzlement, theft, or other criminal act
constituting a felony under U.S. laws involving moral turpitude; or the gross
neglect of the Executive in the performance of his material duties under this
Agreement, for reasons other than the Executive's death, Disability, or
Retirement. The Bank's Board of Directors, by majority vote, shall provide the
Executive with notice of the reasons the Board believes Cause may exist and
provide the Executive with thirty (30) days to cure the alleged Cause and/or
otherwise to respond to the allegation that Cause exists.
Page 13 of 22
<PAGE>
In the event this Agreement is terminated by the Board for Cause, the Bank
shall pay the Executive a base Salary through the effective date of the
employment termination and the Executive shall immediately thereafter forfeit
all rights and benefits (other than vested benefits) Executive would otherwise
have been entitled to receive under this Agreement. The Bank and the Executive
thereafter shall have no further obligations under this Agreement and the
provisions of Article 9 shall not apply. Provided, however, that any termination
for Cause under this provision shall be subject to challenge by the Executive
pursuant to Article 12 of this Agreement.
6.6 Termination for Good Reason:
At any time during the term of this Agreement the Executive may terminate
this Agreement for Good Reason (as defined below) by giving the Board of
Directors of the Bank ninety (90) calendar days written notice of intent to
terminate, which notice sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for such termination. The Executive's
ability to terminate for Good Reason is contingent upon his agreement to allow
the Bank to remedy, within thirty (3) days of notice, the events constituting
Good Reason.
Upon the failure of the Bank to remedy the events constituting Good Reason
within thirty (30) days of notice from the Executive, the Good Reason
termination shall become effective, and the Bank shall pay and provide to the
Executive the benefits set forth in ss. 6.4 herein (as if the termination were
an involuntary termination without Cause).
Good Reason shall mean, without the Executive's express prior written
consent the occurrence of any one or more of the following:
(a) The assignment of the Executive to duties materially inconsistent
with the Executive's authorities, duties, responsibilities, and
status (including titles and reporting requirements) as an officer
of the Bank, or a material reduction or alteration in the nature or
status of the Executive's authorities, duties, or responsibilities
from those in effect as of the Effective Date (or as subsequently
increased), other than an insubstantial and inadvertent act that is
remedied by the Bank promptly after receipt of notice thereof given
by the Executive;
(b) The Bank's requiring the Executive to be based at a location in
excess of fifteen (15) miles from the location of the Executive's
principal job location or office as of the Effective Date, except
for required travel on the Bank's
Page 14 of 22
<PAGE>
business to an extent substantially consistent with the Executive's
present business obligations;
(c) A reduction by the Bank of the Executive's Base Salary as in effect
on the Effective Date, or as the same shall be increased from time
to time;
(d) A reduction by the Bank of the Executive's aggregate incentive
opportunities under the Bank's short-term and long-term incentive
programs, as such opportunities exist on the Effective Date, or as
such opportunities may be increased after the Effective Date. For
this purpose, a reduction in the Executive's incentive opportunities
shall be deemed to have occurred in the event his targeted
annualized award opportunities and/or the degree of probability of
attainment of such annualized award opportunities, are diminished
from the levels and probability of attainment that existed as of the
Effective Date or as such opportunity and/or degree of probability
have been increased from time to time. This subsection (d) shall not
apply as a definition of "good reason" in the event that the
Executive, in his capacity as an officer of the Bank, voluntarily
makes the decision or agrees to such a reduction in incentive
programs;
(e) The failure of the Bank to maintain the Executive's relative level
of coverage under the Bank's employee benefit or retirement plans,
policies, practices, or arrangements in which the Executive
participates as of the Effective Date, both in terms of the amount
of benefits provided and the relative level of the Executive's
participation. For this purpose, the Bank may eliminate and/or
modify existing programs and coverage levels; provided, however,
that the Executive's level of coverage under all such programs must
be at least as great as is such coverage provided to executives who
have the same or lesser levels of reporting responsibilities within
the Bank's organization and the Bank must compensate the Executive
for any reduction or diminution in the value of his specific
benefits for the duration of this Agreement. This subsection (c)
shall not apply as a definition of "good reason" in the event that
the Executive, in his capacity as an officer of the Bank,
voluntarily makes the decision or agrees to such a reduction in
employee benefit plans or retirement programs, except that the
provision of ss. 4.9 as relates to diminished value shall continue
to apply;
(f) The failure of the Bank to obtain a satisfactory agreement from any
successor to the Bank to assume and agree to perform the Bank's
obligations under this
Page 15 of 22
<PAGE>
Agreement; and
(g) Any purported termination by the Bank of the Executive's employment
that is not effected pursuant to a notice of termination satisfying
the requirements of Articles 1 and 6 herein, and for purposes of
this Agreement, no such purported termination shall be effective.
