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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 7, 2000
REGISTRATION NO. 333-34908
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
____________________
AMENDMENT NO. 2 TO FORM S-4
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
____________________
NORTH GEORGIA COMMUNITY FINANCIAL PARTNERS, INC.
(Exact Name of Registrant as Specified in its Charter)
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Georgia 6022 Applied For
(State or other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification No.)
Incorporation or Organization) Classification Code Number)
350 West Belmont Drive
Calhoun, Georgia 30701
(706) 629-6499
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(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
____________________
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. [ ] ________________
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
_________ __, 2000
To the Shareholders of North Georgia National Bank:
We are pleased to invite you to attend the annual meeting of shareholders
of North Georgia National Bank. The meeting will be at the main office of
North Georgia National at 350 West Belmont Drive, Calhoun, Georgia, on
_________, ___________ __, 2000, at _____a.m./p.m.
At the meeting, we will ask you to approve the Agreement and Plan of Share
Exchange 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 902,917
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 shareholders who exercise their dissenters' rights, will be exchanged
for one share of North Georgia Community common stock. We do not expect our
shareholders to recognize any gain or loss for U.S. federal income tax purposes
as a result of the reorganization.
To our knowledge, trades in North Georgia National common stock occurred
most recently in March, 2000, at prices ranging from $10.00 to $12.00 per share.
We do not plan to list the North Georgia Community common stock on any national
securities exchange or the Nasdaq Stock Market.
At the meeting, we also will 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 and, beginning on page ___, about the risks of an investment in
North Georgia Community common stock. The proxy statement/prospectus also
describes our 1999 Stock Incentive Plan, and the election of directors.
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.
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.
Sincerely,
David J. Lance
President and Chief Executive Officer
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.
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 June 1,
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
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Page
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SUMMARY............................................................................................................. 1
Annual Shareholder Meeting........................................................................................ 6
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................................................................................ 6
RISK FACTORS........................................................................................................ 7
A WARNING ABOUT FORWARD-LOOKING STATEMENTS.......................................................................... 11
MEETING OF NORTH GEORGIA NATIONAL SHAREHOLDERS....................................................................... 12
Date, Place, Time, and Purpose................................................................................... 12
Record Date...................................................................................................... 12
Voting........................................................................................................... 12
Proxies.......................................................................................................... 12
Director and Executive Officer Vote.............................................................................. 13
PROPOSAL 1 - APPROVAL OF THE AGREEEMENT AND PLAN OF SHARE EXCHANGE.................................................. 14
DESCRIPTION OF THE REORGANIZATION................................................................................. 14
The Agreement.................................................................................................... 14
Parties to the Agreement......................................................................................... 14
Terms of the Reorganization...................................................................................... 14
Conversion of Stock.............................................................................................. 15
Exchange of Stock Certificates................................................................................... 15
Failure to Surrender Stock Certificates.......................................................................... 15
Reasons for the Reorganization................................................................................... 16
Conditions to Completion of the Reorganization................................................................... 16
Effective Date of the Reorganization............................................................................. 16
Regulatory Approvals............................................................................................. 17
Amendment and Termination of the Agreement....................................................................... 17
Tax-Free Treatment of Share Exchange............................................................................. 17
Accounting Treatment............................................................................................. 18
Dissenters' Rights............................................................................................... 18
Resales of North Georgia Community Common Stock.................................................................. 19
EFFECT OF THE REORGANIZATION ON RIGHTS OF NORTH GEORGIA NATIONAL SHAREHOLDERS..................................... 20
General.......................................................................................................... 20
Authorized Capital Stock......................................................................................... 20
Amendment of Articles of Incorporation, Articles of Association and Bylaws....................................... 20
Classified Board of Directors and Absence of Cumulative Voting................................................... 21
Removal of Directors............................................................................................. 22
Indemnification.................................................................................................. 22
Limitation on Director Liability................................................................................. 23
Special Meetings of Shareholders................................................................................. 24
Actions by Shareholders Without a Meeting........................................................................ 24
Mergers, Consolidations, and Sales of Assets..................................................................... 24
Shareholders' Rights to Examine Books and Records................................................................ 25
Dividends........................................................................................................ 25
Preemptive and Other Rights...................................................................................... 26
COMPARATIVE MARKET PRICES AND DIVIDENDS........................................................................... 27
BUSINESS OF NORTH GEORGIA NATIONAL................................................................................ 27
General.......................................................................................................... 27
Recent Changes in Personnel...................................................................................... 27
Management Stock Ownership....................................................................................... 28
Related Party Transactions....................................................................................... 30
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF NORTH GEORGIA NATIONAL
FOR FISCAL YEAR 1999............................................................................................ 30
Financial Condition.............................................................................................. 30
Liquidity........................................................................................................ 31
Capital.......................................................................................................... 31
Results of Operations............................................................................................ 31
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Capability of Data Processing Systems to Accommodate the Year 2000............................................... 31
Trends........................................................................................................... 32
Asset/Liability Management....................................................................................... 32
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF NORTH GEORGIA NATIONAL
FOR FIRST QUARTER 2000.......................................................................................... 35
Financial Condition.............................................................................................. 35
Liquidity........................................................................................................ 36
Capital.......................................................................................................... 36
Results of Operations............................................................................................ 36
Other Income and Expense......................................................................................... 38
SELECTED FINANCIAL INFORMATION AND STATISTICAL DATA............................................................... 39
BUSINESS OF NORTH GEORGIA COMMUNITY............................................................................... 46
General.......................................................................................................... 46
Proposed Activities.............................................................................................. 46
Competition...................................................................................................... 46
Employees........................................................................................................ 46
Property......................................................................................................... 47
Legal Proceedings................................................................................................ 47
Directors and Executive Officers................................................................................. 47
Interests of Management in the Reorganization.................................................................... 47
Management Stock Ownership....................................................................................... 47
Pro Forma Capitalization......................................................................................... 48
Supervision and Regulation....................................................................................... 48
Privacy.......................................................................................................... 55
Proposed Legislation and Regulatory Action....................................................................... 55
Effect of Governmental Monetary Policies......................................................................... 55
Vote Required.................................................................................................... 56
Recommendation................................................................................................... 56
PROPOSAL 2 - APPROVAL OF THE NORTH GEORGIA NATIONAL 1999 STOCK INCENTIVE PLAN....................................... 57
Terms of the Stock Incentive Plan................................................................................. 57
Administration................................................................................................... 57
Stock Options.................................................................................................... 57
Tax Reimbursement Payments....................................................................................... 59
Termination of Stock Options..................................................................................... 59
Reorganizations.................................................................................................. 59
Amendments or Termination........................................................................................ 59
Federal Income Tax Consequences.................................................................................. 60
Recommendation................................................................................................... 61
PROPOSAL 3 - ELECTION OF DIRECTORS.................................................................................. 62
Director Nominees................................................................................................ 62
Executive Compensation........................................................................................... 64
Vote Required.................................................................................................... 65
Recommendation................................................................................................... 65
SHAREHOLDER PROPOSALS............................................................................................... 65
EXPERTS............................................................................................................. 65
LEGAL MATTERS....................................................................................................... 65
OTHER MATTERS....................................................................................................... 65
WHERE YOU CAN FIND MORE INFORMATION................................................................................. 66
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
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You should read the entire proxy statement/prospectus and its appendices
before you decide how to vote on the proposals.
