<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
Commission file number: 0-16181
ABC BANCORP (A GEORGIA CORPORATION)
I.R.S. EMPLOYER IDENTIFICATION NUMBER 58-1456434
310 FIRST STREET, S.E., MOULTRIE, GEORGIA 31768
TELEPHONE NUMBER: (912) 890-1111
Securities registered pursuant to Section 12(b) of the Act
None
Securities registered pursuant to Section 12(g) of the Act
Common Stock, Par Value $1 Per Share
Check whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the
past 90 days. Yes X No
--------- _________
Check if there is no disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
As of March 1, 1996, registrant had outstanding 3,379,192 shares of common
stock, $1 par value per share, which is registrant's only class of common stock.
The aggregate market value of the voting stock held by nonaffiliates of the
registrant was approximately $38,004,800.
DOCUMENTS INCORPORATED BY REFERENCE
The information required by Part III of this Annual Report is incorporated by
reference from the Registrant's definitive proxy statement to be filed with the
Securities and Exchange Commission pursuant to Regulation 14A not later than 120
days after the end of the fiscal year covered by this Annual Report.
<PAGE>
PART I
ITEM 1. BUSINESS OF THE COMPANY AND SUBSIDIARY BANKS
On August 21, 1981, ABC Bancorp ("ABC" or the "Company") was organized
as a registered bank holding company under the Federal Bank Holding Company Act
of 1956, as amended, and the bank holding company laws of Georgia.
On that date, American Banking Company ("American Bank") was merged
with a subsidiary of ABC created for the purpose of organizing American Bank
into a one-bank holding company structure. Since that time, American Bank has
operated as a wholly-owned subsidiary of ABC.
In 1985, ABC acquired all of the outstanding common stock of another
one-bank holding company, Quitman Bancshares, Inc., in exchange for ABC common
stock. In connection with that acquisition, ABC acquired all of the outstanding
common stock of The Bank of Quitman ("Quitman Bank") which was a wholly-owned
subsidiary of Quitman Bancshares, Inc. Pursuant to terms of the Reorganization
Agreement and the Merger Agreement, Quitman Bancshares, Inc. ceased to exist as
a separate entity and Quitman Bank thus became a wholly-owned subsidiary of ABC.
On July 1, 1986, ABC acquired all of the outstanding common stock of
Bank of Thomas County ("Thomas Bank") for cash and Thomas Bank became a wholly-
owned subsidiary of ABC.
In December 1986, ABC acquired all of the outstanding common stock of
The Citizens Bank of Tifton ("Tifton Bank") in exchange for cash and ABC common
stock.
On October 1, 1992, ABC acquired all of the outstanding common stock
of Cairo Banking Company ("CBC") for cash and CBC became a wholly-owned
subsidiary of ABC.
ABC is a bank holding company and does not engage in any substantial
business other than the normal banking services conducted by its five wholly-
owned bank subsidiaries, which are sometimes hereinafter collectively referred
to as the "Banks."
AMERICAN BANK
American Bank was incorporated on August 3, 1971 and operates a full-
service banking business in Moultrie, Colquitt County, Georgia, providing such
banking services as checking and savings accounts, various other types of time
deposits and money transfers. As of December 31, 1995, American Bank ranked, on
the basis of total deposits, as the smallest of three banks in Colquitt County.
1
<PAGE>
American Bank finances various commercial, agricultural and consumer
transactions and makes and services both secured and unsecured loans to
individuals, firms and corporations. American Bank offers several credit card
products to its customers. American Bank makes a variety of residential,
industrial, commercial and agricultural loans secured by real estate, including
interim construction financing. American Bank also offers individual trust
services.
At December 31, 1995, American Bank had correspondent relationships
with eight other commercial banks in Georgia. American Bank's principal
correspondent bank is SunTrust Bank, Atlanta, Georgia. These correspondent banks
provide certain services to American Bank such as processing checks and other
items, buying and selling Federal funds, handling money transfers and exchanges,
shipping coin and currency, providing security and safekeeping of funds or other
valuable items, and furnishing limited management information and advice. As
compensation for these services, American Bank maintains certain balances with
its correspondents in noninterest-bearing accounts.
QUITMAN BANK
Quitman Bank was founded on December 26, 1888, and operates a full-
service banking business in Quitman and Brooks County, Georgia. On December 31,
1995, Quitman Bank ranked, on the basis of total deposits, as the largest of
four banks in Brooks County.
Among the services provided by Quitman Bank are checking accounts and
savings accounts, certificates of deposit and money transfers. Quitman Bank
finances a variety of agricultural, commercial and consumer transactions and
also makes secured and unsecured loans, including loans secured by real estate,
to individuals, firms and corporations and purchases installment obligations
from retailers without recourse. Quitman Bank also offers several credit card
products to its customers. Quitman Bank does not conduct trust activities.
As of December 31, 1995, Quitman Bank had correspondent relationships
with seven other commercial banks. Quitman Bank's principal correspondent bank
is SunTrust Bank, Atlanta, Georgia. These correspondent banks provide certain
services to American Bank such as processing checks and other items, buying and
selling Federal funds, handling money transfers and exchanges, shipping coin and
currency, providing security and safekeeping of funds or other valuable items,
and furnishing limited management information and advice. As compensation for
these services, American Bank maintains certain balances with its correspondents
in noninterest-bearing accounts.
THOMAS BANK
Thomas Bank was incorporated in 1911 and operates a full service
banking business in Coolidge, Thomasville and Thomas County, Georgia, providing
such banking services as checking and savings accounts, other types of time
deposits and money transfers. As of December 31, 1995, Thomas Bank ranked, on
the basis of total deposits, as the fifth largest of eight banks in Thomas
County.
2
<PAGE>
Thomas Bank finances commercial, agricultural and consumer
transactions and makes and services both secured and unsecured loans to
individuals, firms and corporations. Thomas Bank also offers several credit card
products to its customers. Thomas Bank makes a variety of residential,
industrial, commercial and agricultural loans secured by real estate, including
interim construction financing. Thomas Bank does not conduct trust activities.
At December 31, 1995, Thomas Bank had a correspondent relationship
with three other commercial banks. Thomas Bank's principal correspondent bank is
SunTrust Bank, Atlanta, Georgia. These correspondent banks provide certain
services to Thomas Bank, such as processing checks and other items, buying and
selling Federal funds, handling money transfers and exchanges, shipping coin and
currency, providing security and safekeeping of funds or other valuable items
and furnishing limited management information and advice. As compensation for
these services, Thomas Bank maintains certain balances with its correspondents
in noninterest-bearing accounts.
TIFTON BANK
Tifton Bank was incorporated in 1945 and operates a full service
banking business in Tifton and Tift County, Georgia, providing such banking
services as checking and savings accounts, other types of time deposits and
money transfers. As of December 31, 1995, Tifton Bank ranked, on the basis of
total deposits, as the third largest of six banks in Tift County.
Tifton Bank finances commercial, agricultural and consumer
transactions and makes and services both secured and unsecured loans to
individuals, firms and corporations. Tifton Bank also offers several credit card
products to its customers. Tifton Bank makes a variety of residential,
industrial, commercial and agricultural loans secured by real estate, including
interim construction financing. Tifton Bank does not conduct trust activities.
At December 31, 1995, Tifton Bank had correspondent relationships with
seven other commercial banks. Tifton Bank's principal correspondent bank is
SunTrust Bank, Atlanta, Georgia. These correspondent banks provide certain
services to Tifton Bank, such as processing checks and other items, buying and
selling Federal funds, handling money transfers and exchanges, shipping coin and
currency, providing security and safekeeping of funds or other valuable items
and furnishing limited management information and advice. As compensation for
these services, Tifton Bank maintains certain balances with its correspondents
in noninterest-bearing accounts.
CAIRO BANK
Cairo Bank was incorporated in 1900 and operates a full-service
banking business in Cairo and Grady County and Thomas County, Georgia, providing
such banking services as checking and savings accounts, other types of time
deposits and money transfers. As of December 31, 1995, Cairo Bank ranked as the
second largest of five banks in Grady County.
3
<PAGE>
Cairo Bank also finances commercial, agricultural and consumer
transactions and makes and services both secured and unsecured loans to
individuals, firms and corporations. Cairo Bank offers several credit card
products to its customers. Cairo Bank makes a variety of residential,
industrial, commercial and agricultural loans secured by real estate, including
interim construction financing. Cairo Bank does not conduct trust activities.
At December 31, 1995, Cairo Bank had correspondent relationships with
five other commercial banks. Cairo Bank's principal correspondent is Georgia
Bankers Bank, Atlanta, Georgia. These correspondent banks provide certain
services to Cairo Bank, such as processing checks and other items, buying and
selling Federal funds, providing security and safekeeping of funds or other
valuable items and furnishing limited management information and advice. As
compensation for these services, Cairo Bank maintains certain balances with its
correspondents in noninterest-bearing accounts.
MARKET AREA AND COMPETITION
The Company's market area is a contiguous twelve-county area located
within an approximately 60-mile radius of Moultrie in south central Georgia. I-
75 runs through the Company's market area, which is bordered on the south by the
Georgia-Florida state line. The Banks have offices in Colquitt County, Tift
County, Thomas County, Brooks County and Grady County. As reported by the United
States Bureau of Census, this five-county area had a population in 1990 of
approximately 146,000.
ABC's eleven banking facilities are located in communities whose
economies are based primarily on agriculture, manufacturing and light industry.
Textiles, meat processing and aluminum processing are among the leading
manufacturing industries in the Company's market area, represented by such firms
as Riverside Manufacturing Co., Sipco, Reynolds Metal Company, Tifton
Manufacturing, Wells Aluminum, Inc., W. B. Roddenberry, Inc., Wright's Nursery
and Flowers, Inc.
The banking industry in Georgia is highly competitive. In recent
years, intense market demands, economic pressures, fluctuating interest rates
and increased customer awareness of product and service differences among
financial institutions have forced banks to diversify their services and become
more cost effective. Each of the Banks faces strong competition in attracting
deposits and making loans. Their most direct competition for deposits comes from
other commercial banks, thrift institutions, credit unions and issuers of
securities such as shares in money market funds. Interest rates, convenience of
office locations and marketing are all significant factors in the Banks'
competition for deposits.
Competition for loans comes from other commercial banks, thrift
institutions, savings banks, insurance companies, consumer finance companies,
credit unions and other institutional lenders. The Banks compete for loan
originations through the interest rates and loan fees they charge and the
efficiency and quality of services they provide. Competition is affected by the
general availability of lendable funds, general and local economic conditions,
current interest rate levels and other factors that are not readily predictable.
Management expects that competition will become more intense in the
future due to changes in state and Federal laws and regulations and the entry of
additional bank and nonbank competitors. See SUPERVISION AND REGULATION.
4
<PAGE>
PROPERTIES
The table below sets forth the location, size and other information
with respect to the Company's real properties. All properties are owned by the
Company or its subsidiaries and are unencumbered.
<TABLE>
<CAPTION>
APPROXIMATE
SQUARE
OFFICES USED BY FOOTAGE
- ---------------------------------------- -------------- -----------
<S> <C> <C>
310 First Street, S.E., Moultrie ABC Bancorp 7,000
225 South Main Street, Moultrie American Bank 9,000
1707 First Avenue, S.E., Moultrie American Bank 5,500
137 Broad Street, Doerun American Bank 3,860
1000 West Screven Street, Quitman Quitman Bank 11,530
Eastern Brooks County Quitman Bank 1,100
529 Pine Avenue, Coolidge Thomas Bank 4,000
113 E. Eighth Street, Tifton Tifton Bank 5,800
Second Street at Magnolia Avenue, Tifton Tifton Bank 2,000
201 South Broad Street, Cairo Cairo Bank 10,000
12 East Depot Street, Meigs Cairo Bank 2,700
2242 East Pinetree Boulevard, Thomasville Thomas Bank 3,000
</TABLE>
EMPLOYEES
At December 31, 1995, ABC Bancorp and its subsidiaries employed 182
full-time employees and 17 part-time employees. ABC Bancorp considers its
relationship with its employees to be excellent.
ABC has adopted a simplified employee pension plan covering
substantially all employees. The Company and the Banks made contributions for
all eligible employees in 1995. ABC also maintains a comprehensive employee
benefits program providing, among other benefits, hospitalization and major
medical insurance and life insurance. Management considers these benefits to be
competitive with those offered by other financial institutions in south Georgia.
The Company's employees are not represented by any collective bargaining group.
5
<PAGE>
CERTAIN REGULATORY CONSIDERATIONS RELATING TO ABC
GENERAL
As a bank holding company, ABC is subject to the regulation and
supervision of the Federal Reserve Board and the Georgia Department of Banking
and Finance (the "DBF"). The Subsidiary Banks are subject to supervision and
examination by applicable state and Federal banking agencies, including the
Federal Reserve Board and the FDIC. The Subsidiary Banks are also subject to
various requirements and restrictions under Federal and state law, including
requirements to maintain reserves against deposits, restrictions on the types
and amounts of loans that may be granted and the interest that may be charged
thereon, and limitations on the types of investments that may be made and the
types of services that may be offered. Various consumer laws and regulations
also affect the operations of the Subsidiary Banks. In addition to the impact of
regulation, commercial banks are affected significantly by the actions of the
Federal Reserve Board as it attempts to control the money supply and credit
availability in order to influence the economy.
The BHCA requires every bank holding company to obtain the prior
approval of the Federal Reserve Board before (i) it may acquire direct or
indirect ownership or control of more than 5% of the voting shares of any bank
that it does not already control; (ii) it or any of its subsidiaries, other than
a bank, may acquire all or substantially all of the assets of a bank; and (iii)
it may merge or consolidate with any other bank holding company. I addition, a
bank holding company is generally prohibited from engaging in, or acquiring,
direct or indirect control of the voting shares of any company engaged in non-
banking activities. This prohibition does not apply to activities found by the
Federal Reserve Board, by order or regulation, to be so closely related to
banking or managing or controlling banks as to be a proper incident thereto.
Some of the activities that the Federal Reserve Board has determined by
regulation or order to be closely related to banking are: making or servicing
loans and certain types of leases; performing certain data processing services;
acting as fiduciary or investment or financial advisor; providing discount
brokerage services; underwriting bank eligible securities; underwriting debt and
equity securities on a limited basis through separately capitalized
subsidiaries; and making investments in corporations or projects designed
primarily to promote community welfare.
In addition, the DBF requires information with respect to the
financial condition, operations, management and intercompany relationships of
ABC and the Subsidiary Banks and related matters. The DBF may also require such
other information as is necessary to keep itself informed as to whether the
provisions of Georgia law and the regulations and orders issued thereunder by
the DBF have been complied with, and the DBF may examine ABC. ABC is an
"affiliate" of the Subsidiary Banks under the Federal Reserve Act, which imposes
certain restrictions on (i) loans by the Subsidiary Banks to ABC; (ii)
investments in the stock or securities of ABC by the Subsidiary Banks; (iii) the
Subsidiary Bank's taking the stock or securities of an "affiliate" as collateral
for loans by the Subsidiary Banks to a borrower; and (iv) the purchase of assets
from ABC by the Subsidiary Banks. Further, a bank holding company and its
subsidiaries are prohibited from engaging in certain tie-in arrangements in
connection with any extension of credit, lease or sale of property or furnishing
of services.
6
<PAGE>
PAYMENT OF DIVIDENDS AND OTHER RESTRICTIONS
ABC is a legal entity separate and distinct from its subsidiaries.
There are various legal and regulatory limitations under Federal and state law
on the extent to which ABC's subsidiaries can pay dividends or otherwise supply
funds to ABC.
The principal source of ABC's cash revenues is dividends from its
subsidiaries and there are certain limitations under Federal, Georgia and
Georgia law on the payment of dividends by such subsidiaries. The prior approval
of the Federal Reserve Board or the applicable state commissioner, as the case
may be, is required if the total of all dividends declared by any state member
bank of the Federal Reserve System in any calendar year exceeds the Bank's net
profits (as defined) for that year combined with its retained net profits for
the preceding two calendar years, less any required transfers to surplus or a
fund for the retirement of any preferred stock. The relevant Federal and state
regulatory agencies also have authority to prohibit a state member bank or bank
holding company, which would include ABC and the Subsidiary Banks (including
Central Bank) from engaging in what, in the opinion of such regulatory body,
constitutes an unsafe or unsound practice in conducting its business. The
payment of dividends could, depending upon the financial condition of the
subsidiary, be deemed to constitute such an unsafe or unsound practice.