The Executive's right to terminate employment for Good Reason shall not be
affected by the Executive's incapacity due to physical or mental illness. The
Executive's continued employment shall not constitute a consent to, or a waiver
of rights with respect to, any circumstance constituting Good Reason herein.
Upon a termination of the Executive's employment for Good Reason at any
time during the term of this Agreement, the Executive shall be entitled to
receive the same payments and benefits as he is entitled to receive following an
involuntary termination of his employment by the Bank without Cause, as
specified in ss. 6.4 herein. As such, the provisions of ss. 4.4 pertaining to
the Executive receiving one percent (1%) of the total sale price of the Bank
shall survive the Executive's termination for Good Reason and should the sale or
change of control of the Bank occur within three (3) years of the date of
termination for Good Reason. In such an event, the Executive's right to one
percent (1%) of the total sale price of the Bank shall remain and continue in
full force and effect for the then current three (3) year period of this
Agreement beyond the date of termination of the Executive for Good Reason.
Article 7. No Duty to Mitigate.
As a condition to receiving the severance benefits described in ss. 6.4 or
in ss. 6.6 herein, the Executive is not required to actively seek full-time
employment during the period following employment termination.
Article 8. Excise Tax Gross-Up.
8.1 Equalization Payment:
In the event that the Executive becomes entitled to severance benefits
under ss. 6.4 or ss. 6.6 herein (hereinafter referred to as "Severance
Benefits"), if any of the Severance Benefits will be subject to the tax (the
"Excise Tax") imposed by ss. 4999 of the Internal Revenue Code of 1986, as
amended (the "Code"), or any similar tax that may hereafter be imposed, the Bank
shall pay to the Executive in cash an additional amount (the "Gross-Up
Page 16 of 22
<PAGE>
Payment") such that the net amount retained by the Executive after deduction of
(i) any Excise Tax on the Severance Benefits; and (ii) any federal, state, and
local income tax and Excise Tax on the Gross-Up Payment provided for by this ss.
8.1, shall be equal to the Severance Benefits. Such payment shall be made by the
Bank to the Executive as soon as practicable following the effective date of
termination, but in no event beyond thirty (30) days from such date.
8.2 Tax Computation:
For purposes of determining whether any of the Severance Benefits will be
subject to the Excise Tax and the amounts of such Excise Tax:
(a) Any other payments or benefits received or to be received by the
Executive in connection with a change in control of the Bank or the
Executive's termination of employment (whether pursuant to the terms
of this Plan or any other plan, arrangement, or agreement with the
Bank, or with any individual, entity, or group of individuals or
entities (individually and collectively referred to in this ss. 8.2
as "Persons") whose actions result in a change in control of the
Bank or any Person affiliated with the Bank or such Persons) shall
be treated as "parachute payments" within the meaning of ss.
280G(b)(2) of the Code, and all "excess parachute payments" within
the meaning of ss. 280G(b)(1) of the Code shall be treated as
subject to the Excise Tax, unless in the opinion of tax counsel
selected by the Bank's independent auditors and acceptable to the
Executive, such other payments or benefits (in whole or in part) do
not constitute parachute payments, or unless such excess parachute
payments (in whole or in part) represent reasonable compensation for
services actually rendered within the meaning of ss. 280G(b)(4) of
the Code in excess of the base amount within the meaning of ss.
280G(b)(3) of the Code, or are otherwise not subject to the excise
tax;
(b) The amount of the Severance Benefits which shall be treated as
subject to the Excise Tax shall be equal to the lesser of (i) the
total amount of the Severance Benefits; or (ii) the amount of excess
parachute payments within the meaning of ss. 280(G)(b)(1) of the
Code (after applying clause (a) above). For purposes of this
paragraph, the one percent (1%) of sale price of the Bank as
described in ss. 4.4 shall not be included as Severance Benefits to
the Executive in order to calculate the excise tax or the maximum
amount of excess parachute payments within the meaning of ss.