PROPOSAL 1 - APPROVAL OF THE AGREEMENT AND PLAN OF SHARE EXCHANGE
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.
Tax-Free Treatment of Share Exchange (Page ___)
We have a legal opinion from Powell, Goldstein, Frazer & Murphy LLP,
Atlanta, Georgia, which concludes that the reorganization is tax-free to North
Georgia National shareholders who exchange their shares for shares of North
Georgia Community. However, the Internal Revenue Service may take a different
view. In addition, 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.
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.
Dissenters' Rights (Page ___ and Appendix B)
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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 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.
Present and Future Market for Our Common Stock (Page ___)
Currently, there is only a limited market for shares of North Georgia
National common stock. If the proposed reorganization does not occur, we do not
believe that a more active trading market will develop for North Georgia
National common stock, and we do not plan to list North Georgia National common
stock on any national securities exchange or on the Nasdaq Stock Market.
If the proposed reorganization does occur, there will only be a limited
market for shares of North Georgia Community's common stock, and we do not plan
to list North Georgia Community's common stock on any national securities
exchange or on the Nasdaq Stock Market. As a result, if you need or wish to
dispose of all or part of the shares of North Georgia Community stock that you
receive in the reorganization, you may only be able to do so in a private,
directly negotiated sale.
Risk Factors (Page ___)
In determining whether to approve the Agreement, you should consider
the risks associated with an investment in North Georgia Community common stock.
These risks include the following:
. If we do not become profitable, you may not be able to recover all or
any part of your investment;
. The quality of our loan portfolio is not established;
. The present and future market for our common stock is limited.
. Our ability to pay dividends to our shareholders is limited and
depends on North Georgia National's ability to pay dividends to us;
. Competition from other financial institutions may cause us to pay
interest rates on our deposits or charge rates on our loans that may
attract customers but decrease income;
. Changes in interest rates may decrease our net interest income;
. Government regulation, including lending limits, may have an adverse
effect on our profitability and growth;
. An economic downturn, especially one affecting Gordon County, may
reduce the number of our customers, the amount of our deposits, and the
demand for our loans and other financial products;
. We may not be able to raise additional capital to support our future
business needs;
. Departures of our key personnel or directors may impair our operations;
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. Our directors and officers may influence shareholder actions in a
manner that may be adverse to your personal investment objectives;
. Provisions of our articles of incorporation and bylaws will
significantly limit the ability of others to acquire us; and
. We are authorized to issue additional shares of common stock and shares
of preferred stock which, if issued, may adversely affect your voting
rights and reduce the market price of our common stock.
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
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:
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. 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;
. 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
. 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:
. The holders of two-thirds of the outstanding shares of North Georgia
National common stock must approve the Agreement;
. The number of shares held by shareholders who have perfected dissenters'
rights of appraisal may not make completion of the reorganization
inadvisable;
. North Georgia Community must receive the regulatory approvals below, and
any waiting periods required by law must have passed; and
. North Georgia National must receive a legal opinion confirming the tax-
free nature of the reorganization.
Regulatory Approvals (Page ___)
North Georgia Community has received the required approvals of the
transaction from the Board of Governors of the Federal Reserve System and the
Georgia Department of Banking and Finance.
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:
. 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;
. 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;
. Any of the conditions to the reorganization are not satisfied; or
. 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.
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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.
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 Changes in Personnel (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
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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 358,150
shares of North Georgia National common stock, constituting approximately 40%
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.
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.
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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.
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 of the close of business on June 1, 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.
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RISK FACTORS
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The following describes what we believe are the material risks of an
investment in North Georgia Community's common stock. There may be other risks,
which we have not anticipated.
If we do not become profitable, you may not be able to recover all or any part
of your investment.
Like most new banks, North Georgia National incurred substantial start-up
expenses, was not profitable in the first year of operation and may not be
profitable for several years or ever. If we are ultimately unsuccessful, you
may not recover all or any part of your investment in the common stock.
The quality of our loan portfolio is not established.
Our profitability will depend on our continuing ability to develop a
quality loan portfolio and a core deposit base, both of which may take several
more years to develop. Because many of North Georgia National's loans are new
loans to new borrowers, it will take several years to determine the borrowers'
payment histories. As a result, our management will not be able to reliably
evaluate the quality of the loan portfolio until that time.
Present and future market for our common stock is limited.
Currently, there is only a limited market for shares of North Georgia
National common stock. If the proposed reorganization does not occur, we do not
believe that a more active trading market will develop for North Georgia
National common stock, and we do not plan to list North Georgia National common
stock on any national securities exchange or on the Nasdaq Stock Market.
If the proposed reorganization does occur, there will only be a limited
market for shares of North Georgia Community's common stock, and we do not plan
to list North Georgia Community's common stock on any national securities
exchange or on the Nasdaq Stock Market. As a result, if you need or wish to
dispose of all or part of the shares of North Georgia Community stock that you
receive in the reorganization, you may only be able to do so in a private,
directly negotiated sale.