Under Georgia law (which would apply to any payment of dividends by
the Subsidiary Banks to ABC), the prior approval of the Georgia Commissioner of
Banking and Finance is required before any cash dividends may be paid by a state
bank if: (i) total classified assets at the most recent examination of such bank
exceed 80% of the equity capital (as defined, which includes the reserve for
loan losses) of such bank; (ii) the aggregate amount of dividends declared or
anticipated to be declared in the calendar year exceeds 50% of the net profits
(as defined) for the previous calendar year; or (iii) the ratio of equity
capital to adjusted total assets is less than 6%.
Retained earnings of the Subsidiary Banks available for payment of
cash dividends under all applicable regulations without obtaining governmental
approval were approximately $2.38 million as of December 31, 1995.
In addition, the Subsidiary Banks are subject to limitations under
Section 23A of the Federal Reserve Act with respect to extensions of credit to,
investments in, and certain other transactions with, ABC. Furthermore, loans and
extensions of credit are also subject to various collateral requirements.
7
<PAGE>
CAPITAL ADEQUACY
The Federal Reserve Board has adopted risk-based capital guidelines
for bank holding companies. The minimum ratio of total capital ("Total Capital")
to risk-weighted assets (including certain off-balance sheet items, such as
standby letters of credit, is 8%). At least half of the Total Capital is to be
composed of common stock, minority interests in the equity accounts of
consolidated subsidiaries, noncumulative perpetual preferred stock and a limited
amount of perpetual preferred stock, less goodwill ("Tier I Capital"). The
remainder may consist of subordinated debt, other preferred stock and a limited
amount of loan loss reserves.
In addition, the Federal Reserve Board has established minimum
leverage ratio guidelines for bank holding companies. These guidelines for a
minimum ratio of Tier I Capital to total assets, less goodwill (the "Leverage
Ratio") of 3% for bank holding companies that meet certain specified criteria,
including those having the highest regulatory rating. All other bank holding
companies generally are required to maintain a Leverage Ratio of at least 3%
plus an additional cushion of 100 to 200 basis points. The guidelines also
provide that bank holding companies experiencing internal growth or making
acquisitions will be expected to maintain strong capital positions substantially
above the minimum supervisory levels without significant reliance on intangible
assets. Furthermore, the Federal Reserve Board has indicated that it will
consider a "tangible Tier I capital leverage ratio" (deducting all intangibles)
and other indicia of capital strength in evaluating proposals for expansion or
new activities.
Effective December 19, 1992, a new Section 38 to the Federal Deposit
Insurance Act implemented the prompt corrective action provisions that Congress
enacted as a part of the Federal Deposit Insurance Corporation Improvement Act
of 1991 (the "1991 Act"). The "prompt corrective action" provisions set forth
five regulatory zones in which all banks are placed largely based on their
capital positions. Regulators are permitted to take increasingly harsh action as
a Bank's financial condition declines. Regulators are also empowered to place in
receivership or require the sale of a bank to another depository institution
when a bank's capital leverage ratio reaches two percent. Better capitalized
institutions are generally subject to less onerous regulation and supervision
than banks with less amounts of capital.
The FDIC has adopted regulations implementing the prompt corrective
action provisions of the 1991 Act, which place financial institutions in the
following five categories based upon capitalization ratios: (1) a "well
capitalized" institution has a total risk-based capital ratio of at least 10%, a
Tier I risk-based ratio of at least 6% and a leverage ratio of at least 5%; (2)
an "adequately capitalized" institution has a total risk-based capital ratio of
at least 8%, a Tier I risk-based ratio of at least 4% and a leverage ratio of at
least 4%; (3) an "undercapitalized" institution has a total risk-based capital
ratio of under 8%, a Tier I risk-based ratio of under 4% or a leverage ratio of
under 4%; (4) a "significantly undercapitalized" institution has a total risk-
based capital ratio of under 6%, a Tier I risk-based ratio of under 3% or a
leverage ratio of under 3%; and (5) a "critically undercapitalized" institution
has a leverage ratio of 2% or less. Institutions in any of the three
undercapitalized categories would be prohibited from declaring dividends or
making capital distributions. The FDIC regulations also establish procedures for
"downgrading" an institution to a lower capital category based on supervisory
factors other than capital. Under the FDIC's regulations, all of the Subsidiary
Banks are "well capitalized" institutions.
8
<PAGE>
The following table reflects the Company's and the Banks' compliance
with regulatory capital requirements at December 31, 1995 on a consolidated
basis:
<TABLE>
<CAPTION>
ACTUAL REQUIRED EXCESS
------------------- --------------------- ---------------------
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
-------- --------- -------- --------- -------- ---------
(DOLLARS IN THOUSANDS)
------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Leverage capital $33,260 10.37 % $12,824 4.00 % $20,436 6.37 %
Risk-based capital:
Core capital 33,260 15.23 8,733 4.00 24,527 11.23
Total capital 36,008 16.49 17,466 8.00 18,542 8.49
</TABLE>
Each Bank also met its individual regulatory capital requirements at
December 31, 1995.
A banking organization's qualifying total capital consists of two
components: Tier I Capital (core capital) and Tier 2 Capital (supplementary
capital). Tier 1 Capital is an amount equal to the sum of: (i) common
shareholders' equity (including adjustments for any surplus or deficit); (ii)
qualifying noncumulative perpetual preferred stock (plus, for bank holding
companies, qualifying cumulative perpetual preferred stock in an amount up to
25% of Tier 1 Capital); and (iii) the minority interests in the equity accounts
of consolidated subsidiaries.
Intangible assets (other than goodwill) may be included in Tier 1
Capital for bank holding companies to an extent banking examiners consider
appropriate with the following factors, among others, taken into consideration:
(i) the reliability and predictability of any cash flows associated with the
asset and the degree of certainty that can be achieved in periodically
determining the asset's useful life and value; (ii) the existence of an active
and liquid market for the asset; and (iii) the feasibility of selling the asset
apart from the banking organization or from the bulk of its assets. At least 50%
of the banking organization's total regulatory capital must consist of Tier 1
Capital.
Tier 2 Capital is an amount equal to the sum of (i) the allowance for
possible loan and lease losses in an amount up to 1.25% of risk-weighted assets,
(ii) cumulative perpetual preferred stock and long-term preferred stock (which
for bank holding companies must have an original maturity of 20 years or more)
and related surplus; (iii) hybrid instruments (instruments with characteristics
of both debt and equity), perpetual debt and mandatory convertible debt
securities; and (iv) eligible term subordinated debt and intermediate-term
preferred stock with an original maturity of five years or more, including
related surplus, in an amount up to 50% of Tier 1 Capital. The inclusion of the
foregoing elements of Tier 2 Capital are subject to certain further requirements
and limitations of the Federal bank regulatory agencies.
9
<PAGE>
SUPPORT OF SUBSIDIARY BANKS
Under the Federal Reserve Board policy, ABC is expected to act as a
source of financial strength to, and to commit resources to support, each of the
Subsidiary Banks. This support may be required at times when, absent such
Federal Reserve Board policy, ABC may not be inclined to provide it. In the
event of a bank holding company's bankruptcy, any commitment by the bank holding
company to a Federal bank regulatory agency to maintain the capital of a
subsidiary bank will be assumed by the bankruptcy trustee and entitled to a
priority of payment.
As a result of the enactment of Section 206 of the Financial
Institutions Reform, Recovery and Enforcement Act ("FIRREA") on August 9, 1989,
a depository institution insured by the FDIC can be held liable for any loss
incurred by, or reasonably expected to be incurred by, the FDIC after August 9,
1998 in connection with (i) the default of a commonly controlled FDIC-insured
depository institution or (ii) any assistance provided by the FDIC to any
commonly controlled FDIC-insured depository institution "in danger of default"
is defined generally as the existence of certain conditions indicating that a
default is likely to occur in the absence of regulator assistance.
FDIC INSURANCE ASSESSMENTS
The Subsidiary Banks are subject to FDIC deposit insurance assessments
for the Bank Insurance Fund (the "BIF"). Since 1989, the annual FDIC deposit
insurance assessments increased from $.083 per $100 of deposits to a minimum
level of $.23 per $100, an increase of 177 percent. The FDIC implemented a risk-
based assessment system whereby banks are assessed on a sliding scale depending
on their placement in nine separate supervisory categories, from $.23 per $100
of deposits for the healthiest banks (those with the highest capital, best
management and best overall condition) to as much as $.31 per $100 of deposits
for the less-healthy institutions, for an average $.259 per $100 of deposits.
On August 8, 1995, the FDIC lowered the BIF premium for "healthy"
banks 83% from $.23 per $100 in deposits to $.04 per $100 in deposits, while
retaining the $.31 level for the riskiest banks. The average assessment rate was
therefore reduced from $.232 to $.044 per $100 of deposits. The new rate took
effect on September 29, 1995. On November 14, 1995, the FDIC again lowered the
BIF premium for "healthy" banks from $.04 per $100 of deposits to zero for the
highest rated institutions (92% of the industry). As a result, each of the
Subsidiary Banks pay only the legally required annual minimum payment of $2,000
per year for insurance as of January 1996.
10
<PAGE>
RECENT LEGISLATIVE AND REGULATORY ACTION
On April 19,1995, the four Federal bank regulatory agencies adopted
revisions to the regulations promulgated pursuant to the Community Reinvestment
Act (the "CRA"), which are intended to set distinct assessment standards for
financial institutions. The revised regulations contains three evaluation tests:
(i) a lending test which will compare the institution's market share of loans in
low- and moderate-income areas to its market share of loans in its entire
service area and the percentage of a bank's outstanding loans to low-and
moderate-income areas or individuals; (ii) a services test which will evaluate
the provisions of services that promote the availability of credit to low- and
moderate-income areas; and (iii) an investment test, which will evaluate an
institution's record of investments in organizations designed to foster
community development, small- and minority-owned businesses and affordable
housing lending, including state and local government housing or revenue bonds.
The regulation is designed to reduce some paperwork requirements of the current
regulations and provide regulators, institutions and community groups with a
more objective and predictable manner with which to evaluate the CRA performance
of financial institutions. The rule became effective on January 1, 1996, at
which time evaluation under streamlined procedures were schedule to begin for
institutions with assets of less than $250 million that are owned by a holding
company with total assets of less than $1 billion. Until the regulators release
guidelines for examiners that interpret the rules, it is unclear what effect, if
any, these regulations will have on ABC and the Subsidiary Banks. Congress and
various Federal agencies (including, in addition to the bank regulatory
agencies, the Department of Housing and Urban Development, the Federal Trade
Commission and the Department of Justice) (collectively, the "Federal Agencies")
responsible for implementing the nation's fair lending laws have been
increasingly concerned that prospective home buyers and other borrowers are
experiencing discrimination in their efforts to obtain loans. In recent years,
the Department of Justice has filed suit against financial institutions, which
it determined had discriminated, seeking fines and restitution for borrowers who
allegedly suffered from discriminatory practices. Most, if not all, of these
suits have been settled (some for substantial sums) without a full adjudication
on the merits.
On March 8, 1994, the Federal Agencies, in an effort to clarify what
constitutes lending discrimination and specify the factors the agencies will
consider in determining if lending discrimination exists, announced a policy
statement detailing specific discriminatory practices prohibited under the Equal
Opportunity Act and the Fair Housing Act. In the policy statement, three methods
of proving lending discrimination were identified: (1) over evidence of
discrimination, when a lender blatantly discriminates on a prohibited basis; (2)
evidence of disparate treatment, when a lender treats applicants differently
based on a prohibited factor even where there is no showing that the treatment
was motivated by prejudice or a conscious intention to discriminate against a
person; and (3) evidence of disparate impact, when a lender applies a practice
uniformly to all applicants, but the practice has a discriminatory effect, even
where such practices are neutral on their face and are applied equally, unless
the practice can be justified on the basis of business necessity.
11
<PAGE>
On September 23, 1994, President Clinton signed the Reigle Community
Development and Regulatory Improvement Act of 1994 (the "Regulatory Improvement
Act"). The Regulatory Improvement Act contains funding for community development
projects through banks and community development financial institutions and also
numerous regulatory relief provisions designed to eliminate certain duplicative
regulations and paperwork requirements. On September 29, 1994, President Clinton
signed the Reigle-Neal Interstate Banking and Branching Efficiency Act of 1994
(the "Federal Interstate Bill") which amended Federal law to permit bank holding
companies to acquire existing banks in any state effective September 29, 1995,
and to permit any interstate bank holding company to merge its various bank
subsidiaries into a single bank with interstate branches after May 31, 1997.
States have the authority to authorize interstate branching prior to June 1,
1997, or, alternatively, to opt out of interstate branching prior to that date.
The Georgia Financial Institutions Code was amended in 1994 to permit the
acquisition of a Georgia bank or bank holding company by out-of-state bank
holding companies beginning July 1, 1995. On September 29, 1995, the interstate
banking provisions of the Georgia Financial Institutions Code were superseded by
the Federal Interstate Bill.
In February 1996, the Georgia legislature adopted the "Georgia
Interstate Branching Act," which when signed by the Governor, will permit
Georgia-based banks and bank holding companies owning or acquiring banks outside
of Georgia and all non-Georgia banks and bank holding companies owning or
acquiring banks in Georgia the right to merge any lawfully acquired bank into an
interstate branch network. The Georgia Interstate Branching Act also allows
banks to establish de novo branch banks on a limited basis beginning July 1,
1996. Beginning July 1, 1998, the number of de novo bank branches which may be
established will no longer be limited.
12
<PAGE>
EXECUTIVE OFFICERS
The following table sets forth certain information with respect to the
executive officers of the Company.
<TABLE>
<CAPTION>
NAME, AGE AND POSITION WITH THE PRINCIPAL OCCUPATION FOR THE LAST FIVE
TERM AS OFFICER REGISTRANT YEARS AND OTHER DIRECTORSHIPS
- ---------------------- ----------------------- ---------------------------------------------
<S> <C> <C>
Willard E. Lasseter, Chairman Chairman of the board of ABC Bancorp since 1995.
66, Director since Vice Chairman of the Board of ABC Bancorp from
1982 1992 to 1995. Chairman of the Board since 1990 and
Director of American Bank since 1971. Mr. Lasseter
also served as Vice Chairman of the Board of
American Bank from 1984 to 1990. Mr. Lasseter also
serves as a Director of Cairo Bank and Thomas
Bank. Since 1959, Mr. Lasseter has owned and
operated Lasseter Tractor Company, a John Deere
dealership. He is also engaged in agricultural
operations.
Kenneth J. Hunnicutt; President, Chief Chief Executive Officer of ABC Bancorp since 1994
59; Officer since 1981 Executive Officer and and President since 1981. Mr. Hunnicutt served as
Director Senior President of American Bank from 1989 to
1991 and as President of American Bank from 1975
to 1989 and currently serves as a Director of each
of the Company's subsidiary banks. Mr. Hunnicutt
is the Chairman of the Board of Thomas Bank and
Cairo Bank.
W. Edwin Lane, Jr; Executive Vice Executive Vice President and Chief Financial
42: Officer since President and Chief Officer of ABC Bancorp since January 1, 1995. Mr.
January 1, 1995 Financial Officer Lane served as Controller of First Liberty Bank,
Macon, Georgia from August 1992 to December 1994.
Mr. Lane was associated with Mauldin & Jenkins,
Certified Public Accountants, from 1985 to 1992,
where he served as an audit manager from 1989 to
1992.
</TABLE>
Officers serve at the discretion of the Board of Directors.
13
<PAGE>
ITEM 2. PROPERTIES
The principal properties of the Company consist of the properties of
the Banks. For a description of the properties of the Banks, see "Item 1 -
Business of the Company and Subsidiary Banks - Properties" included elsewhere in
this Annual Report.
ITEM 3. LEGAL PROCEEDINGS
Neither the Company nor any of its subsidiary banks is a party to, nor
is any of their property the subject of, any material pending legal proceedings,
other than ordinary routine proceedings incidental to the business of the Banks,
nor to the knowledge of the management of the Company are any such proceedings
contemplated or threatened against it or its subsidiaries.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SHAREHOLDERS
No matters were submitted to a vote of the Company's shareholders
during the fourth quarter of 1995.
14
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER
MATTERS
(a) In May 1994, the Company sold 747,500 shares of the Company's common stock,
par value $1.00 per share at a price of $12.25 per share pursuant to a
registered public offering (the "Offering"). Simultaneous with the
Offering, the common stock was approved for listing on the Nasdaq National
Market System ("Nasdaq -NMS") under the symbol ABCB.
Prior to the Offering, quotations for the common stock were not reported on
any market, and there was no established public trading market for the
common stock.
The following table sets forth: (a) the high and low bid prices for the
common stock as quoted on Nasdaq-NMS during the periods since the common
stock was listed; and (b) the amount of quarterly dividends declared on the
common stock during the periods indicated.