280G(b)(1) of the Code; and
Page 17 of 22
<PAGE>
(c) The value of any noncash benefits or any deferred payment or benefit
shall be determined by the Bank's independent auditors in accordance
with the principles of ss. 280G(d)(3) and (4) of the Code. The base
amount shall be determined by the Bank's independent auditors in
accordance with the principles of ss. 280G(d)(3) of the Code.
For purposes of determining the amount of the Gross-Up Payment the
Executive shall be deemed to pay federal income taxes at the highest marginal
rate of federal income taxation in the calendar year in which the Gross-Up
Payment is to be made, and state and local income taxes at the highest marginal
rate of taxation in the state and locality of the Executive's residence on the
effective date of employment net of the maximum reduction in federal income
taxes which could be obtained from deduction of such state and local taxes.
8.3 Subsequent Recalculation
In the event the computation of the Bank under ss. 8.1 herein, is adjusted
by the Internal Revenue Service which adjustment becomes binding on the Service,
the Bank, and the Executive, so that the Executive did not receive the greatest
net benefit, the Bank shall reimburse the Executive for the full amount
necessary to make the Executive whole, plus a market rate of interest, as
determined by the Board of Directors.
Article 9. Non-Competition.
9.1 Prohibition on Competition:
Without the prior written consent of the Bank, during the term of this
Agreement, and for twelve (12) months following the expiration of this
Agreement, the Executive shall not, as an employee or an officer, engage
directly or indirectly in any business or enterprise which is "in competition"
with the Bank or its successors or assigns. For purposes of this Agreement, a
business or enterprise will be deemed to be "in competition" if it is a banking
institution, the headquarters of which are within fifteen (15) miles from the
Bank's current location on the Effective Date of this Agreement, in Calhoun,
Georgia.
The Executive further agrees that within this same twelve (12) month time
period, he will keep any and all bank business, trade secrets, and other
proprietary information in strict confidence; he will not solicit business from
the existing customers of the Bank; and he will not solicit or induce any person
employed by the Bank to leave such employment.
However, the Executive shall be allowed to purchase and hold for
investment the
Page 18 of 22
<PAGE>
shares of any corporation whose shares are regularly traded on a national
securities exchange or in the over-the-counter market. Additionally, the
Executive shall be allowed to maintain any holdings which the Executive may have
as of the Effective Date of this Agreement.
Any prohibition on competition by the Executive shall not apply in the
event that the Executive's employment has been terminated without Cause as
provided in ss. 6.4 or for Good Reason as provided in ss. 6.6.
9.2 Specific Performance:
The parties recognize that the Bank will have no adequate remedy at law
for breach by the Executive of the requirements of this Article 9 and, in the
event of such breach, the Bank and the Executive hereby agree that, in addition
to the right to seek monetary damages, the Bank will be entitled to a decree of
specific performance, mandamus, or other appropriate remedy to enforce
performance of such requirements.
Article 10. Indemnification.
The Bank hereby covenants and agrees to indemnify and hold harmless the
Executive in every manner associated with costs resulting from legal fees and
expenses which may be incurred in defense of his executive authority position
with the bank, including any claim, dispute, or litigation by the former
employer of the Executive based on his employment with the Bank.
Article 11. Assignment.
11.1 Assignment by Bank:
This Agreement may and shall be assigned or transferred to, and shall be
binding upon and shall inure to the benefit of, any successor or assignor of the
Bank, and any such successor or assignor shall be deemed substituted for all
purposes of the "Bank" under the terms of this Agreement. As used in this
Agreement, the term "successor" or "assignor" shall mean any person, firm,
corporation, or business entity which at any time, whether by merger, purchase,
or otherwise, acquires all or substantially all of the assets or the business of
the Bank. Notwithstanding such assignment, the Bank shall remain, with such
successor, jointly and severally liable for all its obligations hereunder.
Failure of the Bank to obtain the agreement of any successor or assignor
to be bound by the terms of this Agreement prior to the effectiveness of any
such succession or
Page 19 of 22
<PAGE>
assignment shall be a breach of this Agreement, and shall immediately entitle
the Executive to compensation from the Bank in the same amount and on the same
terms as the Executive would be entitled in the event of an termination of
employment, as provided in ss. 6.4 herein.