Our ability to pay dividends to our shareholders is limited and depends on North
Georgia National's ability to pay dividends to us.
North Georgia Community, at least initially, will have no significant
source of income other than dividends that it receives from North Georgia
National. Our ability to pay dividends to you will therefore depend on North
Georgia National's ability to pay dividends to North Georgia Community. Bank
holding companies and national banks are subject to significant regulatory
restrictions on the payment of dividends. In light of these restrictions and
the need for North Georgia Community and North Georgia National to retain and
build capital, it will be our policy to reinvest all of our earnings for an
undetermined period of time. Therefore, we do not plan to pay dividends at
least until we become profitable and recover any losses that we have incurred.
Our future dividend policy will depend on our earnings, capital requirements,
financial condition and other factors that the Board of Directors of North
Georgia Community and of North Georgia National consider relevant.
Competition from other financial institutions may cause us to pay interest rates
on our deposits or charge rates on our loans that may attract customers but
decrease our income.
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We have strong competition for customers from existing banks and other
types of financial institutions doing business in the Gordon County area and
elsewhere. We may pay higher rates of interest on our deposits or charge lower
rates on our loans than our competitors in order to attract customers. This may
decrease our net interest income. Some of our competitors have been in business
for a long time and have an established customer base and name recognition.
Many of our competitors are larger than we will be for some time and have
greater financial and personnel resources. Some are larger national, super-
regional and regional banks like AmSouth, Wachovia, Synovus and Regions. Many
of our competitors offer services, such as extensive and established branch
networks and trust services, that we either do not expect to provide or will not
provide for some time. In addition, our competitors that are not depository
institutions are generally not subject to the extensive regulations that apply
to North Georgia National.
Changes in interest rates may decrease our net interest income.
Our profitability depends substantially on North Georgia National's net
interest income, which is the difference between the interest income earned on
its loans and other assets and the interest expense paid on its deposits and
other liabilities. Depending on the terms and maturities of the bank's assets
and liabilities, a large change in interest rates may significantly decrease our
net interest income and eliminate our profitability. Most of the factors that
cause changes in market interest rates, including economic conditions, are
beyond our control. While we take measures to minimize the effect that changes
in interest rates will have on our net interest income and profitability, these
measures may not be effective.
Government regulation, including lending limits, may have an adverse effect on
our profitability and growth.
We are subject to extensive government supervision and regulation. Our
ability to profit and grow could be adversely affected by banking laws and
regulations that limit our lending activities, our purchase of securities, and
our payment of dividends. These regulations are intended primarily to protect
depositors, not shareholders, and they place us at a competitive disadvantage
compared to competitors who are less regulated. Future legislation or
government policy also may adversely affect the banking industry or our
operations. For example, The Gramm-Leach-Bliley Act, which became effective on
March 11, 2000, eliminates many of the federal and state law barriers to
affiliations among banks and securities firms, insurance companies and other
financial services providers. Elimination of these barriers may significantly
increase competition across the financial services industry.
An economic downturn, especially one affecting Gordon County, may reduce the
number of our customers, the amount of our deposits and the demand for our loans
and other financial products.
As a holding company for a community bank, our success will depend on the
economy of the region in which we operate. The majority of North Georgia
National's borrowers and depositors are individuals and businesses located and
doing business in the Gordon County area. An economic downturn in the Gordon
County area, or in the national economy generally, could reduce our deposit base
and the demand for our financial products and may decrease our earnings. For
example, an adverse change in the local economy could make it more difficult for
borrowers to repay their loans, which could lead to loan losses for North
Georgia National.
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We may not be able to raise additional capital to support our future business
needs.
If we need additional capital to support our business, expand our
operations or maintain our minimum capital requirements, we may not be able to
raise capital through the sale of additional shares of common stock or other
securities. If we are able to raise capital through the sale of additional
shares of common stock or other securities, the additional shares may dilute
your ownership interest. Also, the sale of additional shares of common stock
may be at prices lower than the price at which you bought your shares or on
terms better than those of the shares you purchased.
Departures of our key personnel or directors may impair our operations.
David J. Lance, North Georgia National's new 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.
As president and chief executive officer, Mr. Lance is 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, our directors' business skills, community involvement, diverse
backgrounds and extensive local business relationships are important to our
success.
Our directors and officers may influence shareholder actions in a manner that
may be adverse to your personal investment objectives.
We anticipate that, after the reorganization, our directors and executive
officers will beneficially own 433,150 shares, representing 47.9%, of North
Georgia Community's outstanding common stock. These persons may acquire
additional shares of common stock after the reorganization, which will increase
this percentage. Because of their ownership position at North Georgia
Community, our directors and executive officers together may be able to
significantly influence the outcome of director elections or block a significant
transaction that might otherwise be approved by the shareholders. For example,
a merger or acquisition not adopted by two-thirds of our board of directors
generally must be approved by a two-thirds vote of all North Georgia Community
shareholders. Our directors and executive officers, as a group, will hold
enough shares of North Georgia Community common stock to block a merger or
acquisition, or any other matter requiring the affirmative vote of two-thirds of
our outstanding shares of common stock. They also will hold enough shares to
significantly influence the outcome of shareholder votes on other matters.
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 one
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 ___.
We are authorized to issue additional shares of common stock and shares of
preferred stock which, if issued, may adversely affect your voting rights and
reduce the market price of our common stock.
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We are authorized by our articles of incorporation to issue additional
shares of common stock and shares of preferred stock without the consent of our
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. However, we do not have any plans to issue any shares of
preferred stock at this time.
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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 June 1, 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 902,917 shares of North Georgia National common stock issued and
outstanding and entitled to vote at the annual meeting, which were held by 437
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.
Improperly Executed Proxies. If the proxy does not contain instructions on
how to vote:
. The proxy holder will vote for approval of the Agreement, the 1999
Stock Incentive Plan, and the director nominees; and
. The proxy holder will use his or her discretion to vote on any other
matter which may properly come before the annual meeting.
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
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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.
Revocation of Proxies. 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:
. Giving written notice of revocation to the Secretary of North Georgia
National;
. Properly submitting to North Georgia National a duly executed proxy
bearing a later date; or
. 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.