<TABLE>
<CAPTION>
Calendar Period Bid Prices Cash
----------------------------- ----------------------------- Dividends
1995 Low High Declared
----------------------------- ------------ ------------- ------------
<S> <C> <C> <C>
First quarter $ 9 $ 10-1/8 $ .07-1/2
Second quarter 9-1/2 11-5/8 .07-1/2
Third quarter 11-3/8 14-1/2 .10
Fourth quarter 13-1/2 14-3/4 .10
</TABLE>
<TABLE>
<CAPTION>
Calendar Period Bid Prices Cash
----------------------------- ----------------------------- Dividends
1994 Low High Declared
----------------------------- ------------ ------------- ------------
<S> <C> <C> <C>
Second quarter $ 12-1/4 $ 13-3/4 $ .07-1/4
Third quarter 12-3/4 14 .07-1/4
Fourth quarter 12 13-3/4 .07-1/4
</TABLE>
(b) As of March 1, 1996, there were approximately 800 holders of record of the
Common Stock.
(c) The Company paid an annual dividend on its Common Stock of $.35 and $.29
per share for fiscal years 1995 and 1994, respectively.
15
<PAGE>
ITEM 6. SELECTED CONSOLIDATED FINANCIAL INFORMATION
The following table presents selected consolidated financial
information for the Company. The data set forth below are derived from the
audited consolidated financial statements of the Company. The selected financial
data should be read in conjunction with, and are qualified in their entirety by,
the Consolidated Financial Statements and the Notes thereto and Management's
Discussion and Analysis of Financial Condition and Results of Operations
included elsewhere herein.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------
1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNT)
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SELECTED BALANCE SHEET DATA:
Total assets $ 341,505 $ 292,799 $ 268,616 $ 259,386 $ 180,548
Total loans 214,251 192,124 161,747 150,945 100,648
Total deposits 300,988 256,869 238,225 234,470 158,543
Investment securities 50,260 46,505 45,937 35,161 30,272
Shareholders' equity 33,935 30,450 19,959 19,405 18,654
SELECTED INCOME STATEMENT DATA:
Interest income $ 26,703 $ 21,328 $ 19,697 $ 15,668 $ 15,861
Interest expense 10,673 7,828 7,732 6,692 8,457
---------- ---------- ---------- ---------- ----------
Net interest income 16,030 13,500 11,965 8,976 7,404
Provision for loan losses 848 638 1,191 1,129 451
Other income 3,276 3,025 2,867 2,097 1,781
Other expenses 12,228 11,547 10,535 8,030 6,677
----------- ----------- ----------- ---------- ----------
Income before tax 6,230 4,340 3,106 1,914 2,057
Income tax expense 1,889 1,240 814 429 487
----------- ----------- ----------- ---------- ----------
Net income before cumulative effect 4,341 3,100 2,292 1,485 1,570
Cumulative effect - - 346 - -
---------- ---------- ---------- ---------- ----------
Net income $ 4,341 $ 3,100 $ 2,638 $ 1,485 $ 1,570
========== ========== ========== ========== ==========
PER SHARE DATA:
Net income before cumulative effect $ 1.29 $ 1.05 $ 0.91 $ 0.58 $ 0.61
Net income 1.29 1.05 1.04 0.58 0.61
Book value 10.04 9.10 8.49 7.64 7.05
Tangible book value 9.43 8.41 7.39 6.54 5.84
Dividends 0.35 0.29 0.29 0.29 0.26
PROFITABILITY RATIOS:
Net income to average total assets 1.43 % 1.15 % 1.03 % 0.78 % 0.92 %
Net income to average stockholders'
equity 13.44 13.99 13.60 8.00 8.80
Net interest margin 5.94 5.62 5.34 5.49 5.14
LOAN QUALITY RATIOS:
Net charge-offs to average total loans 0.16 0.25 1.02 0.91 0.24
Reserve for loan losses to total loans
and OREO 1.99 1.96 2.20 2.64 1.25
Nonperforming assets to total loans
and OREO 1.08 2.04 2.66 4.66 1.26
Reserve for loan losses to nonperforming
loans 184 96 104 65 117
Reserve for loan losses to total
nonperforming assets 184 93 83 57 99
</TABLE>
16
<PAGE>
ITEM 6. SELECTED CONSOLIDATED FINANCIAL INFORMATION (Continued)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------
1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNT)
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
LIQUIDITY RATIOS:
Loans to total deposits 71 % 75 % 68 % 64 % 63 %
Loans to average earnings assets 78 78 70 89 67
Noninterest-bearing deposits to
total deposits 19 19 16 15 16
CAPITAL ADEQUACY RATIOS:
Common stockholders' equity to
total assets 9.9 10.4 7.4 7.5 10.3
Total stockholders' equity to total assets 9.9 10.4 7.4 7.5 10.3
Dividend payout ratio 27 29 25 50 43
</TABLE>
17
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
Liquidity management involves the matching of the cash flow
requirements of customers who may be either depositors desiring to withdraw
funds or borrowers needing assurance that sufficient funds will be available to
meet their credit needs and the ability of the Company and the Banks to meet
those needs. The Company and the Banks seek to meet liquidity requirements
primarily through management of short-term investments (principally Federal
funds sold) and monthly amortizing loans. Another source of liquidity is the
repayment of maturing single payment loans. Also, the Banks maintain
relationships with correspondent banks which could provide funds to them on
short notice, if needed.
The liquidity and capital resources of the Company and the Banks are
monitored on a periodic basis by state and Federal regulatory authorities. As
determined under guidelines established by these regulatory authorities, the
Banks' liquidity ratios at December 31, 1995 were considered satisfactory. At
that date, the Banks' short-term investments were adequate to cover any
reasonably anticipated immediate need for funds. At December 31, 1995, the
Company's and the Banks' capital asset ratios were considered adequate based on
guidelines established by regulatory authorities. During 1995, the Company
increased its capital by $125,000, representing proceeds from exercise of common
stock options. It also increased its capital by retaining net earnings of
$3,162,000 after payment of dividends. After recording an increase in capital of
$198,000 for unrealized gains on securities, net of taxes, total capital
increased during 1995 by $3,485,000. At December 31, 1995, total capital of the
Company amounted to $33,935,000.
At December 31, 1995, there were no binding outstanding commitments
for capital expenditures. However, the Company anticipates that expenditures of
approximately $1,500,000 will be required for expansion or relocation of
properties which it plans to implement in 1996 in order to serve its customers
and meet the needs of the citizens in the communities served by its Banks. In
addition, the Company has entered into definitive merger agreements for the
acquisition of two bank holding companies in early 1996, pending approval by
regulatory authorities and shareholders of the companies being acquired. It is
expected that approximately $6,000,000 will be required to consummate these two
acquisitions.
18
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
RESULTS OF OPERATIONS
The Company's results of operations are determined by its ability to
effectively manage interest income and expense, to minimize loan and investment
losses, to generate noninterest income and to control noninterest expense. Since
interest rates are determined by market forces and economic conditions beyond
the control of the Company, the ability to generate net interest income is
dependent upon the Banks' ability to obtain an adequate spread between the rate
earned on interest-earning assets and the rate paid on interest-bearing
liabilities. Thus, the key performance measure for net interest income is the
interest margin or net yield, which is taxable-equivalent net interest income
divided by average earning assets.
The primary component of consolidated earnings is net interest income,
or the difference between interest income on interest-earning assets and
interest paid on interest-bearing liabilities. The net interest margin is net
interest income expressed as a percentage of average interest-earning assets.
Interest-earning assets consist of loans, investment securities and Federal
funds sold. Interest-bearing liabilities consist of deposits, of which
approximately 17% are noninterest-bearing. A portion of interest income is
earned on tax-exempt investments, such as state and municipal bonds. In an
effort to state this tax-exempt income and its resultant yields on a basis
comparable to all other taxable investments, an adjustment is made to analyze
this income on a taxable-equivalent basis.
The net interest margin increased by 32 basis points or 5.69% to 5.94%
in 1995 as compared to 5.62% in 1994. This increase in net interest margin was
achieved by an increase of 103 basis points on average yield earned on interest-
earning assets accompanied by an increase of 94 basis points in average rate
paid on interest-bearing liabilities. Net interest income on a taxable-
equivalent basis was $16,314,000 in 1995 as compared to $13,814,000 in 1994,
representing an increase of 18.10%. Net interest income on a taxable-equivalent
basis was $13,814,000 in 1994 as compared to $12,273,000 in 1993, representing
an increase of 12.56%. Net interest margin increased by 5.24% to 5.62% in 1994
from 5.34% in 1993 because average interest-earning assets increased by 5.34% in
1994 as compared to 1993.
Average interest-earning assets increased by $28,559,000 or 11.62% to
$274,428,000 in 1995 from $245,869,000 in 1994. Average loans increased by
$24,341,000; average investments increased by $2,516,000; and average Federal
funds sold increased by $1,702,000. The increase in average interest-earning
assets was funded by an increase in average deposits of $22,869,000 or 9.52% to
$263,046,000 in 1995 from $240,177,000 in 1994. By comparison, average interest-
earning assets increased by $15,912,000 or 6.92% to $245,869,000 in 1994 from
$229,957,000 in 1993. During 1994, average deposits increased by $9,424,000 or
4.08%, to $240,177,000 from $230,753,000 in 1993. Approximately 17% of the
average deposits were noninterest-bearing deposits in 1995 as compared to 16%
noninterest-bearing deposits in 1994.
19
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
RESULTS OF OPERATIONS (CONTINUED)
The allowance for loan losses represents a reserve for potential
losses in the loan portfolio. The adequacy of the allowance for loan losses is
evaluated periodically based on a review of all significant loans, with a
particular emphasis on nonaccruing, past due and other loans that management
believes require attention.
The provision for loan losses is a charge to earnings in the current
period to replenish the allowance and maintain it at a level management has
determined to be adequate. The provision for loan losses charged to earnings
amounted to $848,000 in 1995, $638,000 in 1994 and $1,191,000 in 1993. The
increase in the provision for loan losses in 1995 of $210,000, or 32.92%, as
compared with 1994 was accompanied by an increase of 11.52% in total loans in
1995 and an increase in the allowance for loan losses of 13.71%. Net charge-offs
represented 39.27% of the provision for loan losses in 1995 as compared to
70.85% in 1994. The decrease in loan charge-offs in 1995 resulted from an
improvement in the quality of the collateral held as security on loans and the
ability of the creditors to service their debt. The loan charge-offs for 1995
represented .16% of average loans outstanding during the year as compared to
.25% for 1994. At December 31, 1995, the allowance for loan losses was 1.99% of
total loans outstanding as compared to an allowance for loan losses of 1.96% of
total loans outstanding at December 31, 1994. The determination of the allowance
rests upon management's judgment about factors affecting loan quality and
assumptions about the local and national economy. Management considers the year-
end allowance for loan losses adequate to cover potential losses in the loan
portfolio.
Following is a comparison of noninterest income for 1995, 1994 and
1993.
<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Service charges on deposit accounts $2,595,000 $2,456,000 $2,299,000
Other service charges, commissions and fees 301,000 224,000 230,000
Other income 380,000 345,000 338,000
----------- ----------- -----------
$3,276,000 $3,025,000 $2,867,000
=========== =========== ===========
</TABLE>
The most significant increase in noninterest income was an increase in
service charges on deposit accounts of $139,000 in 1995 over 1994, representing
an increase of 5.66%. This increase in service charges was achieved by an
increase in average deposits of $22,869,000 during 1995 as compared to 1994.
Total other income increased $158,000 or 5.51% in 1994 attributable to an
increase of $157,000 in service charges on deposits.
20
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
RESULTS OF OPERATIONS (CONTINUED)
Following is an analysis of noninterest expense for 1995, 1994 and
1993.
<TABLE>
<CAPTION>
1995 1994 1993
------------- ------------- -------------
<S> <C> <C> <C>
Salaries and employee benefits $ 6,210,000 $ 5,711,000 $ 5,238,000
Occupancy and equipment expense 1,830,000 1,754,000 1,567,000
Deposit insurance premiums 301,000 559,000 551,000
Data processing fees 372,000 448,000 290,000
Other expense 3,515,000 3,075,000 2,889,000
------------- ------------- -------------
$12,228,000 $11,547,000 $10,535,000
============= ============= =============
</TABLE>
Salaries and employee benefits increased $499,000, or 8.74% in 1995
over 1994. Salaries increased $297,000; bonuses increased $74,000; and employee
benefits increased $127,000. The increase in employee benefits was attributable
to an increase of $54,000 or 10.82% in retirement benefits as compared to 1994.
Deposit insurance premiums decreased $258,000 or 46.15% in 1995 as a result of
the decrease in assessments by the Federal Insurance Deposit Corporation which
became effective in early 1995. The most significant increase in noninterest-
expense in 1994 as compared to 1993 was an increase of $158,000 or 54.48% in
data processing fees which was attributable to a major data processing
conversion completed in the first quarter of 1994.
Average total assets increased $34,700,000 or 12.92% to $303,190,000
in 1995 as compared to $268,490,000 in 1994. The increase in average total
assets was accompanied by an increase in average deposits of $22,869,000 or
9.52%. Average total assets increased $11,843,000 or 4.61% to $268,490,000 in
1994 as compared to $256,647,000 in 1993 and was accompanied by an increase in
average total deposits of $9,424,000 or 4.08% to $240,177,000 in 1994 from
$230,753,000 in 1993.
Following is a condensed summary of the increase in net income in 1995
as compared to 1994.
<TABLE>
<CAPTION>
Increase
(Decrease)
in Net
1995 1994 Income
------------ ------------ ------------
<S> <C> <C> <C>
Net interest income $16,030,000 $13,500,000 $ 2,530,000
Provision for loan losses 848,000 638,000 (210,000)
Other income 3,276,000 3,025,000 251,000
Other expense 12,228,000 11,547,000 (681,000)
------------ ------------ ------------
Income before income taxes 6,230,000 4,340,000 1,890,000
Applicable income taxes 1,889,000 1,240,000 (649,000)
------------ ------------ ------------
Net income $ 4,341,000 $ 3,100,000 $ 1,241,000
============ ============ =============
</TABLE>
21
<PAGE>
SELECTED STATISTICAL INFORMATION OF ABC BANCORP
The following statistical information should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results of
Operation" and the financial statements and related notes included elsewhere in
this Annual Report and in the documents incorporated herein by reference.
AVERAGE BALANCES AND NET INCOME ANALYSIS
The following tables set forth the amount of the ABC's interest income or
interest expense for each category of interest-earning assets and interest-
bearing liabilities and 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. Federally tax-exempt income is presented on
a taxable-equivalent basis assuming a 34% Federal tax rate.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------------------------------------------
1995 1994 1993
--------------------------------- -------------------------------- ---------------------------------
INTEREST AVERAGE INTEREST AVERAGE INTEREST AVERAGE
AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD/
BALANCE EXPENSE RATE PAID BALANCE EXPENSE RATE PAID BALANCE EXPENSE RATE PAID
----------- ---------- ----------- --------- --------- ----------- --------- --------- -----------
(DOLLARS IN THOUSANDS)
----------------------------------------------------------------------------------------------------
ASSETS
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans, net of unearned
interest $ 205,023 $ 22,647 11.05 % $ 180,682 $ 18,017 9.97 % $ 159,976 $ 16,278 10.18 %
Investment securities:
Taxable 38,781 2,271 5.86 35,099 1,928 5.49 32,851 1,997 6.08
Nontaxable 9,595 835 8.70 10,761 924 8.59 9,265 905 9.77
Federal funds sold 21,029 1,234 5.87 19,327 773 4.00 27,865 825 2.96
---------- ---------- --------- ------------ ---------- -------- ------------ ---------- ----------
Total interest-earning
assets 274,428 26,987 9.83 245,869 21,642 8.80 229,957 20,005 8.70
---------- ---------- ------------ ---------- ------------ ----------
Noninterest-earning assets:
Cash 15,741 16,132 16,035
Allowance for loan losses (4,072) (3,951) (2,950)
Unrealized gain on avail-
able for sale securities 61
Other assets 17,032 10,440 13,605
---------- ------------ ------------
Total noninterest-earning
assets 28,762 22,621 26,690
---------- ------------ ------------
Total assets $ 303,190 $ 268,490 $ 256,647
========== ============ ============
</TABLE>
22
<PAGE>
AVERAGE BALANCES AND NET INCOME ANALYSIS (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------------------------------------------
1995 1994 1993
-------------------------------- -------------------------------- ---------------------------------
INTEREST AVERAGE INTEREST AVERAGE INTEREST AVERAGE
AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD/
BALANCE EXPENSE RATE PAID BALANCE EXPENSE RATE PAID BALANCE EXPENSE RATE PAID
---------- ---------- ----------- --------- --------- ----------- --------- --------- -----------
(DOLLARS IN THOUSANDS)
---------------------------------------------------------------------------------------------------
LIABILITIES AND
STOCKHOLDERS' EQUITY
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest-bearing liabilities:
Savings and interest-bearing
demand deposits $ 81,137 $ 2,484 3.06 % $ 88,482 $ 2,539 2.87 % $ 87,867 $ 2,686 3.06 %
Time deposits 138,036 7,887 5.71 112,730 5,064 4.49 108,288 4,808 4.44
Other short-term borrowings 5,308 302 5.69 2,557 68 2.66 - - -
Debt - - 1,931 157 8.13 3,654 238 6.51
---------- --------- -------- ----------- ---------- -------- ----------- ---------- --------
Total interest-bearing
liabilities 224,481 10,673 4.75 205,700 7,828 3.81 199,809 7,732 3.87
---------- --------- ----------- ---------- ----------- ----------
Noninterest-bearing liabilities
and stockholders' equity:
Demand deposits 43,873 38,965 34,598
Other liabilities 2,533 1,659 2,915
Stockholders' equity 32,303 22,166 19,325
---------- ----------- -----------
Total noninterest-bearing
liabilities and
stockholders' equity 78,709 62,790 56,838
---------- ----------- -----------
Total liabilities and
stockholders' equity $ 303,190 $ 268,490 $ 256,647
========== =========== ===========
Interest rate spread 5.08 % 4.99 % 4.83 %
======== ======== ========
Net interest income $ 16,314 $ 13,814 $ 12,273
========= ========== ==========
Net interest margin 5.94 % 5.62 % 5.34 %
======== ======== ========
</TABLE>
23
<PAGE>
RATE AND VOLUME ANALYSIS
The following table reflects the changes in net interest income
resulting from changes in interest rates and from asset and liability volume.