Except as herein provided, this Agreement may not otherwise be assigned by
the Bank.
11.2 Assignment by Executive:
The services to be provided by the Executive to the Bank hereunder are
personal to the Executive, and the Executive's duties may not be assigned by the
Executive; provided, however that this Agreement shall inure to the benefit of
and be enforceable by the Executive's personal or legal representatives,
executors, and administrators, successors, heirs, distributees, devisees, and
legatees. If the Executive dies while any amounts payable to the Executive
hereunder remain outstanding, all such amounts, unless otherwise provided
herein, shall be paid in accordance with the terms of this Agreement to the
Executive's devisee, legatee, or other designee or, in the absence of such
designee, to the Executive's estate.
Article 12. Dispute Resolution and Notice.
12.1 Dispute Resolution:
The Executive shall have the right and option to elect to have any good
faith dispute or controversy arising under or in connection with this Agreement
settled by litigation or by arbitration.
If arbitration is selected, such proceeding shall be conducted before a
panel of three (3) arbitrators from the American Arbitration Association (AAA),
sitting in a location selected by the Executive within fifty (50) miles from the
location of Executive's principal place of employment, in accordance with the
rules of the American Arbitration Association then in effect. Judgment may be
entered on the award of the arbitrators in any court having competent
jurisdiction.
All expenses of such litigation or arbitration, including the reasonable
fees and expenses of the legal representative for the Executive, and necessary
costs and disbursements incurred as a result of such dispute or legal
proceeding, and any prejudgment interest, shall be born by the Bank.
Page 20 of 22
<PAGE>
12.2 Notice:
Any notices, requests, demands, or other communications provided for by
this Agreement shall be sufficient if in writing and if sent by registered or
certified mail to the Executive at the last address Executive has filed in
writing with the Bank or, in the case of the Bank, to an executive officer of
the Bank, at the Bank's principal offices.
Article 13. Miscellaneous.
13.1 Entire Agreement:
This Agreement supersedes any prior agreements or understandings, oral or
written, between the parties hereto, or between the Executive and the Bank, with
respect to the subject matter hereof, and constitutes the entire agreement of
the parties with respect thereto.
13.2 Modification:
This Agreement shall not be varied, altered, modified, canceled, changed,
or in any way amended except by mutual agreement of the parties in a written
instrument executed by the parties hereto or their legal representatives.
13.3 Severability:
In the event that any provision of this Agreement shall be determined to
be unenforceable for any reason, the remaining provisions of this Agreement
shall be unaffected thereby and shall remain in full force and effect.
13.4 Counterparts:
This Agreement may be executed in one (1) or more counterparts, each of
which shall be deemed to be an original, but all of which together will
constitute one and the same Agreement.
13.5 Tax Withholding:
The Bank may withhold from any benefits payable under this Agreement all
federal, state, city, or other taxes as may be required pursuant to any law or
governmental regulation or ruling.
Page 21 of 22
<PAGE>
13.6 Beneficiaries:
The Executive may designate one or more persons or entities as the primary
and/or contingent beneficiaries of any amounts to be received under this
Agreement. Such designation must be in the form of a signed writing acceptable
to the Board or the Board's designee. The Executive may make or change such
designation at any time.
Article 14. Governing Law.
To the extent not preempted by federal law, the provisions of this
Agreement shall be construed and enforced in accordance with the laws of the
State of Georgia.
IN WITNESS WHEREOF, the Executive has executed, and the Bank (pursuant to
a Resolution adopted at a duly constituted meeting of the Bank's Board of
Directors) has executed this Agreement in duplicate, as of the 22 day of
September, 1999.
NORTH GEORGIA NATIONAL BANK
By: /s/ Thomas M. Kinnamon
-------------------------------------
THOMAS M. KINNAMON
Chairman of the Board of Directors
By: /s/ Ernest M. Acree, Jr.
-------------------------------------
ERNEST M. ACREE, JR.