Director and Executive Officer Vote
-----------------------------------
As of the record date, all directors and executive officers of North
Georgia National as a group were entitled to vote approximately 358,150 shares
of North Georgia National common stock, constituting approximately 40% 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:
. Each share of North Georgia National common stock will be converted
into one share of North Georgia Community common stock;
. 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
. 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:
. Will not be issued a certificate representing the shares of North
Georgia Community common stock which he or she is entitled to receive;
. Will not be able to vote the shares of North Georgia Community common
stock which he or she is entitled to receive; and
. 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).
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:
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. 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;
. 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
. 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:
. The holders of two-thirds of the outstanding shares of North Georgia
National common stock must approve the Agreement;
. The number of shares held by shareholders who have perfected
dissenters' rights of appraisal must not make completion of the
reorganization inadvisable;
. North Georgia Community must receive the required regulatory
approvals, and any waiting periods required by law must have passed;
and
. 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.
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 of the
transaction by the Federal Reserve and the Georgia Department of Banking and
Finance. Both the Federal Reserve and the Georgia Department of Banking and
Finance have approved the reorganization.
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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:
. 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;
. 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;
. Any of the conditions to completion of the reorganization have not
been satisfied; or
. 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.
Tax-Free Treatment of Share Exchange
We have a legal opinion from Powell, Goldstein, Frazer & Murphy LLP,
Atlanta, Georgia, which concludes that the reorganization is tax-free to North
Georgia National shareholders who exchange their shares for shares of North
Georgia Community. 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:
. 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.
. 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 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.
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Dissenters' Rights'
Office of the Comptroller of the Currency ("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
Georgia Business Corporations Code rules for dissenters' right are reproduced in
full as Appendix B to this proxy statement/prospectus.
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 transactions, 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:
. 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
---
. Must either abstain from voting or vote against approval of the
Agreement; AND
---
. 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.
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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.
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:
. 1% of the outstanding shares of common stock; or
. 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 OCC.
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.
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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 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:
. Article 6. Board of Directors;
. Article 7. Bylaws; Number of Directors;
. Article 8. Removal of Directors;
. Article 9. Liability of Directors;
. Article 12. Certain Business Transactions; and
. 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.
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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 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.
22
<PAGE>
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:
. for any appropriation, in violation of his or her duties, of any
business opportunity of North Georgia Community;
. for any acts or omissions which involve intentional misconduct or a
knowing violation of law;
. 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
. for any transaction from which the director or officer derives an
improper personal benefit.
North Georgia Community's bylaws on indemnification provide for:
. the advancement of expenses to its directors at the outset of a
proceeding;
. 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
. 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:
23
<PAGE>
. any appropriation, in violation of his or her duties, of any business
opportunity of the Corporation;
. acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
. 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
. 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.
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.
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<PAGE>
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:
. 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
. 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.
25
<PAGE>
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
. 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;
. the shareholder describes with reasonable particularity his or her
purpose for the inspection and the records that he or she wishes to
inspect;
. the records requested are directly connected with his or her stated
purpose; and
. 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:
. North Georgia Community would not be able to pay its debts as they
become due in the usual course of business; or
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<PAGE>
. 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.
27
<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 May 31, 2000,
trades have occurred at prices ranging from $10.00 to $12.00.
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 Changes in Personnel
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.
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
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<PAGE>
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
Thomas M. Kinnamon 116,400/7/ 12.9%
604 Sheridan Avenue
Dalton, Georgia 30721
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<PAGE>
AMOUNT AND
NAME AND ADDRESS OF NATURE OF BENEFICIAL % OF
BENEFICIAL OWNER OWNERSHIP CLASS
------------------- -------------------- -----
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 Officers, 433,150/9/ 47.9%
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.
/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.
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/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:
. Were made in the ordinary course of business;
. 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
. 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 FOR FISCAL YEAR 1999
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 $2.0 million
was raising during 1999 -- $200,000 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) $43,000 for costs incurred in the
original offering and issuance of the stock and $6,000 for costs incurred in the
non-public offering, (2) $466,000 in pre-opening losses, (3) $1.1 million
accumulated loss since opening, and (4) $72,000 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.
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
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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 $466,000
during its organizational period - $1,000 in 1997, $448,000 in 1998, and $17,000
in 1999. From beginning of operations to December 31,1999, North Georgia
National has incurred additional operating losses of $1.1 million. 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.
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.
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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 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
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<PAGE>
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.
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<PAGE>
<TABLE>
<CAPTION>
After Three After One Year
Within Three Months but Within but Within After Five
Months One 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>
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS OF NORTH GEORGIA NATIONAL
FOR FIRST QUARTER 2000
Financial Condition
The following is a summary of North Georgia National's balance sheets for
the periods indicated:
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999 Increase (Decrease)
(Dollars in Thousands) Amount Percent
--------------------------------- ------------------------------------
<S> <C> <C> <C> <C>
Cash and Due From Banks $ 1,489 $ 1,541 $ (52) -3..37%
Securities 3,425 2,428 997 41.06%
Federal funds sold 900 1,315 (415) -31.56%
Loans 20,109 16,644 3,465 20.82%
Premises and equipment 2,181 2,199 (18) -0.82%
Other Assets 251 173 78 45.09%
------- ------- ------ --------
Total $28,355 $24,300 $4,055 16.69%
======= ======= ====== ========
Deposits $20,178 $16,915 $3,263 19.29%
Other borrowings 636 -- 636 --
Other liabilities 144 116 28 24.14%
Stockholders equity 7,397 7,269 128 1.76%
------- ------- ------ --------
Total $28,355 $24,300 $4,055 16.69%
======= ======= ====== ========
</TABLE>
North Georgia National had total assets of $28.4 million as of March 31,
2000. Total deposits were $20.2 million and consisted of deposits of
individuals and small businesses in the local market. Stockholders' equity was
$7.4 million. Between January 1, 2000 and March 3, 2000 North Georgia National
received net proceeds of $353,243, the result of the sale in a non-public
offering of 17,667 shares of its common stock, and also the sale, to David J.