Federally tax-exempt interest is presented on a taxable-equivalent basis
assuming a 34% Federal tax rate. The change in interest attributable to rate
has been determined by applying the change in rate between years to average
balances outstanding in the later year. The change in interest due to volume
has been determined by applying the rate from the earlier year to the change in
average balances outstanding between years. Thus, changes that are not solely
due to volume have been consistently attributed to rate.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------------
1995 VS. 1994 1994 VS. 1993
---------------------------------- --------------------------------
INCREASE CHANGES DUE TO INCREASE CHANGES DUE TO
--------------------- --------------------
(DECREASE) RATE VOLUME (DECREASE) RATE VOLUME
------------ --------- ----------- ---------- --------- ----------
(DOLLARS IN THOUSANDS)
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in:
Income from earning assets:
Interest and fees on loans $ 4,630 $ 2,203 $ 2,427 $ 1,739 $ (368) $ 2,107
Interest on securities:
Taxable 343 141 202 (69) (206) 137
Nontaxable (89) 11 (100) 19 (127) 146
Interest on Federal funds sold 461 393 68 (52) 201 (253)
----------- --------- --------- ---------- --------- ---------
Total interest income 5,345 2,748 2,597 1,637 (500) 2,137
----------- --------- --------- ---------- --------- ---------
Expense from interest-bearing liabilities:
Interest on savings and interest-
bearing demand deposits (55) 156 (211) (147) (166) 19
Interest on time deposits 2,823 1,686 1,137 256 59 197
Interest on short-term borrowings 234 161 73 68 - 68
Interest on debt (157) - (157) (81) 31 (112)
----------- --------- --------- ---------- --------- ---------
Total interest expense 2,845 2,003 842 96 (76) 172
----------- --------- --------- ---------- --------- ---------
Net interest income $ 2,500 $ 745 $ 1,755 $ 1,541 $ (424) $ 1,965
=========== ========= ========= ========== ========= =========
</TABLE>
24
<PAGE>
ASSET/LIABILITY MANAGEMENT
A principal objective of the ABC's asset/liability management strategy
is to minimize its exposure to changes in interest rates by matching the
maturity and repricing horizons of interest-earning assets and interest-bearing
liabilities. This strategy is overseen in part through the direction of the
Asset and Liability Committee (the "ALCO Committee") of each Bank, which
establishes policies and monitors results to control interest rate sensitivity.
Management's strategy is to maintain a balanced interest rate risk
position to protect its net interest margin from market fluctuations. To this
end, the ALCO Committee of each Bank reviews, on a monthly basis, the maturity
and repricing of assets and liabilities. The Company has adopted a goal of
achieving and maintaining a one-year gap ratio between rate sensitive assets to
rate sensitive liabilities of 80% to 120%. Management believes that the type
and amount of the Company's interest rate-sensitive liabilities (a significant
portion of which are composed of money market, NOW and savings accounts whose
yields, to a certain extent, are subject to the discretion of management) may
reduce the potential impact that a rise in interest rates might have on the
Company's net interest income.
As of December 31, 1995, the Company's cumulative one-year interest
rate sensitivity gap ratio was 128%. This indicates that the Company's
interest-earning assets will reprice during this period at a rate slightly
faster than the Company's interest-bearing liabilities. Certain assumptions
regarding the interest sensitivity of these assets and liabilities have been
incorporated into this analysis. The Company believes that it has positioned
itself to maintain its net interest margin in the event of changes in interest
rates. There can be no assurance, however, that this strategy will be
successful.
25
<PAGE>
The following table sets forth the distribution of the repricing of
ABC's earning assets and interest-bearing liabilities as of December 31, 1995,
the interest rate sensitivity gap (i.e., interest rate sensitive assets less
interest rate sensitive liabilities), the cumulative interest rate sensitivity
gap ratio (i.e., interest rate sensitive assets divided by interest rate
sensitivity liabilities) and the cumulative sensitivity gap ratio. The table
also sets forth the time periods in which earning assets and 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
the Banks' 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.
<TABLE>
<CAPTION>
AT DECEMBER 31, 1995
-------------------------------------------------------------------
MATURING OR REPRICING WITHIN
-------------------------------------------------------------------
ZERO TO THREE ONE
THREE MONTHS TO YEAR TO OVER
MONTHS ONE YEAR FIVE YEARS FIVE YEARS TOTAL
---------- ------------ ------------ ------------ -----------
(DOLLARS IN THOUSANDS)
-------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
EARNING ASSETS:
Federal fund sold $ 41,025 $ - $ - $ - $ 41,025
Investment securities 2,135 10,683 29,355 8,087 50,260
Loans 87,283 20,548 84,858 21,562 214,251
---------- ----------- ----------- ---------- ----------
130,443 31,231 114,213 29,649 305,536
---------- ----------- ----------- ---------- ----------
Interest-bearing liabilities:
Interest-bearing demand deposits (1) - 17,638 54,195 - 71,833
Savings (1) - - 22,318 - 22,318
Certificates less than $100,000 22,344 52,575 35,715 - 110,634
Certificates, $100,000 and over 15,541 15,040 7,192 - 37,773
Other short-term borrowings 3,487 - - - 3,487
---------- ----------- ----------- ---------- ----------
41,372 85,253 119,420 - 246,045
---------- ----------- ----------- ---------- ----------
Interest rate sensitivity gap $ 89,071 $ (54,022) $ (5,207) $ 29,649 $ 59,491
========== =========== =========== ========== ==========
Cumulative interest rate sensitivity gap $ 89,071 $ 35,049 $ 29,842 $ 59,491
========== =========== =========== ==========
Interest rate sensitivity gap ratio 3.15 0.37 0.96 N/A
========== =========== =========== ==========
Cumulative interest rate sensitivity gap ratio 3.15 1.28 1.12 1.24
========== =========== =========== ==========
</TABLE>
(1) The Company has found that NOW checking accounts and savings deposits are
generally not sensitive to changes in interest rates and, therefore, it has
placed such liabilities in the "One to Five Years" category. It has also
found that the money-market checking deposits reprice between three months
to one year, on the average.
26
<PAGE>
INVESTMENT PORTFOLIO
The Company manages the mix of asset and liability maturities in an effort
to control the effects of changes in the general level of interest rates on net
interest income. See "--Asset/Liability Management." Except for its effect on
the general level of interest rates, inflation does not have a material impact
on the Company due to the rate variability and short-term maturities of its
earning assets. In particular, approximately 50% of the loan portfolio is
comprised of loans which mature or reprice within one year or less. Mortgage
loans, primarily with five to fifteen year maturities, are also made on a
variable rate basis with rates being adjusted every one to five years.
Additionally, 25% of the investment portfolio matures within one year.
TYPES OF INVESTMENTS
The amortized cost and fair value of investments in securities at the dates
indicated are summarized as follows:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
----------- ------------ ------------- ------------
(Dollars in Thousands)
-------------------------------------------------------
<S> <C> <C> <C> <C>
SECURITIES AVAILABLE FOR SALE
DECEMBER 31, 1995:
U. S. GOVERNMENT AND AGENCY SECURITIES $ 37,174 $ 285 $ (93) $ 37,366
MORTGAGE-BACKED SECURITIES 2,282 69 (8) 2,343
OTHER SECURITIES 300 - (18) 282
----------- ---------- --------- ------------
$ 39,756 $ 354 $ (119) $ 39,991
=========== ========== ========= ============
December 31, 1994:
U. S. Government and agency securities $ 1,664 $ - $ (14) $ 1,650
Other securities 300 - (40) 260
----------- ---------- --------- ------------
$ 1,964 $ - $ (54) $ 1,910
=========== ========== ========= ============
SECURITIES HELD TO MATURITY
DECEMBER 31, 1995:
STATE AND MUNICIPAL SECURITIES $ 10,269 $ 258 $ (65) $ 10,462
=========== ========== ========= ============
December 31, 1994:
U. S. Government and agency securities $ 32,159 $ 19 $ (1,196) $ 30,982
State and municipal securities 9,819 114 (471) 9,462
Mortgage-backed securities 2,617 22 (59) 2,580
----------- ---------- --------- ------------
$ 44,595 $ 155 $ (1,726) $ 43,024
=========== ========== ========= ============
</TABLE>
27
<PAGE>
MATURITIES
The amounts of investments in securities in each category as of
December 31, 1995 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>
U. S. TREASURY
AND OTHER U.S.
GOVERNMENT AGENCIES STATE AND
AND CORPORATIONS POLITICAL SUBDIVISIONS
YIELD YIELD
AMOUNT (1) AMOUNT (1) (2)
------------ --------- ------------ -----------
(DOLLARS IN THOUSANDS)
-----------------------------------------------------
<S> <C> <C> <C> <C>
Maturity:
One year or less $ 11 ,848 5.75 % $ 727 6.12 %
After one year through five years 28,143 6.22 2,734 6.63
After five years through ten years - - 5,722 7.72
After ten years - - 1,086 8.37
------------- --------- ---------- --------------
$ 39,991 6.08 % $ 10,269 7.39 %
============= ========= ========== ==============
</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 acquisition price of each security in that
range.
(2) Yields on securities of state and political subdivisions are stated on a
taxable-equivalent basis, using a tax rate of 34%.
28
<PAGE>
LOAN PORTFOLIO
TYPES OF LOANS
Management believes that the Company's loan portfolio is adequately
diversified. The loan portfolio contains no foreign or energy-related loans or
significant concentrations in any one industry, with the exception of
agricultural-related loans, which constituted approximately 26% of the Company's
loan portfolio as of December 31, 1995. The amount of loans outstanding at the
indicated dates is shown in the following table according to type of loans.
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------------------------------------------
1995 1994 1993 1992 1991
------------ ------------- --------------- ------------- --------------
(DOLLARS IN THOUSANDS)
-----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Commercial and financial $ 23,733 $ 23,531 $ 20,849 $ 19,650 $ 11,379
Agricultural 15,124 17,079 9,767 10,789 8,109
Real estate - construction 1,836 1,828 3,387 2,130 1,421
Real estate - mortgage, farmland 40,053 34,887 29,489 24,922 14,129
Real estate - mortgage, commercial 41,438 35,242 27,402 22,284 12,506
Real estate -mortgage, residential 52,377 44,064 41,902 43,500 31,343
Consumer instalment loans 38,973 34,213 27,231 25,979 19,007
Other 717 1,280 1,720 1,691 2,754
----------- ----------- ------------ ----------- ------------
214,251 192,124 161,747 150,945 100,648
Less reserve for possible loan losses 4,272 3,757 3,571 4,013 1,257
----------- ----------- ------------ ----------- ------------
Loans, net $ 209,979 $ 188,367 $ 158,176 $ 146,932 $ 99,391
=========== =========== ============ =========== ============
</TABLE>
MATURITIES AND SENSITIVITY TO CHANGES IN INTEREST RATES
Total loans as of December 31, 1995 are shown in the following table
according to maturity or repricing opportunities (1) one year or less, (2) after
one year through five years, and (3) after five years.
<TABLE>
<CAPTION>
(DOLLARS IN
THOUSANDS)
----------
MATURITY OR REPRICING WITHIN:
<S> <C>
One year or less $ 107,831
After one year through five years 84,858
After five years 21,562
------------
$ 214,251
============
</TABLE>
29
<PAGE>
The following table summarizes loans at December 31, 1995 with the due
dates after one year which (1) have predetermined interest rates and (2) have
floating or adjustable interest rates.
<TABLE>
<CAPTION>
(DOLLARS IN
THOUSANDS)
-----------
<S> <C>
Predetermined interest rates $ 106,420
Floating or adjustable interest rates -
------------
$ 106,420
============
</TABLE>
Records were not available to present the above information in each
category listed in the first paragraph above and could not be reconstructed
without undue burden.
NONPERFORMING LOANS
The following table presents, at the dates indicated, the aggregate of
nonperforming loans for the categories indicated.
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------------------------------------
1995 1994 1993 1992 1991
----------- ----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS)
---------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Loans accounted for on a
nonaccrual basis $ 2,259 $ 3,460 $ 3,119 $ 5,605 $ 511
Instalment loans and term loans
contractually past due ninety
days or more as to interest or
principal payments and still
accruing 27 103 316 595 563
Loans, the terms of which have
been renegotiated to provide a
reduction or deferral of interest
or principal because of
deterioration in the financial
position of the borrower - 358 - - -
Loans now current about which
there are serious doubts as to
the ability of the borrower
to comply with present loan
repayment terms - - - - -
</TABLE>
30
<PAGE>
In the opinion of management, any loans classified by regulatory
authorities as doubtful, substandard or special mention that have not been
disclosed above do not (i) represent or result from trends or uncertainties
which management reasonably expects will materially impact future operating
results, liquidity or capital resources, or (ii) 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. Any loans classified by regulatory authorities as loss have
been charged off.
COMMITMENTS AND LINES OF CREDIT
In the ordinary course of business, the Banks have granted commitments
to extend credit to approved customers. Generally, these commitments to extend
credit have been granted on a temporary basis for seasonal or inventory
requirements and have been approved by the Banks' Board of Directors. The Banks
have also granted commitments to approved customers for standby letters of
credit. These commitments are recorded in the financial statements when funds
are disbursed or the financial instruments become payable. The Banks use the
same credit policies for these off balance sheet commitments as they do for
financial instruments that are recorded in the consolidated financial
statements. Commitments generally have fixed expiration dates or other
termination clauses and may require payment of a fee. Since many of the
commitment amounts expire without being drawn upon, the total commitment amounts
do not necessarily represent future cash requirements.
Following is a summary of the commitments outstanding at December 31,
1995 and 1994.
<TABLE>
<CAPTION>
1995 1994
------------- --------------
(DOLLARS IN THOUSANDS)
----------------------------
<S> <C> <C>
Commitments to extend credit $ 36,024 $ 22,344
Credit card commitments 2,883 2,345
Standby letters of credit 905 590
----------- -----------
$ 39,812 $ 25,279
=========== ===========
</TABLE>
31
<PAGE>
SUMMARY OF LOAN LOSS EXPERIENCE
The provision for possible loan losses is created by direct charges to
operations. Losses on loans are charged against the allowance in the period in
which such loans, in management's opinion, become uncollectible. Recoveries
during the period are credited to this allowance. The factors that influence
management's judgment in determining the amount charged to operating expense are
past loan experience, composition of the loan portfolio, evaluation of possible
future losses, current economic conditions and other relevant factors. The
Company's allowance for loan losses was approximately $4,272,000 at December 31,
1995, representing 1.99% of year end total loans outstanding, compared with
$3,757,000 at December 31, 1994, which represented 1.96% of year end total loans
outstanding. The allowance for loan losses is reviewed quarterly based on
management's evaluation of current risk characteristics of the loan portfolio,
as well as the impact of prevailing and expected economic business conditions.
Management considers the allowance for loan losses adequate to cover possible
loan losses on the loans outstanding.