Director
By: /s/ Mike Jinright
-------------------------------------
MIKE JINRIGHT
Director
Attest: /s/ Rita B. Gray
--------------------------
Secretary of North Georgia
National Bank
EXECUTIVE
By: /s/ David J. Lance
-------------------------------------
DAVID J. LANCE
Page 22 of 22
<PAGE>
Exhibit 10.2
Addendum to Employment Agreement
THIS EMPLOYMENT AGREEMENT ADDENDUM is made and entered into as an
amendment and addition to that certain Employment Agreement originally dated
September 22, 1999, (hereinafter referred to as the "Employment Agreement") by
and between NORTH GEORGIA NATIONAL BANK, a National Banking Association with
principal offices located in Calhoun, Georgia, (hereinafter referred to as the
"Bank"), and DAVID J. LANCE (hereinafter referred to as to "Executive").
WHEREAS, the original Employment Agreement at Section 13.2 concerning
Modification provides that the Employment Agreement between the parties may not
be amended in any way except by mutual agreement of the parties in a written
instrument; and
WHEREAS, the parties intend for all terms and provisions set forth in the
original Employment Agreement to remain in full force and effect in addition to
the terms set forth in this Addendum (the original Employment Agreement being
attached hereto as "Exhibit A" and incorporated fully herein by specific
reference);
WHEREAS, the parties now desire and have agreed to amend the original
Employment Agreement by way of this written Addendum thereto;
NOW THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements of the parties set forth in the original Employment
Agreement, and of other good and valuable consideration the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound, agree to amend the original Employment Agreement by adding
provisions at the end of the paragraph comprising Section 4.4 concerning
Long-Term Incentives as follows:
In the event of such as sale or transfer of the Bank, then upon
receipt by the Executive of one percent (1%) of the total sale price of
the Bank, the Bank shall pay to the Executive in cash an additional amount
(the "Gross-Up Payment") such that the net amount retained by the
Executive after deduction of any and all federal, state, and local income
tax and any excise tax on the Gross-Up Payment provided for by this ss.
4.4, shall be equal to the initial one percent (1%) of the total sale
price. Such cash payment of the one percent (1%) of the sale price and the
Gross-Up Payment shall be made by the Bank to the Executive upon the
closing date of such sale.
Page 1 of 2
<PAGE>
Additionally, during the entire term of this Agreement, the Bank
hereby grants to the Executive a Right of First Refusal on any such sale
of the Bank. In the event that the Bank receives a good faith bona fide
offer for purchase, then the Bank shall deliver to the executive a
certified written copy of such purchase offer. Thereafter, the Executive
shall have sixty (60) days either to match the outstanding offer by
agreeing to purchase the Bank or to decline to exercise his Right of First
Refusal to purchase the Bank. If the Executive agrees to purchase the
Bank, the Executive may accomplish such purchase either individually or as
a part of any group of investors, partners, or other financial business
arrangements as the Executive, in his sole discretion, may deem
appropriate and necessary to complete the purchase transaction.
IN WITNESS WHEREOF, the Executive has executed, and the Bank (pursuant to a
resolution adopted at a duly constituted meeting of the Bank's Board of
Directors) has executed this Addendum to the original Employment Agreement, as
of the 16th day of November, 1999.
NORTH GEORGIA NATIONAL BANK
By: /s/ Thomas M. Kinnamon
-------------------------------------
THOMAS M. KINNAMON
Chairman of the Board of Directors
Attest: /s/ Ernest M. Acree, Jr.
---------------------------------
ERNEST M. ACREE, JR., Director
[SEAL]
EXECUTIVE
By: /s/ David J. Lance
-------------------------------------
DAVID J. LANCE
Page 2 of 2
<PAGE>
Exhibit 21.1
------------
SUBSIDIARIES OF
NORTH GEORGIA COMMUNITY FINANCIAL PARTNERS, INC.
North Georgia Community Financial Partners, Inc. currently has no
subsidiaries. If the proposed reorganization of North Georgia National Bank
into a one-bank holding company occurs, North Georgia National, a national bank
chartered under the laws of the United States, will become a wholly-owned
subsidiary of North Georgia Community.
<PAGE>
Exhibit 23.2
------------
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We have issued our report dated January 6, 2000, accompanying the financial
statements of North Georgia National Bank contained in the Registration
Statement on Form S-4 and the related Prospectus. We consent to the use of the
aforementioned report in the Registration Statement on Form S-4 and the related
Prospectus and to the use of our name as it appears under the caption "Experts."