Lance, president of North Georgia National, of 14,950 shares of its common
stock. Mr. Lance purchased these shares as a result of his employment agreement
with North Georgia National. During the first quarter of 2000, North Georgia
National's capital was reduced by $221,000 for losses recorded through March
31, 2000 of $218,000 coupled with additional unrealized losses on available for
sale securities of $3,000.
As indicated in the above table, North Georgia National's total assets grew
at a rate of 16.69%. This high rate of growth is not uncommon for a de novo
bank. North Georgia National's deposits also grew by 19.29%, and these funds
were invested in loans and securities. North Georgia National's loan to deposit
ratio has increased from 98.4% at December 31, 1999 to 101.9% at March 31, 2000
as new loan demand exceeded new deposit growth during the first quarter.
North Georgia National's non-public offering of its common stock began on
December 10, 1999 and ended March 3, 2000. North Georgia National sold a total
of 167,467 shares of common stock, at $12.00 per share, raising a total of
$2,009,604 in capital.
36
<PAGE>
Liquidity
As of March 31, 2000, North Georgia National had liquid assets of $5.6
million ($1.5 million in cash and due from banks, $3.2 million in available for
sale investment securities and $0.9 million in federal funds sold). North
Georgia National's liquidity was 21.79% as of March 31, 2000. Management and
the board of directors monitor liquidity on a regular basis and believe 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%, 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, de novo banks are required to maintain higher
ratios during the first five years of operation. North Georgia National's
capital ratios are far in excess of these requirements. The actual capital
ratios are as follows:
<TABLE>
<CAPTION>
Actual Regulatory Requirement
------ ----------------------
<S> <C> <C>
Leverage Capital Ratio 28.82% 4.00%
Risk Based Capital Ratios:
Tier 1 31.27% 4.00%
Total Risk Based 32.33% 8.00%
</TABLE>
Results of Operations
North Georgia National began banking operations on February 10, 1999. Prior
to commencement, North Georgia National was engaged in activities involving its
formation, selling its common stock and obtaining necessary regulatory
approvals. 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.
Following is a summary of North Georgia National's operations for the
periods indicated:
<TABLE>
<CAPTION>
Three Months Ended
March 31
2000 1999 Increase
Dollars in Thousands (Decrease)
---------------------------- -----------------
<S> <C> <C> <C>
Interest Income:
Loans $ 406 $ 10 $396
Securities 41 86 (45)
Fed Funds 27 25 2
Total Interest Income $ 474 $ 121 $353
Total Interest Expense $ 217 $ 25 $192
Net Interest Income $ 257 $ 96 $161
Loan Loss Provision 60 8 52
Other Income 35 15 20
Other Expense 463 296 157
Net Loss $(221) $(193) $(28)
</TABLE>
37
<PAGE>
As indicated in the above table, North Georgia National's net interest
income was $217,000. North Georgia National's net interest margin for the
first quarter 2000 was 4.55% as compared to 4.41% for the entire year of 1999.
The net interest margin has increased slightly as average loans become a larger
component of average interest earning assets.
The significant growth in loan demand has prompted North Georgia National
to increase its provision for loan losses. The provision for the first quarter
2000 was $60,000 and increased from the first quarter of 1999 by $52,000. 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 continuing
review of loan loss experience, current economic conditions which may affect a
borrower's ability to repay and the underlying collateral value.
Information with respect to nonaccrual, past due and restructured loans at
March 31, 2000 and 1999 is as follows:
<TABLE>
<CAPTION>
March 31
2000 1999
(Dollars in Thousands)
-----------------------------
<S> <C> <C>
Nonaccrual Loans $ 0 $ 0
Loans contractually past due ninety days or more as to
interest or principal payments and still accruing 0 0
Restructured Loans 0 0
Loans, now current about which there are serious doubts
as to the ability of borrowers to comply with loan 77 0
repayment terms
Interest income that would have been recorded on nonaccrual
and restructured loans under original terms 0 0
Interest income that was recorded on nonaccrual and 0 0
restructured loans
</TABLE>
It is the policy of North Georgia National 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 the 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 preceding table 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.
Information regarding certain loans and allowance for loan loss data
through March 31, 2000 and 1999 is as follows:
38
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended
2000 1999
(Dollars in Thousands)
<S> <C> <C>
Average amount of loans outstanding $17,739 $ 382
===============================
Balance of allowance for loan losses at beginning of period 200 0
0 0
Loans charged off 77 0
Commercial and financial 0 0
Real estate mortgage 0 0
Installment 7 0
-------------------------------
7 0
-------------------------------
Loans recovered
Commercial and financial 0 0
Real estate mortgage 0 0
Installment 0 0
0 0
-------------------------------
Net charge-offs 7 0
Additions to allowance charged to operating expense during period 60 8
Balance of allowance for loan losses at end of period 253 8
===============================
Ratio of net loans charged off during the period to average 0.04% N/A
loans outstanding
</TABLE>
Other Income and Expense
The increases in other operating income and expenses are due to North Georgia
National's being open the entire first quarter of 2000 and to its overall
growth.
Other operating income, consisting primarily of service charges on deposit
accounts, has increased by $21,000 for the first quarter of 2000 as compared to
the first quarter of 1999.
Other operating expenses have increased by $157,000 for the first quarter of
2000 as compared to the first quarter of 1999. Salaries and employee benefits
have increased by $45,000, occupancy and equipment expenses have increased by
$50,000, and other expenses have increased by $62,000.
39
<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)
<TABLE>
<CAPTION> Year Ended December 31, 1999
----------------------------
ASSETS (Dollars in Thousands)
<S> <C>
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
=======
</TABLE>
(1) Average balances were determined using the daily average balances during
the year.
(2) There were no nonaccrual loans included in average loans.
40
<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.
<TABLE>
<CAPTION>
Year Ended December 31, 1999
--------------------------------
Average
Interest Rate
-------------------------------------
(Dollars in Thousands)
<S> <C> <C>
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%
====
</TABLE>
(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.
41
<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>
<TABLE>
<CAPTION>
After ten years Total
------------------------ ---------
Amount Yield(1) Amount Yield (1)
------------------------- ---------------------------
<S> <C> <C> <C> <C>
U.S. Government agencies $ -- -- $2,174 5.56%
====== ======
</TABLE>
(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.
42
<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.