Management has not allocated the Company's allowance for loan losses
to specific categories of loans. Based on management's best estimate,
approximately 10% of the allowance should be allocated to real estate loans, 65%
to commercial, financial and agricultural loans and 25% to consumer/instalment
loans as of December 31, 1995.
The following table presents an analysis of the Company's loan loss
experience for the periods indicated:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------------------------------
1995 1994 1993 1992 1991
----------- ----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS)
----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Average amount of loans outstanding $ 205,023 $ 180,682 $ 159,976 $ 118,313 $ 98,737
========== ========== ========== ========== ==========
Balance of reserve for possible loan losses at
beginning of period $ 3,757 $ 3,571 $ 4,013 $ 1,257 $ 1,046
---------- ---------- ---------- --------- ----------
Charge-offs:
Commercial, financial and agricultural (96) (431) (428) (406) (214)
Real estate (103) (144) (1,851) (698) (200)
Consumer (531) (396) (374) (318) (41)
Recoveries:
Commercial, financial and agricultural 90 74 273 26 44
Real estate 127 265 554 210 166
Consumer 180 180 193 113 5
---------- ---------- ---------- --------- ----------
Net charge-offs (333) (452) (1,633) (1,073) (240)
---------- ---------- ---------- --------- ----------
Additions to reserve charged to operating expenses 848 638 1,191 1,129 451
---------- ---------- ---------- --------- ----------
Allowance for loan losses of acquired subsidiary - - - 2,700 -
---------- ---------- ---------- --------- ----------
Balance of reserve for possible loan losses $ 4,272 $ 3,757 $ 3,571 $ 4,013 $ 1,257
========== ========== ========== ========= ==========
Ratio of net loan charge-offs to average loans 0.16% 0.25% 1.02% 0.91% 0.24%
========== ========== ========== ========= ==========
</TABLE>
32
<PAGE>
DEPOSITS
Average amount of deposits and average rate paid thereon, classified
as to noninterest-bearing demand deposits, interest-bearing demand and savings
deposits and time deposits, for the periods indicated are presented below.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------
1995 1994
-------------------- ---------------------
AMOUNT RATE AMOUNT RATE
----------- -------- ----------- ---------
(DOLLARS IN THOUSANDS)
------------------------------------------
<S> <C> <C> <C> <C>
Noninterest-bearing demand deposits $ 43,873 - % $ 38,965 - %
Interest-bearing demand and savings deposits 81,137 3.06 88,482 2.87
Time deposits 138,036 5.71 112,730 4.49
----------- ----------
Total deposits $ 263,046 $ 240,177
=========== ==========
</TABLE>
The amounts of time certificates of deposit issued in amounts of
$100,000 or more as of December 31, 1995, are shown below by category, which is
based on time remaining until maturity of (1) three months or less, (2) over
three through twelve months and (3) over twelve months.
<TABLE>
<CAPTION>
(DOLLARS IN
THOUSANDS)
----------
<S> <C>
Three months or less $ 15,541
Over three through twelve months 15,040
Over twelve months 7,192
-----------
Total $ 37,773
===========
</TABLE>
33
<PAGE>
RETURN ON ASSETS AND SHAREHOLDERS' EQUITY
The following rate of return information for the periods indicated is
presented below.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
Return on assets (1) 1.43 % 1.15 % 1.03 %
Return on equity (2) 13.44 13.99 13.65
Dividends payout ratio (3) 27.13 28.57 25.96
Equity to assets ratio (4) 10.65 8.26 7.53
</TABLE>
(1) Net income divided by average total assets.
(2) Net income divided by average equity.
(3) Dividends declared per share divided by net income per share.
(4) Average equity divided by average total assets.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following consolidated financial statements of the Company and its
subsidiaries are included on pages F-1 through F-30 of this Annual Report on
Form 10-K:
Consolidated Balance Sheets - December 31, 1995 and 1994
Consolidated Statements of Income - Years ended December 31, 1995, 1994 and
1993
Consolidated Statements of Stockholders' Equity - Years ended December 31,
1995, 1994 and 1993
Consolidated Statements of Cash Flows - Years ended December 31, 1995, 1994
and 1993
Notes to Consolidated Financial Statements.
34
<PAGE>
ITEM 9. DISAGREEMENT ON ACCOUNTING AND FINANCIAL DISCLOSURE
During 1995 the Company did not change its accountants and there was
no disagreement on any matter of accounting principles or practices for
financial statement disclosure that would have required the filing of a current
report on Form 8-K.
35
<PAGE>
PART III
ITEM 10. DIRECTORS. EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS,
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
The information required by this Item is incorporated by reference to
the Company's definitive Proxy Statement to be filed with the Securities and
Exchange Commission pursuant to Regulation 14A within 120 days after the end of
the fiscal year covered by this Annual Report ("ABC's Proxy Statement").
Information concerning the Company's executive officers is included in
Item 1 of Part I of this Annual Report.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item is incorporated by reference to
ABC's Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item is incorporated by reference to
ABC's Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item is incorporated by reference to
ABC's Proxy Statement.
36
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
Item 13(a) 1., 2. and 3.
(a) The following documents are filed as part of this report:
1. Financial statements:
(a) ABC Bancorp and Subsidiaries:
(i) Consolidated Balance Sheets - December 31, 1995 and
1994
(ii) Consolidated Statements of Income - Years ended
December 31, 1995 1994 and 1993
(iii) Consolidated Statements of Stockholders' Equity - Years
ended December 31, 1995 1994 and 1993
(iv) Consolidated Statements of Cash Flows - Years ended
December 31, 1995 1994 and 1993
(v) Notes to Consolidated Financial Statements
(b) ABC Bancorp (Parent Company Only):
Parent Company only financial information has been included
in Note 12 of Notes to Consolidated financial statements.
2. Financial statement schedules:
All schedules are omitted as the required information is
inapplicable or the information is presented in the financial
statements or related notes.
37
<PAGE>
3. Exhibits required by Item 601 of Regulation S-B:
Exhibit
No. Description
------ -----------------
3.1 Articles of Incorporation, as amended (filed as
Exhibit 2.1 to the Registrant's Regulation A
Offering Statement on Form 1-A (File No. 24A-
2630), filed with the Commission on August 14,
1987 and incorporated herein by reference).
3.2 By-laws of the Registrant, as amended (filed as
Exhibit 2.2 to the Registrant's Regulation A
Offering Statement on Form 1-A (File No. 24A-
2630), filed with the Commission on August 14,
1987 and incorporated herein by reference).
10.1 * 1985 Incentive Stock Option Plan (filed as Exhibit
5.1 to the Registrant's Regulation A Offering
Statement on Form 1-A (File No. 24A-2630), filed
with the Commission on August 14, 1987 and
incorporated herein by reference).
10.2 * Incentive Stock Option Agreement with Kenneth J.
Hunnicutt dated October 17, 1985 (filed as Exhibit
5.2 to the Registrant's Regulation A Offering
Statement on Form 1-A (File No. 24A-2630), filed
with the Commission on August 14, 1987 and
incorporated herein by reference).
10.3 * Deferred Compensation Agreement for Kenneth J.
Hunnicutt dated December 16, 1986 (filed as
Exhibit 5.3 to the Registrant's Regulation A
Offering Statement on Form 1-A (File No. 24A-
2630), filed with the Commission on August 14,
1987 and incorporated herein by reference).
10.4 Security Deed in favor of M.I.A., Co. dated
December 31, 1984 (filed as Exhibit 5.4 to the
Registrant's Regulation A Offering Statement on
Form 1-A (File No. 24A-2630), filed with the
Commission on August 14, 1987 and incorporated
herein by reference).
10.5 Loan Agreement and Master Term Note dated December
30, 1986 (filed as Exhibit 5.5 to the Registrant's
Regulation A Offering Statement on Form 1-A (File
No. 24A-2630), filed with the Commission on August
14, 1987 and incorporated herein by reference).
38
<PAGE>
Exhibit
No Description
------- ------------------
10.6 * Executive Salary Continuation Agreement dated
February 14, 1984 (filed as Exhibit 10.6 to the
Registrant's Annual Report on Form 10-K (File
Number 2-71257), filed with the Commission on
March 27, 1989 and incorporated herein by
reference).
10.7 * 1992 Incentive Stock Option Plan and Option
Agreement for K. J. Hunnicutt (filed as Exhibit
10.7 to the Registrant's Annual Report on Form 10-
K (File Number 0-16181), filed with the Commission
on March 30, 1993 and incorporated herein by
reference).
10.8 * Executive Employment Agreement with Kenneth J.
Hunnicutt dated September 20, 1994 (filed as
Exhibit 10.8 to the Registrant's Annual Report on
Form 10-K (File Number 0-16181), filed with the
Commission on March 30, 1995 and incorporated
herein by reference).
10.9.* Executive Consulting Agreement with Eugene M.
Vereen dated September 20, 1994 (filed as Exhibit
10.9 to the Registrant's Annual Report on Form 10-
K (File Number 0-16181), filed with the Commission
on March 30, 1995 and incorporated herein by
reference).
10.10 Agreement and Plan of Merger by and between the
Company and Southland Bancorporation dated as of
December 18, 1995.
10.11 Agreement and Plan of Merger by and between the
Company and Central Bankshares, Inc. dated as of
December 29, 1995.
22.1 Subsidiaries of the Company (filed as Exhibit 22.1
to the Registrant's Annual Report on Form 10-K
(File Number 0-16181), filed with the Commission
on March 30, 1993 and incorporated herein by
reference).
25.1 Power of Attorney relating to this Form 10-K is
set forth on the signature pages to this Form
10-K.
* Identifies management contracts, compensatory plans or other
remunerative arrangements with the Registrant's executive officers.
(b) The Registrant did not file any reports on Form 8-K during the last
quarter of the period covered by this report.
39
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
ABC BANCORP
Date: March 19, 1996 By: /s/ Kenneth J. Hunnicutt
-------------- -------------------------------------------------
Kenneth J. Hunnicutt, President, Chief Executive
Officer and Director
Date: March 19, 1996 By: /s/ W. Edwin Lane, Jr.
-------------- -------------------------------------------------
W. Edwin Lane, Jr., Executive Vice President
and Chief Financial Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Kenneth J. Hunnicutt as his attorney-in-fact,
acting will full power of substitution for him in his name, place and stead, in
any and all capacities, to sign any amendments to this Form 10-K and to file the
same, with exhibits thereto, and any other documents in connection therewith,
with the Securities and Exchange Commission and hereby ratifies and confirms all
that said attorney-in-fact, or his substitute or substitutes, may do or cause to
be done by virtue thereof.
Pursuant to the requirements of the Exchange Act, this Form 10-K has been
signed by the following persons in the capacities and on the dates indicated.
Date: March 19, 1996 /s/ Kenneth J. Hunnicutt
-------------- -----------------------------------------------------
Kenneth J. Hunnicutt, President, Chief Executive
Officer and Director
Date: March 19, 1996 /s/ W. Edwin Lane, Jr.
-------------- -----------------------------------------------------
W. Edwin Lane, Jr., Executive Vice President and
Chief Financial Officer
Date: March 19, 1996 /s/ J. Raymond Fulp
-------------- -----------------------------------------------------
J. Raymond Fulp, Director
Date: March 19, 1996 /s/ Willard E. Lasseter
-------------- -----------------------------------------------------
Willard E. Lasseter, Director and Chairman of the
Board
40
<PAGE>
March 19, 1996 /s/ Bobby B. Lindsey
Date:______________ ________________________________________________________
Bobby B. Lindsey, Director
Date:______________ ________________________________________________________
Hal L. Lynch, Director
March 19, 1996 /s/ Joseph C. Parker
Date:______________ ________________________________________________________
Joseph C. Parker, Director
March 19, 1996 /s/ Eugene M. Vereen
Date:______________ ________________________________________________________
Eugene M. Vereen, Jr., Director
March 19, 1996 /s/ Doyle Weltzbarker
Date:______________ ________________________________________________________
Doyle Weltzbarker, Director and Vice Chairman of the
Board
Date:______________ ________________________________________________________
Henry Wortman, Director
41
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
No. Description
- ------- -----------
<S> <C>
3.1 Articles of Incorporation, as amended (filed as Exhibit 2.1 to the
Registrant's Regulation A Offering Statement on Form 1-A (File No.
24A-2630), filed with the Commission on August 14, 1987 and
incorporated herein by reference).
3.1.1 Articles of Amendment to Articles of Incorporation.
3.2 By-laws of the Registrant, as amended (filed as Exhibit 2.2 to the
Registrant's Regulation A Offering Statement on Form 1-A (File No.
24A-2630), filed with the Commission on August 14, 1987 and
incorporated herein by reference).
10.1 1985 Incentive Stock Option Plan (filed as Exhibit 5.1 to the
Registrant's Regulation A Offering Statement on Form 1-A (File No.
24A-2630), filed with the Commission on August 14, 1987 and
incorporated herein by reference).
10.2 Incentive Stock Option Agreement with Kenneth J. Hunnicutt dated
October 17, 1985 (filed as Exhibit 5.2 to the Registrant's Regulation
A Offering Statement on Form 1-A (File No. 24A-2630), filed with the
Commission on August 14, 1987 and incorporated herein by reference).
10.3 Deferred Compensation Agreement for Kenneth J. Hunnicutt dated
December 16, 1986 (filed as Exhibit 5.3 to the Registrant's Regulation
A Offering Statement on Form 1-A (File No. 24A-2630), filed with the
Commission on August 14, 1987 and incorporated herein by reference).
10.3 Security Deed in favor of M.I.A., Co. dated December 31, 1984 (filed
as Exhibit 5.4 to the Registrant's Regulation A Offering Statement on
Form 1-A (File No. 24A-2630), filed with the Commission on August 14,
1987 and incorporated herein by reference).
10.5 Loan Agreement and Master Term Note dated December 30, 1986 (filed as
Exhibit 5.5 to the Registrant's Regulation A Offering Statement on
Form 1-A (File No. 24A-2630), filed with the Commission on August 14,
1987 and incorporated herein by reference).
10.6 Executive Salary Continuation Agreement dated February 14, 1984 (filed
as Exhibit 10.6 to the Annual Report on Form 10-K (File Number
2-71257), filed herewith with the Commission on March 27, 1989 and
incorporated herein by reference).
</TABLE>
42
<PAGE>
<TABLE>
<CAPTION>
Exhibit
No. Description
- ------- -----------
<S> <C>
10.7 1992 Incentive Stock Option Plan and Option Agreement for K. J.
Hunnicutt (filed as Exhibit 10.7 to the Registrant's Annual Report on
Form 10-K (File Number 0-16181), filed with the Commission on March
30, 1993 and incorporated herein by reference.)
10.8 Executive Employment Agreement with Kenneth J. Hunnicutt dated
September 20, 1994 (filed as Exhibit 10.8 to the Registrant's Annual
Report on Form 10-K (File Number 0-16181), filed with the Commission
on March 30, 1995 and incorporated herein by reference).
10.9 Executive Consulting Agreement with Eugene M. Vereen dated September
20, 1994. (filed as Exhibit 10.9 to the Registrant's Annual Report on
Form 10-K (File Number 0-16181), filed with the Commission on March
30, 1995 and incorporated herein by reference).
10.10 Agreement and Plan of Merger by and between the Company and Southland
Bancorporation dated as of December 18, 1995.
10.11 Agreement and Plan of Merger by and between the Company and Central
Bankshares, Inc. dated as of December 29, 1995.
22.1 Subsidiaries of the Company (filed as Exhibit 22.1 to the Registrant's
Annual Report on Form 10-K (File Number 0-16181, filed with the
Commission on March 30, 1993 and incorporated herein by reference).
25.1 Power of Attorney relating to this Form 10-K is set forth on the
signature pages to this Form 10-K.
27 Financial Data Schedule.
</TABLE>
43
<PAGE>
ABC BANCORP
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
Consolidated financial statements:
Independent Auditor's Report
Consolidated Balance Sheets - December 31, 1995 and 1994
Consolidated Statements of Income - Years ended December 31, 1995 1994 and
1993
Consolidated Statements of Stockholders' Equity - Years ended December 31,
1995, 1994 and 1993
Consolidated Statements of Cash Flows - Years ended December 31, 1995, 1994
and 1993
Notes to Consolidated Financial Statements
All schedules are omitted as the required information is inapplicable or the
information is presented in the financial statements or related notes.
F-1
<PAGE>
INDEPENDENT AUDITOR'S REPORT
- --------------------------------------------------------------------------------
TO THE BOARD OF DIRECTORS
ABC BANCORP
MOULTRIE, GEORGIA
We have audited the accompanying consolidated balance sheets of ABC
BANCORP AND SUBSIDIARIES as of December 31, 1995 and 1994, and the related
consolidated statements of income, stockholders' equity and cash flows for each
of the three years in the period ended December 31, 1995. These financial
statements are the responsibility of the Company'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 consolidated financial statements referred to
above present fairly, in all material respects, the financial position of ABC
Bancorp and Subsidiaries as of December 31, 1995 and 1994, and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1995, in conformity with generally accepted accounting
principles.