/s/ MAULDIN & JENKINS, LLC
Atlanta, Georgia
April 14, 2000
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 1,541,141
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 1,315,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 2,427,745
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 16,843,563
<ALLOWANCE> 200,000
<TOTAL-ASSETS> 24,299,598
<DEPOSITS> 16,915,029
<SHORT-TERM> 0
<LIABILITIES-OTHER> 116,102
<LONG-TERM> 0
0
0
<COMMON> 4,351,500
<OTHER-SE> 2,916,967
<TOTAL-LIABILITIES-AND-EQUITY> 24,299,598
<INTEREST-LOAN> 532,751
<INTEREST-INVEST> 190,498
<INTEREST-OTHER> 68,091
<INTEREST-TOTAL> 791,340
<INTEREST-DEPOSIT> 266,446
<INTEREST-EXPENSE> 291,862
<INTEREST-INCOME-NET> 499,478
<LOAN-LOSSES> 201,050
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1,645,570
<INCOME-PRETAX> (1,164,249)
<INCOME-PRE-EXTRAORDINARY> (1,164,249)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,164,249)
<EPS-BASIC> (1.66)
<EPS-DILUTED> (1.66)
<YIELD-ACTUAL> 4.41
<LOANS-NON> 0
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 0
<CHARGE-OFFS> 1,000
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 200,000
<ALLOWANCE-DOMESTIC> 200,000
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
<PAGE>
Exhibit 99.1
NORTH GEORGIA NATIONAL BANK
PROXY
SOLICITED BY THE BOARD OF DIRECTORS FOR THE ANNUAL MEETING OF
SHAREHOLDERS
TO BE HELD ON ____________, ______________ __, 2000
The undersigned hereby appoints ____________ and ____________, or either of
them, as proxies, with the power to appoint their substitutes, and hereby
authorizes them to represent and to vote, as designated below, all of the common
stock of North Georgia National Bank, which the undersigned would be entitled to
vote if personally present at the annual meeting of shareholders to be held on
_________,_____________, 2000, at _____ a.m. at 350 West Belmont Drive, Calhoun,
Georgia, and at any adjournments thereof, upon the proposals described in the
accompanying notice of the meeting and the proxy statement relating to the
meeting, receipt of which are hereby acknowledged.
The Board of Directors recommends that shareholders vote "FOR" each of the
proposals.
PROPOSAL 1: To approve the Agreement and Plan of Share Exchange:
|_| For |_| Against |_| Abstain
PROPOSAL 2: To approve North Georgia National Bank's 1999 Stock Incentive Plan:
|_| For |_| Against |_| Abstain
PROPOSAL 3: To elect as North Georgia National Bank directors the persons listed
in the _________ __, 2000 proxy statement.
|_| For |_| Withhold Authority
You may cumulate your votes for the election of directors as follows:
1. Multiply the number of Bank shares you own (_____________ no. of shares)
by the number of directors to be elected (11) to determine total number of
votes you may cast for directors (_________________total votes you may
cast).
2. Cast all your votes for a single nominee, or distribute them in any manner
among two or more nominees:
Nominee Votes Cast Nominee Votes Cast
Ernest M. Acree, Jr. __________ Michael E. Jinright __________
Sharon A. Black __________ Thomas M. Kinnamon __________
Marcus G. Ethridge __________ David J. Lance __________
Franklin G. Fuller __________ John D. Oxford __________
Jim Tyson Griffin __________ Roger D. Rigney __________
Henry E. Holland, Jr. __________
(Total Votes Cast) (_________)
Be sure to complete reverse side.
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This proxy, when properly executed, will be voted in the manner directed by the
undersigned shareholder. Unless otherwise specified, the proxy holders will vote
"for" the proposals. this proxy will be voted in accordance with the best
judgment of the proxy holder on such other business as may properly come before
the meeting.
If stock is held in the name of more than one person, all holders should
sign. Signatures should correspond exactly with the name or names appearing on
the stock certificate(s). When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by president or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
____________________________________
Signature(s) of Shareholder(s)
[LABEL] ____________________________________
Name(s) of Shareholders(s)
Date: ________________________, 2000
Please mark, sign and date this Proxy, and return it as soon as possible in the
enclosed return-addressed envelope. No postage necessary.
I WILL _________ WILL NOT ___________ ATTEND THE ANNUAL MEETING OF
SHAREHOLDERS.