<TABLE>
<CAPTION>
December 31, 1999
-----------------
(Dollars in Thousands)
<S> <C>
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
=======
</TABLE>
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
========
43
<PAGE>
Risk Elements
Information with respect to nonaccrual, past due, and restructured loans at
December 31, 1999 is as follows:
<TABLE>
<CAPTION>
December 31, 1999
----------------------
(Dollars in Thousands)
<S> <C>
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
</TABLE>
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.
44
<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.
<TABLE>
<CAPTION>
Year Ended December 31, 1999
----------------------------
(Dollars in Thousands)
<S> <C>
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%
======
</TABLE>
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:
<TABLE>
<CAPTION>
December 31, 1999
Percent of loans in each
Amount category to total loans
---------- ------------------------
(Dollars in Thousands)
<S> <C> <C>
Commercial $110 47.09%
Real estate - construction 10 .50
Real estate - mortgage 50 32.78
Consumer installment loans and other 30 18.63
---- ------
$200 100.00%
==== ======
</TABLE>
45
<PAGE>
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)
<TABLE>
<CAPTION>
1999
Amount Rate
------ ----
(Dollars in Thousands)
<S> <C> <C>
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
======
</TABLE>
(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.
<TABLE>
<CAPTION>
(Dollars in Thousands)
<S> <C>
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
======
</TABLE>
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.
46
<PAGE>
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:
. AmSouth Bank, a bank of an Alabama-based bank holding company;
. Wachovia Bank, N.A., a bank of a North Carolina-based bank holding company;
. First National Bank of Northwest Georgia, a bank owned by Hardwick Holding
Company, Dalton, Georgia;
. Georgia Bank & Trust, a bank owned by Synovus Financial Corp., Columbus,
Georgia;
. First Market Bank, a bank of a Tennessee-based holding company;
. NBC Bank, FSB, a branch of a Tennessee-based savings association; and
. 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.
47
<PAGE>
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.
48
<PAGE>
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.
<TABLE>
<CAPTION>
PRO FORMA CAPITALIZATION
MARCH 31, 2000
North North
Georgia Georgia Pro Forma Pro 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 (1,834,097) (1,834,097)
Accumulated other comprehensive loss 0 (74,850) (74,850)
--- ----------- -----------
Total stockholders' equity $12 $ 7,397,454 $ 7,397,454
=== =========== ===========
(a) To record redemption of common stock
(b) To reclassify capital surplus to common stock
</TABLE>
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:
. 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;
. Acquiring all or substantially all of the assets of any bank; or
. Merging or consolidating with any other bank holding company.
49
<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:
. The bank holding company has registered securities under Section 12 of
the Securities Act of 1934, or
. 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:
. Financial in nature;
. Incidental to a financial activity; or
. 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.
50
<PAGE>
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:
. Lending, trust and other banking activities;
. 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;
. Providing financial, investment, or advisory services;
. Issuing or selling instruments representing interests in pools of assets
permissible for a bank to hold directly;
. Underwriting, dealing in or making a market in securities;
. 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;
. Foreign activities permitted outside of the United States if the Federal
Reserve has determined them to be usual in connection with banking
operations abroad;
. Merchant banking through securities or insurance affiliates; and
. 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:
. Factoring accounts receivable;
. Acquiring or servicing loans;
. Leasing personal property;
. Conducting discount securities brokerage activities;
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. Performing selected data processing services;
. Acting as agent or broker in selling credit life insurance and other types
of insurance in connection with credit transactions; and
. 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.
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.
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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.
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.
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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:
. The federal Truth-In-Lending Act, governing disclosures of credit terms to
consumer borrowers;
. 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;
. The Equal Credit Opportunity Act, prohibiting discrimination on the basis
of race, creed or other prohibited factors in extending credit;
. The Fair Credit Reporting Act of 1978, governing the use and provision of
information to credit reporting agencies;
. The Fair Debt Collection Act, governing the manner in which consumer debts
may be collected by collection agencies; and
. 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:
. 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
. 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:
. A bank's loans or extensions of credit to affiliates;
. A bank's investment in affiliates;
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. Assets a bank may purchase from affiliates, except for real and personal
property exempted by the Federal Reserve;
. The amount of loans or extensions of credit to third parties
collateralized by the securities or obligations of affiliates; and
. 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 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 358,150 shares of
North Georgia National common stock, constituting approximately 40% of the total
number
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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").
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
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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:
. To be paid in cash; or
. By the delivery of previously-owned shares of common stock; or
. To be satisfied through a cashless exercise executed through a broker;
or
. 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.
Termination of Stock Options
The terms of a particular Stock Option may provide that they terminate,
among other reasons:
. Upon the holder's termination of employment or other status with respect
to North Georgia National or any affiliate of North Georgia National;
. Upon a specified date;
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. Upon the holder's death or disability; or
. 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.
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
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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.
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.
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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
<TABLE>
<CAPTION>
YEAR POSITIONS WITH NORTH
FIRST GEORGIA NATIONAL AND
NAME (AGE) ELECTED BUSINESS EXPERIENCE
------------------------------- ------- -----------------------------------------------
<S> <C> <C>
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. (56) 1999 Senior Vice President for Business 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 North Georgia
National
Michael E. Jinright (36) 1998 Managing Partner with Acree, Jinright & Co.,
Dalton, Georgia (public accounting)
</TABLE>
62
<PAGE>
<TABLE>
<CAPTION>
YEAR POSITIONS WITH NORTH
FIRST GEORGIA NATIONAL AND
NAME (AGE) ELECTED BUSINESS EXPERIENCE
------------------------------- ------- -----------------------------------------------
<S> <C> <C>
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)
</TABLE>
63
<PAGE>
Executive Compensation
The following table presents the total compensation paid or accrued by
North Georgia National during fiscal year 1999 to its chief executive officers.
No other executive officer of North Georgia National earned over $100,000 in
salary and bonus during 1999.