As discussed in Note 1 to the consolidated financial statements,
effective January 1, 1993, the Company changed its method of accounting for
income taxes.
/s/ Mauldin & Jenkins
Albany, Georgia
January 24, 1996
F-2
<PAGE>
ABC BANCORP AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
(Dollars in Thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSETS 1995 1994
- ------ ---------- ----------
<S> <C> <C>
Cash and due from banks $ 23,612 $ 20,089
Federal funds sold 41,025 21,902
Securities available for sale, at fair value (Note 2) 39,991 1,910
Securities held to maturity, at cost (fair value $10,462
and $43,024) (Note 2) 10,269 44,595
Loans (Note 3) 214,251 192,124
Less allowance for loan losses 4,272 3,757
---------- ----------
Loans, net 209,979 188,367
---------- ----------
Premises and equipment, net (Note 4) 6,942 7,171
Other assets 9,687 8,765
---------- ----------
$ 341,505 $ 292,799
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Deposits
Noninterest-bearing demand $ 58,430 $ 48,450
Interest-bearing demand 71,833 63,262
Savings 22,318 23,644
Time, $100,000 and over 37,773 27,291
Other time 110,634 94,222
---------- ----------
Total deposits 300,988 256,869
Securities sold under repurchase agreements 1,887 2,338
Other short-term borrowings 1,600 -
Other liabilities 3,095 3,142
---------- ----------
Total liabilities 307,570 262,349
---------- ----------
COMMITMENTS AND CONTINGENT LIABILITIES (Note 8)
STOCKHOLDERS' EQUITY (Note 10)
Common stock, par value $1; 10,000,000 shares authorized,
3,597,074 and 2,697,987 shares issued, respectively 3,597 2,698
Capital surplus 16,826 17,728
Retained earnings 14,918 11,753
Unrealized gains (losses) on securities available for sale,
net of taxes 149 (49)
---------- ----------
35,490 32,130
Less cost of shares acquired for the treasury,
217,882 and 183,412 shares, respectively (1,555) (1,680)
---------- ----------
Total stockholders' equity 33,935 30,450
---------- ----------
$ 341,505 $ 292,799
========== ==========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-3
<PAGE>
ABC BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(DOLLARS IN THOUSANDS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans $ 22,647 $ 18,017 $ 16,278
Interest on taxable securities 2,271 1,863 1,892
Interest on nontaxable securities 551 610 597
Interest on deposits in other banks - 65 105
Interest on Federal funds sold 1,234 773 825
---------- ---------- ----------
26,703 21,328 19,697
---------- ---------- ----------
INTEREST EXPENSE
Interest on deposits 10,371 7,603 7,476
Interest on securities sold under repurchase agreements 77 68 18
Interest on other borrowings 225 157 238
---------- ---------- ----------
10,673 7,828 7,732
---------- ---------- ----------
Net interest income 16,030 13,500 11,965
PROVISION FOR LOAN LOSSES (Note 3) 848 638 1,191
---------- ---------- ----------
Net interest income after provision for loan losses 15,182 12,862 10,774
---------- ---------- ----------
OTHER INCOME
Service charges on deposit accounts 2,595 2,456 2,299
Other service charges, commissions and fees 301 224 230
Other 380 345 338
---------- ---------- ----------
3,276 3,025 2,867
---------- ---------- ----------
OTHER EXPENSES
Salaries and employee benefits (Note 5) 6,210 5,711 5,238
Equipment expense 1,074 1,091 723
Occupancy expense 756 663 844
Amortization of intangible assets 268 268 279
Data processing fees 372 448 290
Directors fees 314 291 270
FDIC premiums 301 559 551
Other operating expenses (Note 6) 2,933 2,516 2,340
---------- ---------- ----------
12,228 11,547 10,535
---------- ---------- ----------
</TABLE>
F-4
<PAGE>
ABC BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(DOLLARS IN THOUSANDS)
================================================================================
<TABLE>
<CAPTION>
1995 1994 1993
------------ ----------- -----------
<S> <C> <C> <C>
Income before income taxes and cumulative
effect of accounting change $ 6,230 $ 4,340 $ 3,106
APPLICABLE INCOME TAXES (Note 7) 1,889 1,240 814
------------ ----------- -----------
Income before cumulative effect of
accounting change 4,341 3,100 2,292
CUMULATIVE EFFECT OF CHANGE IN METHOD OF ACCOUNTING
FOR INCOME TAXES - - 346
------------ ----------- -----------
Net income $ 4,341 $ 3,100 $ 2,638
============ =========== ===========
INCOME PER COMMON SHARE:
Income before cumulative effect of accounting change $ 1.29 $ 1.05 $ 0.91
Cumulative effect of accounting change - - 0.13
------------ ----------- -----------
Net income (Note 1) $ 1.29 $ 1.05 $ 1.04
============ =========== ===========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-5
<PAGE>
ABC BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(DOLLARS IN THOUSANDS)
================================================================================
<TABLE>
<CAPTION>
COMMON STOCK CAPITAL RETAINED
------------------------
SHARES PAR VALUE SURPLUS EARNINGS
---------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1992 1,950,487 $ 1,950 $ 10,152 $ 7,571
Net income - - - 2,638
Cash dividends paid, $.29 per share - - - (672)
Purchase of 143,024 shares of treasury stock - - - -
---------- ------------ ------------ ------------
BALANCE, DECEMBER 31, 1993 1,950,487 1,950 10,152 9,537
Net income - - - 3,100
Cash dividends declared, $.29 per share - - - (884)
Proceeds from sale of stock, net of stock
offering expense 747,500 748 7,576 -
Net change in unrealized losses on
securities available for sale, net of taxes - - - -
---------- ------------ ------------ ------------
BALANCE, DECEMBER 31, 1994 2,697,987 2,698 17,728 11,753
Net income - - - 4,341
Cash dividends declared, $.35 per share - - - (1,176)
Four-for-three common stock split 899,087 899 (899) -
Purchase of fractional shares - - (3) -
Stock issued under stock option purchase plan - - - -
Net change in unrealized gains on
securities available for sale, net of taxes - - - -
---------- ------------ ------------ ------------
BALANCE, DECEMBER 31, 1995 3,597,074 $ 3,597 $ 16,826 $ 14,918
========== ============ ============ ============
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<TABLE>
<CAPTION>
UNREALIZED
GAINS (LOSSES)
ON SECURITIES
AVAILABLE
FOR SALE, TREASURY STOCK
---------------------------
NET OF TAXES SHARES COST TOTAL
- -------------- ------------ ------------- ------------
<S> <C> <C> <C>
$ - 40,388 $ (268) $ 19,405
- - - 2,638
- - - (672)
- 143,024 (1,412) (1,412)
- -------------- ------------ ------------- -----------
- 183,412 (1,680) 19,959
- - - 3,100
- - - (884)
- - - 8,324
(49) - - (49)
- -------------- ------------ ------------- -----------
(49) 183,412 (1,680) 30,450
- - - 4,341
- - - (1,176)
- 61,137 - -
- - - (3)
- (26,667) 125 125
198 - - 198
- -------------- ------------ ------------- -----------
$ 149 217,882 $ (1,555) $ 33,935
============== ============ ============= ===========
</TABLE>
F-6
<PAGE>
ABC BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(DOLLARS IN THOUSANDS)
================================================================================
<TABLE>
<CAPTION>
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 4,341 $ 3,100 $ 2,638
---------- ---------- ----------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 936 809 638
Amortization of intangible assets 268 268 279
Provision for loan losses 848 638 1,191
Provision for deferred taxes (160) (22) (170)
Write-downs of other real estate owned - 53 -
(Increase) decrease in interest receivable (775) (804) 100
Increase (decrease) in interest payable 190 104 (90)
Increase (decrease) in taxes payable (29) 184 76
Other prepaids, deferrals and accruals, net (653) 798 (178)
---------- ---------- ----------
Total adjustments 625 2,028 1,846
---------- ---------- ----------
Net cash provided by operating activities 4,966 5,128 4,484
---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Decrease in interest-bearing deposits in banks - 1,257 100
Purchases of securities available for sale (21,690) (1,664) -
Purchases of securities held to maturity (1,654) (7,524) (24,502)
Proceeds from maturities of securities available for sale 4,086 - -
Proceeds from maturities of securities held to maturity 15,778 8,531 13,587
(Increase) decrease in Federal funds sold (19,123) 9,673 9,565
Increase in loans, net (22,460) (30,829) (12,435)
Purchase of premises and equipment (717) (2,303) (382)
Proceeds from the sale of premises and equipment 24 22 26
---------- ---------- ----------
Net cash used in investing activities (45,756) (22,837) (14,041)
---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in deposits 44,119 18,644 3,755
Increase (decrease) in repurchase agreements (451) (842) 3,117
Proceeds from other borrowings 1,600 - 1,412
Repayment of long-term debt - (4,677) (15)
Dividends paid (1,077) (645) (672)
Proceeds from stock offering, net - 8,324 -
Proceeds from exercise of stock options 125 - -
Purchase of fractional shares (3) - -
Purchase of shares of stock for the treasury - - (1,412)
---------- ---------- ----------
Net cash provided by financing activities 44,313 20,804 6,185
---------- ---------- ----------
</TABLE>
F-7
<PAGE>
ABC BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(DOLLARS IN THOUSANDS)
================================================================================
<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Net increase (decrease) in cash and due from banks $ 3,523 $ 3,095 $ (3,372)
Cash and due from banks at beginning of year 20,089 16,994 20,366
----------- ----------- -----------
Cash and due from banks at end of year $ 23,612 $ 20,089 $ 16,994
=========== =========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION
Cash paid during the year for:
Interest $ 10,483 $ 7,724 $ 7,822
Income taxes $ 2,078 $ 1,078 $ 562
NONCASH TRANSACTIONS
Net change in unrealized gains (losses)
on securities available for sale $ 289 $ (54) $ -
Property transferred from premises and equipment
to other real estate owned $ - $ 103 $ -
Dividends declared $ 338 $ 239 $ -
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-8
<PAGE>
ABC BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF FINANCIAL STATEMENT PRESENTATION
ABC Bancorp, headquartered in Moultrie, Georgia, is the holding
company (the "Company") for five community banks ("the Banks")
located in the south Georgia cities of Moultrie, Quitman, Tifton,
Cairo and Thomasville. The Banks operate 11 banking offices and two
drive-through facilities within ABC Bancorp's market area. Through
its Banks, ABC Bancorp operates a full service banking business and
offers a broad range of retail and commercial banking services to
its customers. The Company and the Banks are subject to the
regulations of certain Federal and state agencies and are
periodically examined by those regulatory agencies.
The accounting and reporting policies of the Company conform to
generally accepted accounting principles and general practices
within the financial services industry. In preparing the financial
statements, management is required to make estimates and assumptions
that affect the reported amounts of assets and liabilities as of the
date of the balance sheet and revenues and expenses for the period.
Actual results could differ from those estimates.
The principles which significantly affect the determination of
financial position, results of operations and cash flows are
summarized below.
CASH AND CASH EQUIVALENTS
For purposes of reporting cash flows, cash and due from banks
includes cash on hand and amounts due from banks (including cash
items in process of clearing). Cash flows from loans originated by
the Banks, deposits, interest-bearing deposits and Federal funds
purchased and sold are reported net.
The Company maintains amounts due from banks which, at times, may
exceed Federally insured limits. The Company has not experienced any
losses in such accounts.
F-9
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
SECURITIES AVAILABLE FOR SALE
Securities classified as available for sale are those debt
securities that the Company intends to hold for an indefinite period
of time, but not necessarily to maturity. Any decision to sell a
security classified as available for sale would be based on various
factors, including significant movements in interest rates, changes
in the maturity mix of the Company's assets and liabilities,
liquidity needs, regulatory capital considerations and other similar
factors. Securities available for sale are carried at fair value.
Unrealized gains or losses are reported as increases or decreases in
stockholders' equity, net of the related deferred tax effect.
Realized gains or losses, determined on the basis of the cost of
specific securities sold, are included in earnings.
SECURITIES HELD TO MATURITY
Securities classified as held to maturity are those debt securities
the Company has both the intent and ability to hold to maturity
regardless of changes in market conditions, liquidity needs or
changes in general economic conditions. These securities are carried
at cost adjusted for amortization of premium and accretion of
discount, computed by the interest method over their contractual
lives. The sale of a security within three months of its maturity
date or after collection of at least 85 percent of the principal
outstanding at the time the security was acquired is considered a
maturity for purposes of classification and disclosure.
A decline in the fair value below cost of any available for sale or
held to maturity security that is deemed other than temporary is
charged to earnings resulting in the establishment of a new cost basis
for the security.
F-10
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
LOANS AND INTEREST INCOME
Loans are stated at principal amounts outstanding less unearned
income and the allowance for loan losses. Interest income on loans
is credited to income based on the principal amount outstanding at
the respective rate of interest except for add-on interest on
certain instalment loans for which interest is recognized on the
sum-of-the-months method.
Accrual of interest income is discontinued on loans when, in the
opinion of management, collection of such interest income becomes
doubtful. When a loan is placed on nonaccrual status, all interest
previously accrued but not collected is reversed against current
interest income. Accrual of interest on such loans is resumed when,
in management's judgment, the collection of interest and principal
becomes probable.
Fees on loans and costs incurred in origination of loans are
recognized at the time the loan is placed on the books. Because loan
fees are not significant and the majority of loans have maturities
of one year or less, the results on operations are not materially
different than the results which would be obtained by accounting for
loan fees and costs in accordance with generally accepted accounting
principles.
The allowance for loan losses is established through a provision for
loan losses charged to expense. Loans are charged against the
allowance for loan losses when management believes that
collectibility of the principal is unlikely. The allowance is an
amount that management believes will be adequate to absorb estimated
losses on existing loans that may become uncollectible, based on
evaluation of the collectibility of loans and prior loss experience.
This evaluation also takes into consideration such factors as
changes in the nature and volume of the loan portfolio, overall
portfolio quality, review of specific problem loans and current
economic conditions that may affect the borrower's ability to pay.
Certain estimates are susceptible to change in the near term. Such
estimates include the creditworthiness of significant borrowers and
the collateral value of delinquent loans. While management uses the
best information available to make its evaluation, future
adjustments to the allowance may be necessary if there are
significant changes in economic conditions. In addition, regulatory
agencies, as an integral part of their examination process,
periodically review the Company's allowance for loan losses, and may
require the Company to record additions to the allowance based on
their judgment about information available to them at the time of
their examinations.
F-11
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
LOANS AND INTEREST INCOME (CONTINUED)
Impaired loans are measured based on the present value of expected
future cash flows discounted at the loan's effective interest rate
or, as a practical expedient, at the loan's observable market price
or the fair value of the collateral if the loan is collateral
dependent. A loan is impaired when it is probable the creditor will
be unable to collect all contractual principal and interest payments
due in accordance with the terms of the loan agreement. Accrual of
interest on an impaired loan is discontinued when management
believes, after considering collection efforts and other factors,
that the borrower's financial condition is such that collection of
interest is doubtful. Cash collections on impaired loans are
credited to the loans receivable balance, and no interest income is
recognized on those loans until the principal balance has been
collected.
PREMISES AND EQUIPMENT
Premises and equipment are stated at cost less accumulated
depreciation. Depreciation is computed principally by the straight-
line method over the following estimated useful lives:
<TABLE>
<CAPTION> Years
---------
<S> <C>
Buildings and improvements 15-40
Furniture and equipment 5-7
</TABLE>
OTHER REAL ESTATE OWNED
Other real estate owned (OREO) represents properties acquired
through foreclosure or other proceedings. OREO is held for sale and
is recorded at the lower of the recorded amount of the loan or fair
value of the properties less estimated costs of disposal. Any write-
down to fair value at the time of transfer to OREO is charged to the
allowance for loan losses. Property is evaluated regularly to ensure
the recorded amount is supported by its current fair value and
valuation allowances to reduce the carrying amount to fair value
less estimated costs to dispose are recorded as necessary.
Subsequent decreases in fair value and increases in fair value, up
to the value established at foreclosure, are recognized as charges
or credits to noninterest expense. OREO is reported net of allowance
for losses in the Company's financial statements.
F-12
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INTANGIBLE ASSETS
Intangible assets, arising from excess of purchase price over net
assets acquired of purchased banks, are being amortized on the
straight-line method over various periods not exceeding 25 years.