<TABLE>
<CAPTION>
Summary Compensation Table
Annual Compensation Long Term Compensation
------------------- ----------------------
Awards Payouts
------ -------
Other Securities All
Annual Restricted Underlying Other
Compen- Stock Options/ LTIP Compen-
Salary Bonus sation/1/ Awards SARs Payouts sation/2/
Name and Position Year ($) ($) ($) ($) (#) ($) ($)
------------------- ---- ------ --------- --------- ---------- ---------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
David J. Lance 1999 40,909 70,000(4) 3,500 -- 75,000 41,000
President, Director 21,850/5/
and Chief Executive
Officer since
November, 1999
M. Lauch 1999 69,358 -- 6,417 -- -- -- 25,000/3/
McKinnon
President, Director
and Chief Executive
Officer until
November, 1999
</TABLE>
(1) Consists of an automobile allowance.
(2) We have omitted information on certain "perks" and other personal benefits
because the aggregate value of these items does not meet the minimum amount
required for disclosure under the Securities and Exchange Commission
regulations.
(3) Consists of a severance payment in connection with Mr. McKinnon's
resignation from the Bank.
(4) Consists of signing bonus under the Employment Agreement between David J.
Lance and North Georgia National.
(5) Consists of club memberships under the employment agreement between David
J. Lance and North Georgia National.
Directors of North Georgia National will not be compensated for their
services as directors at least until North Georgia National earns a cumulative
profit.
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.
64
<PAGE>
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.
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 before December 31, 2000 to be included in the proxy material
for that annual meeting.
A shareholder must notify either North Georgia Community or North Georgia
National before March 31, 2001 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 have
been 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.
65
<PAGE>
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 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.
66
<PAGE>
FINANCIAL STATEMENTS
F-1
<PAGE>
NORTH GEORGIA NATIONAL BANK
FINANCIAL REPORT
DECEMBER 31, 1999
F-2
<PAGE>
NORTH GEORGIA NATIONAL BANK
FINANCIAL REPORTS
--------------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
AUDITED FINANCIAL STATEMENTS
INDEPENDENT AUDITOR'S REPORT............................................... F-4
Balance sheets, December 31, 1999 and 1998............................ F-5
Statements of operations, years ended December 31, 1999 and 1998...... F-6
Statements of comprehensive loss, years ended December 31, 1999
and 1998............................................................ F-7
Statements of stockholders' equity (deficit), years ended
December 31, 1999 and 1998.......................................... F-8
Statements of cash flows, years ended December 31, 1999 and 1998...... F-9
Notes to financial statements.................................. F-10 - F-25
UNAUDITED FINANCIAL STATEMENTS
Balance sheet, March 31, 2000......................................... F-27
Statements of operations, three months ended March 31, 2000 and 1999.. F-28
Statements of comprehensive loss, three months ended March 31, 2000
and 1999............................................................ F-29
Statements of cash flows, three months ended March 31, 2000 and 1999.. F-30
Notes to financial statements......................................... F-31
</TABLE>
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>
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>
The accompanying notes are an integral part of these 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>
The accompanying notes are an integral part of these 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>
The accompanying notes are an integral part of these 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>
The accompanying notes are an integral part of these 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>
The accompanying notes are an integral part of these 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>
NORTH GEORGIA NATIONAL BANK
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>
NORTH GEORGIA NATIONAL BANK
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>
NORTH GEORGIA NATIONAL BANK
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>
NORTH GEORGIA NATIONAL BANK
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>
NORTH GEORGIA NATIONAL BANK
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>
NORTH GEORGIA NATIONAL BANK
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>
NORTH GEORGIA NATIONAL BANK
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>
NORTH GEORGIA NATIONAL BANK
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>
NORTH GEORGIA NATIONAL BANK
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>
NORTH GEORGIA NATIONAL BANK
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>
NORTH GEORGIA NATIONAL BANK
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>
NORTH GEORGIA NATIONAL BANK
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>
NORTH GEORGIA NATIONAL BANK
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>
NORTH GEORGIA NATIONAL BANK
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>
NORTH GEORGIA NATIONAL BANK
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>
NORTH GEORGIA NATIONAL BANK
FINANCIAL REPORT
MARCH 31, 2000
(Unaudited)
F-26
<PAGE>
NORTH GEORGIA NATIONAL BANK
BALANCE SHEET
MARCH 31, 2000
(Unaudited)
--------------------------------------------------------------------------------
Assets
------
Cash and due from banks $ 1,489,039
Federal funds sold 900,000
Securities available-for-sale 3,424,819
Loans 20,362,274
Less allowance for loan losses 253,704
--------------
Loans, net 20,108,570
Premises and equipment 2,181,163
Other assets 251,237
--------------
Total assets $ 28,354,828
==============
Liabilities and Stockholders' Equity
------------------------------------
Deposits
Noninterest-bearing demand $ 2,126,366
Interest-bearing demand 11,292,853
Savings 451,547
Time 6,306,798
--------------
Total deposits 20,177,564
Federal funds purchased 636,131
Other liabilities 143,679
--------------
Total liabilities 20,957,374
--------------
Commitments and contingent liabilities
Stockholders' equity
Common stock, par value $5; 5,000,000 shares authorized;
902,917 issued and outstanding 4,514,585
Capital surplus 4,791,816
Accumulated deficit (1,834,097)
Accumulated other comprehensive loss (74,850)
--------------
Total stockholders' equity 7,397,454
--------------
Total liabilities and stockholders' equity $ 28,354,828
==============
The accompanying notes are an integral part of these financial statements.
F-27
<PAGE>
NORTH GEORGIA NATIONAL BANK
STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(Unaudited)
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------
2000 1999
------------ ------------
<S> <C> <C>
Interest income
Loans $ 406,140 $ 10,418
Taxable securities 40,633 85,694
Federal funds sold 27,029 24,997
------------ ------------
Total interest income 473,802 121,109
------------ ------------
Interest expense
Deposits 210,775 7,050
Federal funds purchased and other borrowings 6,422 17,911
------------ ------------
Total interest expense 217,197 24,961
------------ ------------
Net interest income 256,605 96,148
Provision for loan losses 60,000 8,000
------------ ------------
Net interest income after provision
for loan losses 196,605 88,148
------------ ------------
Other operating income 35,730 14,795
------------ ------------
Other expenses
Salaries and employee benefits 216,890 172,165
Equipment and occupancy expenses 77,266 26,807
Other operating expenses 159,189 97,174
------------ ------------
Total other expenses 453,345 296,146
------------ ------------
Loss before income taxes (221,010) (193,203)
Income tax expense - -
------------ ------------
Net loss $ (221,010) $ (193,203)
============ ============
Basic and diluted losses per common share $ (0.26) $ (0.28)
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-28
<PAGE>
NORTH GEORGIA NATIONAL BANK
STATEMENTS OF COMPREHENSIVE LOSS
THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(Unaudited)
--------------------------------------------------------------------------------
2000 1999
------------ ------------
Net loss $ (221,010) $ (193,203)
Other comprehensive loss:
Unrealized holding losses on securities
available-for-sale arising during period (3,246) -
------------ ------------
Comprehensive loss $ (224,256) $ (193,203)
============ ============
The accompanying notes are an integral part of these financial statements.
F-29
<PAGE>
NORTH GEORGIA NATIONAL BANK
STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(Unaudited)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
2000 1999
--------------- ---------------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss $ (221,010) $ (193,203)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 38,954 8,200
Provision for loan losses 60,000 8,000
Increase in other assets (78,031) (38,878)
Increase (decrease) in other liabilities 27,577 (105,879)
--------------- ---------------
Net cash used in operating activities (172,510) (321,760)
--------------- ---------------
INVESTING ACTIVITIES
Purchases of securities available-for-sale (1,000,000) (2,203,768)
Net (increase) decrease in Federal funds sold 415,000 (3,140,000)
Net increase in loans (3,525,007) (992,823)
Purchase of premises and equipment (21,494) (378,418)
--------------- ---------------
Net cash used in investing activities (4,131,501) (6,715,009)
--------------- ---------------
FINANCING ACTIVITIES
Net increase in deposits 3,262,535 2,628,999
Repayment of notes payable -- (2,125,704)
Net increase in federal funds purchased 636,131 --
Net proceeds from sale of common stock 353,243 7,000,000
--------------- ---------------
Net cash provided by financing activities 4,251,909 7,503,295
--------------- ---------------
Net increase (decrease) in cash and due from banks (52,102) 466,526
Cash and due from banks at beginning of year 1,541,141 1,511
--------------- ---------------
Cash and due from banks at end of period $ 1,489,039 $ 468,037
============== ==============
</TABLE>
The accompanying notes are an integral part of these statements.
----------------------------------------------------------------
F-30
<PAGE>
NORTH GEORGIA NATIONAL BANK
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
--------------------------------------------------------------------------------
NOTE 1. NATURE OF BUSINESS AND BASIS OF PRESENTATION
The Bank is a full-service commercial bank which opened for business on
February 10, 1999. The Bank 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. The Bank also offers real estate loans
(including home equity lines of credit), commercial loans, construction
loans, education loans and consumer loans. In addition, the Bank
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.
The financial information included herein is unaudited; however, such
information reflects all adjustments (consisting solely of normal
recurring adjustments) which are, in the opinion of management,
necessary for the fair statement of results for the interim period.
The results of operations for the three-month period ended March 31,
2000 are not necessarily indicative of the results to be expected for
the full year.
NOTE 2. CURRENT ACCOUNTING DEVELOPMENTS
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 does not
believe the adoption of SFAS No. 133 will have a material effect 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.
F-31
<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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<PAGE>
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]
C-15
<PAGE>
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: _________________________, 20__.
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.
C-17
<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
C-18
<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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<PAGE>
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.
C-25
<PAGE>
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: _________________________, 20__.
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:_____________________________
C-26
<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
C-28
<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
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibits
-------- -----------------------
<S> <C>
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).
3.1/1/ Articles of Incorporation of North Georgia Community.
3.2/1/ 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.
5.1/1/ 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).
</TABLE>
<PAGE>
<TABLE>
Exhibit
Number Description of Exhibits
-------- -----------------------
<S> <C>
10.1*/1/ Employment Agreement dated September 22, 1999, between North Georgia National Bank and
David J. Lance.
10.2*/1/ Addendum to Employment Agreement, dated November 16, 1999, between North Georgia
National Bank and David J. Lance.
10.3*/1/ North Georgia National Bank 1999 Stock Incentive Plan (included as Appendix C to the
proxy statement/prospectus and incorporated by reference herein).
21.1/1/ 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).
24/1/ Power of Attorney (appears on the signature page to this registration statement).
27.1/1/ Annual Financial Data Schedule
27.2/1/ Interim Financial Data Schedule
99.1/1/ North Georgia National Bank Form of Proxy.
</TABLE>
*The indicated exhibit is a compensatory plan required to be filed as an
exhibit to this registration statement on Form S-4.
/1/Previously filed.
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 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.
<PAGE>
(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 June 6, 2000.
NORTH GEORGIA COMMUNITY FINANCIAL
PARTNERS, INC.
By: /s/ David J. Lance
------------------
David J. Lance
President
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 June 6, 2000.
Signature Title
--------- -----
/s/ Thomas M. Kinnamon* Secretary and Director
-----------------------
Thomas M. Kinnamon
/s/ David J. Lance President and Director
------------------
David J. Lance (principal executive officer)
(principal financial officer)
(principal accounting officer)
*/s/ David J. Lance
-------------------
David J. Lance
Attorney-in-Fact
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibits
-------- -----------------------
<S> <C>
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).
3.1/1/ Articles of Incorporation of North Georgia Community.
3.2/1/ 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.
5.1/1/ 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*/1/ Employment Agreement dated September 22, 1999, between North Georgia National Bank and
David J. Lance.
10.2*/1/ Addendum to Employment Agreement, dated November 16, 1999, between North Georgia
National Bank and David J. Lance.
10.3*/1/ North Georgia National Bank 1999 Stock Incentive Plan (included as Appendix C to the
proxy statement/prospectus and incorporated by reference herein).
21.1/1/ 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).
24/1/ Power of Attorney (appears on the signature page to this registration statement).
27.1/1/ Annual Financial Data Schedule
27.2/1/ Interim Financial Data Schedule
99.1/1/ North Georgia National Bank Form of Proxy.
</TABLE>
*The indicated exhibit is a compensatory plan required to be filed as an
exhibit to this registration statement on Form S-4.
/1/Previously filed.