INCOME TAXES
The Company and its subsidiaries file a consolidated income tax
return. Each subsidiary provides for income taxes based on its
contribution to income taxes (benefits) of the consolidated group.
As of January 1, 1993, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 109, "Accounting for Income
Taxes". SFAS No. 109 requires a balance sheet approach to accounting
for income taxes and requires that deferred tax assets and
liabilities be adjusted in the period of enactment for the effect of
an enacted change in tax laws or rates. The adoption of SFAS No. 109
resulted in an income tax benefit of $345,937, which has been
included in the consolidated statement of income for the year ended
December 31, 1993 as a cumulative effect.
Deferred taxes are provided on a liability method whereby deferred
tax assets are recognized for deductible temporary differences and
operating loss and tax credit carryforwards and deferred tax
liabilities are recognized for taxable temporary differences.
Temporary differences are the differences between the reported
amounts of assets and liabilities and their tax bases. Deferred tax
assets are reduced by a valuation allowance when, in the opinion of
management, it is more likely than not that some portion or all of
the deferred tax assets will not be realized. Deferred tax assets
and liabilities are adjusted for the effect of changes in tax laws
on the date of enactment.
F-13
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
FAIR VALUE OF FINANCIAL INSTRUMENTS
Financial Accounting Standards Board Statement No. 107, "Disclosures
About Fair Value of Financial Instruments," requires disclosure of
fair value information about financial instruments, whether or not
recognized in the balance sheet, for which it is practicable to
estimate that value. In cases where quoted market prices are not
available, fair values are based on estimates using present value or
other valuation techniques. Those techniques are significantly
affected by the assumptions used, including the discount rate 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. Statement No. 107 excludes certain
financial instruments from its disclosure requirements. Accordingly,
the aggregate fair value amounts presented do not represent the
underlying value of the Company.
The following methods and assumptions were used by the Company in
estimating the fair value of its financial instruments:
Carrying amounts approximate fair values for the following
instruments:
Cash and due from banks
Federal funds sold
Securities available for sale
Variable rate loans that reprice frequently
Credit card loans and equity line loans
Variable rate money market accounts
Variable rate certificates of deposit
Short-term borrowing
Accrued interest receivable
Accrued interest payable
F-14
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
Quoted market prices, where available, or if not available, based on
quoted market prices of comparable instruments for securities held
to maturity.
Discounted cash flows using interest rates currently being offered
on instruments with similar terms and with similar credit quality:
All loans except variable rate loans described above
Fixed rate certificates of deposit
Commitments to extend credit and standby letters of credit are not
recorded until such commitments are funded. The value of these
commitments are the fees charged to enter into such agreements.
These commitments do not represent a significant value to the
Company until such commitments are funded. The Company has
determined that such instruments do not have a distinguishable fair
value and no fair value has been assigned to these instruments.
EARNINGS PER SHARE
Earnings per share are calculated on the basis of the weighted
average number of shares outstanding. All per share data for prior
years have been adjusted to reflect the four-for-three stock split
effected in the form of a stock dividend to shareholders of record
as of July 17, 1995.
F-15
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
NOTE 2. INVESTMENTS IN SECURITIES
Effective January 1, 1994, the Bank adopted Financial Accounting
Standards Board Statement No. 115 "Accounting for Certain Investments
in Debt and Equity Securities." Upon adoption, the Company transferred
$300,005 of marketable equity securities from securities held to
maturity to securities available for sale. The securities available
for sale were marked to fair value resulting in a net unrealized loss
of $11,986 which was included in stockholders' equity at $11,986.
Under special provisions adopted by the Financial Accounting Standards
Board in October 1995, the Company transferred $20,188,243 from
securities held to maturity to securities available for sale on
December 31, 1995, resulting in a net unrealized gain of $94,743 which
was included in stockholders' equity at $62,531 net of related taxes
of $32,212.
The amortized cost and approximate fair values of investments in
securities at December 31, 1995 and 1994 were as follows:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS)
-------------------------------------------------
<S> <C> <C> <C> <C>
SECURITIES AVAILABLE FOR SALE
DECEMBER 31, 1995:
U. S. GOVERNMENT AND AGENCY SECURITIES $ 37,174 $ 285 $ (93) $ 37,366
MORTGAGE-BACKED SECURITIES 2,282 69 (8) 2,343
OTHER SECURITIES 300 - (18) 282
---------- ---------- ---------- ----------
$ 39,756 $ 354 $ (119) $ 39,991
========== ========== ========== ==========
December 31, 1994:
U. S. Government and agency securities $ 1,664 $ - $ (14) $ 1,650
Other securities 300 - (40) 260
---------- ---------- ---------- ----------
$ 1,964 $ - $ (54) $ 1,910
========== ========== ========== ==========
SECURITIES HELD TO MATURITY
DECEMBER 31, 1995:
STATE AND MUNICIPAL SECURITIES $ 10,269 $ 258 $ (65) $ 10,462
========== ========== ========== ==========
December 31, 1994:
U. S. Government and agency securities $ 32,159 $ 19 $ (1,196) $ 30,982
State and municipal securities 9,819 114 (471) 9,462
Mortgage-backed securities 2,617 22 (59) 2,580
---------- ---------- ---------- ----------
$ 44,595 $ 155 $ (1,726) $ 43,024
========== ========== ========== ==========
</TABLE>
F-16
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
NOTE 2. INVESTMENTS IN SECURITIES (CONTINUED)
There were no sales of securities during 1995, 1994 or 1993.
The amortized cost and fair value of securities as of December 31,
1995 by contractual maturity are shown below. Maturities may differ
from contractual maturities in mortgage-backed securities because the
mortgages underlying the securities may be called or repaid without
any penalties. Therefore, these securities are not included in the
maturity categories in the following maturity summary.
<TABLE>
<CAPTION>
SECURITIES AVAILABLE FOR SALE SECURITIES HELD TO MATURITY
----------------------------- ---------------------------
AMORTIZED FAIR AMORTIZED FAIR
COST VALUE COST VALUE
---------- ----------- ---------- ----------
(DOLLARS IN THOUSANDS)
------------------------------------------------------------
<S> <C> <C> <C> <C>
Due in one year or less $ 11,541 $ 11,566 $ 727 $ 724
Due from one year to five years 25,633 25,800 2,734 2,748
Due from five to ten years - - 5,722 5,891
Due after ten years - - 1,086 1,099
Mortgage-backed securities 2,282 2,343 - -
Marketable equity securities 300 282 - -
---------- ----------- ---------- ----------
$ 39,756 $ 39,991 $ 10,269 $ 10,462
========== =========== ========== ==========
</TABLE>
Securities with a carrying value of $33,837,773 and $28,616,565 at December
31, 1995 and 1994, respectively, were pledged to secure public deposits and for
other purposes.
F-17
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
NOTE 3. LOANS AND ALLOWANCE FOR LOAN LOSSES
The composition of loans is summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------
1995 1994
----------- ------------
(DOLLARS IN THOUSANDS)
--------------------------------
<S> <C> <C>
Commercial and financial $ 23,733 $ 23,531
Agricultural 15,124 17,079
Real estate - construction 1,836 1,828
Real estate - mortgage, farmland 40,053 34,887
Real estate - mortgage, commercial 41,438 35,242
Real estate - mortgage, residential 52,377 44,064
Consumer instalment loans 38,976 34,220
Other 717 1,280
----------- ------------
214,254 192,131
Unearned discount (3) (777)
Allowance for loan losses (4,272) (3,757)
----------- ------------
$ 209,979 $ 188,367
=========== ============
</TABLE>
At December 31, 1995, executive officers and directors, and companies in
which they have a 10 percent or more beneficial ownership, were indebted to the
Company in the aggregate amount of $7,792,000. 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.
Following is a summary of transactions:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1995 1994
----------- -----------
(DOLLARS IN THOUSANDS)
---------------------------
<S> <C> <C>
BALANCE, BEGINNING OF YEAR $ 7,234 $ 8,506
Advances 5,030 4,670
Repayments (4,715) (4,890)
Transactions due to changes in directors 243 (1,052)
----------- -----------
BALANCE, END OF YEAR $ 7,792 $ 7,234
=========== ===========
</TABLE>
F-18
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
NOTE 3. LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
Changes in the allowance for loan losses are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1995 1994
----------- -----------
(DOLLARS IN THOUSANDS)
---------------------------
<S> <C> <C>
BALANCE, BEGINNING OF YEAR $ 3,757 $ 3,571
Provision charged to operations 848 638
Loans charged off (730) (971)
Recoveries 397 519
----------- -----------
BALANCE, END OF YEAR $ 4,272 $ 3,757
=========== ===========
</TABLE>
Information with respect to impaired loans as of and for the year
ended December 31, 1995 is as follows:
<TABLE>
<CAPTION>
(DOLLARS IN
THOUSANDS)
----------
<S> <C>
Loans receivable for which there is a related allowance for
credit losses $ 1,006
Loans receivable for which there is no related allowance for
credit losses 1,253
----------
Total impaired loans $ 2,259
==========
Allowance provided for impaired loans included in the
allowance for loan losses $ 163
==========
Average balance $ 3,089
==========
Interest income recognized $ 161
==========
</TABLE>
F-19
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
NOTE 3. LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
Loans on which the accrual of interest had been discontinued or
reduced amounted to $3,817,699 at December 31, 1994. The reduction in
interest income associated with nonaccrual and renegotiated loans for
1994 and 1993 is as follows. For 1995, nonaccrual loans have been
included in the impaired loan information above.
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1994 1993
----------- -----------
(DOLLARS IN THOUSANDS)
---------------------------
<S> <C> <C>
Income in accordance with original loan terms $ 324 $ 201
Income recognized 37 9
----------- -----------
$ 287 $ 192
=========== ===========
</TABLE>
NOTE 4. PREMISES AND EQUIPMENT, NET
Major classifications of these assets are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1995 1994
----------- -----------
(DOLLARS IN THOUSANDS)
---------------------------
<S> <C> <C>
Land $ 1,563 $ 1,564
Buildings 5,446 5,271
Equipment 5,936 6,223
Construction in progress 182 -
----------- -----------
13,127 13,058
Accumulated depreciation (6,185) (5,887)
----------- -----------
$ 6,942 $ 7,171
=========== ===========
</TABLE>
Depreciation expense for the years ended December 31, 1995, 1994 and
1993 was $886,320, $738,562 and $462,368, respectively.
F-20
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
NOTE 5. EMPLOYEE BENEFIT PLANS
The Company and all subsidiaries have adopted simplified employee
pension plans for substantially all employees. These plans are SEP-IRA
defined contribution plans. Contributions to these plans charged to
expense during 1995, 1994 and 1993 amounted to $540,766, $499,254 and
$484,870, respectively.
NOTE 6. DEFERRED COMPENSATION PLANS
The Company and two subsidiary Banks have entered into separate
deferred compensation arrangements with certain executive officers and
directors. The plans call for certain amounts payable at retirement,
death or disability. The estimated present value of the deferred
compensation is being accrued over the remaining expected term of
active employment. The Company and Banks have purchased life insurance
policies which they intend to use to finance this liability. Aggregate
compensation expense under the plans were $54,724, $81,295 and $83,459
for 1995, 1994 and 1993, respectively, and is included in other
operating expenses.
NOTE 7. INCOME TAXES
The total income taxes in the consolidated statements of income are as
follows:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------
1995 1994 1993
------------ ------------ ------------
(DOLLARS IN THOUSANDS)
----------------------------------------
<S> <C> <C> <C>
Current $ 2,049 $ 1,262 $ 638
Deferred (160) (22) 176
------------ ------------ ------------
$ 1,889 $ 1,240 $ 814
============ ============ ============
</TABLE>
F-21
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
NOTE 7. INCOME TAXES (CONTINUED)
The Company's provision for income taxes 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>
DECEMBER 31,
-------------------------------------------------------
1995 1994 1993
-------------------------------------------------------
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
-------- -------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)
-------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Tax provision at statutory rate $ 2,118 34 % $ 1,475 34 % $ 1,056 34 %
Increase (decrease) resulting from:
Tax-exempt interest (216) (3) (246) (6) (274) (9)
Amortization of excess
cost over assets acquired 32 - 37 1 49 2
Changes in valuation allowance
for deferred taxes (72) (1) (50) (1) - -
Other 27 - 24 1 (17) (1)
-------- -------- -------- -------- -------- --------
Provision for income taxes $ 1,889 30 % $ 1,240 29 % $ 814 26 %
======== ======== ======== ======== ======== ========
</TABLE>
Net deferred income tax assets of $486,260 and $411,710 at December
31, 1995 and 1994, respectively, are included in other assets. The
components of deferred income taxes are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1995 1994
----------- ----------
(DOLLARS IN THOUSANDS)
--------------------------
<S> <C> <C>
DEFERRED TAX ASSETS:
Loan loss reserves $ 836 $ 640
Deferred compensation 148 138
Other real estate - 18
Other 34 68
Net operating loss tax carryforward 285 310
Less valuation allowance (228) (300)
----------- ----------
1,075 874
----------- ----------
DEFERRED TAX LIABILITIES:
Deprecation and amortization (253) (179)
Amortization of intangible assets (250) (283)
Unrealized gain on securities available for sale (86) -
----------- ----------
(589) (462)
----------- ----------
Net deferred tax assets $ 486 $ 412
=========== ==========
</TABLE>
F-22
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
NOTE 8. COMMITMENTS AND CONTINGENT LIABILITIES
In the normal course of business, the Company 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 Company'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. The Company uses the same
credit and collateral policies for these off-balance-sheet financial
instruments as it does for on-balance-sheet financial instruments. A
summary of the Company's commitments is as follows:
<TABLE>
<CAPTION>
December 31,
--------------------------
1995 1994
---------- ----------
(Dollars in Thousands)
--------------------------
<S> <C> <C>
Commitments to extend credit $ 36,024 $ 22,344
Credit card commitments 2,883 2,345
Standby letters of credit 905 590
---------- ----------
$ 39,812 $ 25,279
========== ==========
</TABLE>
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 Company evaluates each customer's
creditworthiness on a case-by-case basis. The amount of collateral
obtained, if deemed necessary by the Company 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, crops, livestock, inventory,
equipment and personal property.
F-23
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
NOTE 8. COMMITMENTS AND CONTINGENT LIABILITIES (CONTINUED)
Credit card commitments are unsecured.
Standby letters of credit are conditional commitments issued by the
Company 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 loan
facilities to customers. Collateral held varies as specified above and
is required in instances which the Company deems necessary.
In the normal course of business, the Company is involved in various
legal proceedings. In the opinion of management and counsel for the
Company, any liability resulting from such proceedings would not have
a material adverse effect on the Company's financial statements.
NOTE 9. CONCENTRATIONS OF CREDIT
The Banks make agricultural, agribusiness, commercial, residential and
consumer loans to customers primarily in the twelve county area
surrounding Moultrie in south central Georgia.
A substantial portion of the Company's customers' abilities to honor
their contracts is dependent on the business economy in the
geographical area served by the Banks.
Although the Company's loan portfolio is diversified, there is a
relationship in this region between the agricultural economy and the
economic performance of loans made to nonagricultural customers. The
Company's lending policies for agricultural and nonagricultural
customers require loans to be well-collateralized and supported by
cash flows. Collateral for agricultural loans include equipment,
crops, livestock and land. Credit losses from loans related to the
agricultural economy is taken into consideration by management in
determining the allowance for loan losses.
A substantial portion of the Company's loans are secured by real
estate in the Company's primary market area. In addition, a
substantial portion of the real estate owned is located in those same
markets. Accordingly, the ultimate collectibility of a substantial
portion of the Company's loan portfolio and the recovery of a
substantial portion of the carrying amount of real estate owned are
susceptible to changes in market conditions in the Company's primary
market area.
F-24
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
NOTE 9. CONCENTRATIONS OF CREDIT (CONTINUED)
The Company has a concentration of funds on deposit at its primary
correspondent bank at December 31, 1995, as follows:
<TABLE>
<S> <C>
Noninterest-bearing accounts $15,448,169
Federal funds sold 25,550,000
-----------
$40,998,169
===========
</TABLE>
NOTE 10. STOCKHOLDERS' EQUITY
The primary source of funds available to the Parent Company is the
payment of dividends by the subsidiary Banks. Banking regulations
limit the amount of dividends that may be paid without prior approval
of the Banks' regulatory agency. Approximately $2,381,100 are
available to be paid as dividends by the Bank subsidiaries at December
31, 1995.
Banking regulations also require the Company to maintain minimum
capital levels in relation to Company assets. At December 31, 1995,
the Company's capital ratios were considered adequate based on
regulatory minimum capital requirements. The minimum capital
requirements and the actual capital ratios for the Company at December
31, 1995 are as follows:
<TABLE>
<CAPTION>
Regulatory
Actual Requirement
----------- -----------
<S> <C> <C>
Leverage capital ratio 10.37 % 4.00 %
Risk based capital ratios:
Core capital 15.23 4.00
Total capital 16.49 8.00
</TABLE>
F-25
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
NOTE 11. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying value and estimated fair value of the Company's financial
instruments are as follows:
<TABLE>
<CAPTION>
December 31,
------------------------------------------------------
1995 1994
-------------------------- --------------------------
Carrying Fair Carrying Fair
Value Value Value Value
------------ ------------ ------------ ------------
(Dollars in Thousands)
------------------------------------------------------
<S> <C> <C> <C> <C>
FINANCIAL ASSETS:
Cash and short-term investments $ 64,637 $ 64,637 $ 41,991 $ 41,991
============ ============ ============ ============
Investments in securities $ 50,260 $ 50,453 $ 46,505 $ 44,934
============ ============ ============ ============
Loans $ 214,251 $ 205,845 $ 192,124 $ 185,314
Allowance for loan losses (4,272) - (3,757) -
------------ ------------ ------------ ------------
Loans, net $ 209,979 $ 205,845 $ 188,367 $ 185,314
============ ============ ============ ============
FINANCIAL LIABILITIES:
Noninterest-bearing demand $ 58,430 $ 58,430 $ 48,450 $ 48,450
Interest-bearing demand 71,833 71,833 63,262 63,262
Savings 22,318 22,318 23,644 23,644
Time deposits 148,407 150,186 121,513 121,595
------------ ------------ ------------ ------------
Total deposits $ 300,988 $ 302,767 $ 256,869 $ 256,951
============ ============ ============ ============
Short-term borrowings $ 3,487 $ 3,487 $ 2,338 $ 2,338
============ ============ ============ ============
</TABLE>
F-26
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
NOTE 12. CONDENSED FINANCIAL INFORMATION OF ABC BANCORP (PARENT COMPANY ONLY)
CONDENSED BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
(Dollars in Thousands)
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
ASSETS
Cash $ 1,027 $ 1,307
Interest-bearing deposits in banks 2,060 1,500
Investment in subsidiaries 27,607 24,461
Other assets 3,856 3,838
----------- -----------
Total assets $ 34,550 $ 31,106
=========== ===========
LIABILITIES
Other liabilities $ 615 $ 656
----------- -----------
Total liabilities 615 656
----------- -----------
STOCKHOLDERS' EQUITY 33,935 30,450
----------- -----------
Total liabilities and stockholders' equity $ 34,550 $ 31,106
=========== ===========
</TABLE>
F-27
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
NOTE 12. CONDENSED FINANCIAL INFORMATION OF ABC BANCORP (PARENT COMPANY ONLY)
(Continued)
CONDENSED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(Dollars in Thousands)
<TABLE>
<CAPTION>
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
INCOME
Dividends from subsidiaries $ 1,815 $ 1,170 $ 1,150
Interest 106 84 11
Fee and rental income 2,757 2,427 1,950
Other income 25 94 32
---------- ---------- ----------
Total income 4,703 3,775 3,143
---------- ---------- ----------
EXPENSE
Interest - 111 193
Amortization and depreciation 423 436 423
Other expense 2,944 2,644 1,926
---------- ---------- ----------
Total expense 3,367 3,191 2,542
---------- ---------- ----------
Income before income taxes (benefits)
and equity in undistributed earnings
of subsidiaries 1,336 584 601
INCOME TAXES (BENEFITS) (58) (55) 147
---------- ---------- ----------
Income before equity in undistributed
earnings of subsidiaries 1,394 639 454
EQUITY IN UNDISTRIBUTED EARNINGS
OF SUBSIDIARIES 2,947 2,461 2,184
---------- ---------- ----------
Net income $ 4,341 $ 3,100 $ 2,638
========== ========== ==========
</TABLE>
F-28
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
NOTE 12. CONDENSED FINANCIAL INFORMATION OF ABC BANCORP (PARENT COMPANY ONLY)
(Continued)
CONDENSED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(Dollars in Thousands)
<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES
Net income $ 4,341 $ 3,100 $ 2,638
----------- ----------- -----------
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 155 168 144
Amortization of intangible assets 268 268 279
Undistributed earnings of subsidiaries (2,947) (2,461) (2,184)
Increase in interest receivable (9) (6) -
Increase (decrease) in taxes payable (180) 30 19
Provision for deferred taxes 14 5 204
(Increase) decrease in due from
subsidiaries (55) 45 (49)
Other prepaids, deferrals and accruals, net (88) 50 (56)
----------- ----------- -----------
Total adjustments (2,842) (1,901) (1,643)
----------- ----------- -----------
Net cash provided by operating
activities 1,499 1,199 995
----------- ----------- -----------
CASH FLOWS FROM INVESTING
ACTIVITIES
Increase in interest-bearing deposits in banks (560) (1,500) -
Purchases of premises and equipment (281) (243) (22)
Proceeds from sale of premises 17 - -
Contribution of capital to subsidiary bank - (1,500) -
----------- ----------- -----------
Net cash used in investing activities (824) (3,243) (22)
----------- ----------- -----------
</TABLE>
F-29
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
NOTE 12. CONDENSED FINANCIAL INFORMATION OF ABC BANCORP (PARENT COMPANY ONLY)
(Continued)
CONDENSED STATEMENTS OF CAS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(Dollars in Thousands)
<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from long-term debt $ - $ - $ 1,412
Repayment of long-term debt - (4,677) (15)
Proceeds from sale of stock, net of
stock offering expense - 8,324 -
Proceeds from exercise of stock options 125 - -
Purchase of treasury stock - - (1,412)
Purchase of fractional shares (3) - -
Dividends paid (1,077) (645) (672)
----------- ----------- -----------
Net cash provided by (used in)
financing activities (955) 3,002 (687)
----------- ----------- -----------
Net increase (decrease) in cash (280) 958 286
Cash at beginning of year 1,307 349 63
----------- ----------- -----------
Cash at end of year $ 1,027 $ 1,307 $ 349
=========== =========== ===========
SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION
Cash paid during the year for interest $ - $ 111 $ 193
</TABLE>
F-30
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
NOTE 13. PENDING ACQUISITIONS
The Company has entered into a definitive merger agreement with
Southland Bancorporation, Dothan, Alabama pursuant to which it would
acquire all of the outstanding stock of Southland Bancorporation in
exchange for a combination of cash and the Company's common stock. The
total merger consideration will approximate $11.4 million. Total
assets of Southland Bancorporation at December 31, 1995 were
approximately $101 million. The merger is subject to approval by
Southland Bancorporation shareholders and certain regulatory
authorities and the registration of the Company's common stock to be
issued in connection with the merger. As a result of the merger,
Southland Bank, a wholly-owned subsidiary of Southland Bancorporation,
will become a wholly-owned subsidiary of the Company. The merger will
be accounted for as a purchase transaction.
The Company has also entered into a definitive merger agreement with
Central Bankshares, Inc., Cordele, Georgia whereby it would acquire
all of the outstanding common stock of Central Bankshares, Inc. in
exchange for the Company's common stock. The total merger
consideration will approximate $8.3 million. Total assets of Central
Bankshares at December 31, 1995 were approximately $51 million. The
merger is subject to approval by Central Bankshares, Inc. shareholders
and certain regulatory authorities and the registration of the
Company's common stock to be issued in connection with the merger. As
a result of the merger, Central Bank & Trust, a wholly-owned
subsidiary of Central Bankshares, Inc., will become a wholly-owned
subsidiary of the Company. The merger will be accounted for as a
pooling of interests.
F-31
<PAGE>
EXHIBIT 3.1.1
ARTICLES OF AMENDMENT
OF THE ARTICLES OF INCORPORATION
OF ABC BANCORP
Pursuant to the provisions of Section 14-2-1006 of the Georgia Business
Corporation Code, as amended (the "Code"), the undersigned, on behalf of ABC
Bancorp (the "Corporation"), hereby submits the following information:
1. The name of the Corporation is ABC Bancorp.
2. Pursuant to Section 14-2-1003 of the Code, the following
amendment to the Articles of Incorporation of the Corporation was duly adopted
by the Board of Directors on March 21, 1995 and by the Shareholders on April 18,
1995. Effective as of the date hereof, the Articles of Incorporation of the
Corporation are hereby amended by deleting Article V thereof in its entirety and
adding the following Article V thereto:
V.
The maximum amount of shares of stock that this corporation
shall be authorized to issue shall be 15,000,000 shares which
are to be divided into two classes as follows:
10,000,000 shares of Common Stock,
par value $1.00 per share; and
5,000,000 shares of Preferred Stock.
The Common Stock may be created and issued from time to time in
one or more series with voting rights for each series as
determined by the Board of Directors of the corporation and set
forth in the resolution or resolutions providing for the
creation and issuance of the stock in such series. The Preferred
Stock may be created and issued from time to time in one or more
series with such designations, preferences, limitations,
conversion rights, cumulative, relative, participating, optional
or other rights, including voting rights, qualifications,
limitations or restrictions thereof as determined by the Board
of Directors of the corporation and set forth in the resolution
or restrictions providing for the creation and issuance of the
stock in such series.
3. All other provisions of the Articles of Incorporation of the
Corporation shall remain in full force and effect.
EXECUTED this 26th day of May, 1995.
ABC BANCORP
By: /s/ Kenneth J. Hunnicutt
----------------------------
Kenneth J. Hunnicutt
Chief Executive Officer and
President
ATTEST:
/s/ Sara R. Hall
- -------------------
Sara R. Hall
Secretary
<PAGE>
EXHIBIT 10.10
AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
ABC BANCORP
AND
SOUTHLAND BANCORPORATION
AS OF DECEMBER 18, 1995
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
PREAMBLE.................................................................... 1
ARTICLE 1 TERMS OF MERGER.............................................. 1
1.1 Merger........................................................... 1
1.2 Time and Place of Closing........................................ 2
1.3 Effective Time................................................... 2
ARTICLE 2 ARTICLES, BYLAWS, MANAGEMENT................................. 2
2.1 Articles of Incorporation........................................ 2
2.2 Bylaws........................................................... 2
2.3 Directors and Officers........................................... 2
ARTICLE 3 MANNER OF CONVERTING AND EXCHANGING SHARES................... 2
3.1 Conversion of Shares............................................. 2
3.2 Exchange of Shares............................................... 6
3.3 Anti-Dilution Provisions......................................... 6
3.4 Shares Held by TARGET or PURCHASER............................... 6
3.5 TARGET Bank...................................................... 6
3.6 Rights of Former TARGET Shareholders............................. 7
3.7 Options.......................................................... 7
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF TARGET..................... 7
4.1 Organization, Standing and Power................................. 7
4.2 Authority; No Breach............................................. 8
4.3 Capital Stock.................................................... 8
4.4 TARGET Subsidiaries.............................................. 9
4.5 Financial Statements............................................. 9
4.6 Absence of Undisclosed Liabilities.............................. 10
4.7 Absence of Certain Changes or Events............................ 10
4.8 Tax Matters..................................................... 10
4.9 TARGET Allowance for Possible Loan Losses....................... 11
4.10 Assets.......................................................... 11
4.11 Environmental Matters........................................... 12
4.12 Compliance with Laws............................................ 13
4.13 Labor Relations................................................. 13
4.14 Employee Benefit Plans.......................................... 14
4.15 Material Contracts.............................................. 15
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
4.16 Legal Proceedings............................................... 16
4.17 Reports......................................................... 16
4.18 Statements True and Correct..................................... 16
4.19 Accounting, Tax and Regulatory Matters.......................... 17
4.20 Charter Provisions.............................................. 17
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF PURCHASER................. 17
5.1 Organization, Standing and Power................................ 17
5.2 Authority; No Breach............................................ 17
5.3 Capital Stock................................................... 18
5.4 PURCHASER Subsidiaries.......................................... 19
5.5 Financial Statements............................................ 19
5.6 Absence of Undisclosed Liabilities.............................. 20
5.7 Absence of Certain Changes or Events............................ 20
5.8 Tax Matters..................................................... 20
5.9 PURCHASER Allowance for Possible Loan Losses.................... 21
5.10 Assets.......................................................... 21
5.11 Environmental Matters........................................... 22
5.12 Compliance with Laws............................................ 23
5.13 Labor Relations................................................. 23
5.14 Employee Benefit Plans.......................................... 23
5.15 Legal Proceedings............................................... 25
5.16 Reports......................................................... 25
5.17 Statements True and Correct..................................... 26
5.18 Accounting, Tax and Regulatory Matters.......................... 26
5.19 Charter Provisions.............................................. 26
ARTICLE 6 CONDUCT OF BUSINESS PENDING CONSUMMATION.................... 27
6.1 Affirmative Covenants of TARGET................................. 27
6.2 Negative Covenants of TARGET.................................... 27
6.3 Covenants of PURCHASER.......................................... 29
6.4 Adverse Changes in Condition.................................... 29
6.5 Reports......................................................... 29
ARTICLE 7 ADDITIONAL AGREEMENTS....................................... 29
7.1 Registration Statement; Proxy Statement; Shareholder Approval... 29
7.2 Listing......................................................... 30
7.3 Applications.................................................... 30
7.4 Filings with State Offices...................................... 30
7.5 Agreement as to Efforts to Consummate........................... 30
7.6 Investigation and Confidentiality............................... 30
7.7 Press Releases.................................................. 31
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
7.8 No Solicitation................................................. 31
7.9 Tax Treatment................................................... 33
7.10 Agreement of Affiliates......................................... 33
7.11 Employee Benefits and Contracts................................. 33
7.12 Large Deposits.................................................. 34
7.13 Indemnification Against Certain Liabilities..................... 34
7.14 Registration Rights and Election Agreement...................... 34
7.15 Irrevocable Proxies............................................. 34
7.16 Reserve for Snead Annuity....................................... 34
ARTICLE 8 CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE........... 35
8.1 Conditions to Obligations of Each Party......................... 35
8.2 Conditions to Obligations of PURCHASER.......................... 36
8.3 Conditions to Obligations of TARGET............................. 37
ARTICLE 9 TERMINATION................................................. 38
9.1 Termination..................................................... 38
9.2 Effect of Termination........................................... 39
ARTICLE 10 MISCELLANEOUS............................................... 39
10.1 Definitions..................................................... 39
10.2 Expenses........................................................ 47
10.3 Brokers and Finders............................................. 47
10.4 Entire Agreement................................................ 47
10.5 Amendments...................................................... 47
10.6 Waivers......................................................... 48
10.7 Assignment...................................................... 48
10.8 Notices......................................................... 48
10.9 Governing Law................................................... 49
10.10 Counterparts.................................................... 49
10.11 Captions........................................................ 49
10.12 Enforcement of Agreement........................................ 49
10.13 Severability.................................................... 49
10.14 Survival........................................................ 50
</TABLE>
iii
<PAGE>
LIST OF EXHIBITS
<TABLE>
<CAPTION>
Exhibit Number Description
- -------------- -----------
<S> <C>
1. Form of agreement of affiliates of Southland Bancorporation
((S) 7.10).
2. Matters as to which Balch & Bingham will opine ((S) 8.2(d)).
3. Registration Rights and Election Agreement ((S) 7.14).
4. Employment Agreement between PURCHASER and John E. Meyer,
Jr. ((S) 8.2(f)).
5. Matters as to which Rogers & Hardin will opine ((S) 8.3(d)).
6. Irrevocable Proxy ((S) 7.15).
</TABLE>
iv
<PAGE>
AGREEMENT AND PLAN OF MERGER
----------------------------
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement") is made and entered
into as of December 18, 1995, by and between SOUTHLAND BANCORPORATION
("TARGET"), a corporation organized and existing under the laws of the State of
Alabama, with its principal office located in Dothan, Alabama, and ABC BANCORP
("PURCHASER"), a corporation organized and existing under the laws of the State
of Georgia, with its principal office located in Moultrie, Georgia.
PREAMBLE
--------
Certain terms used in this Agreement are defined in Section 10.1 hereof.
The Boards of Directors of TARGET and PURCHASER are of the opinion that the
transactions described herein are in the best interests of the parties and their
respective shareholders. This Agreement provides for the combination of TARGET
with PURCHASER pursuant to the merger of TARGET with and into PURCHASER, as a
result of which the outstanding shares of the capital stock of TARGET shall be
converted into the right to receive the consideration provided for herein, and
the shareholders of TARGET (other than those shareholders, if any, who exchange
their shares solely for cash) shall become shareholders of PURCHASER. The
transactions described in this Agreement are subject to the approvals of the
shareholders of TARGET, the Board of Governors of the Federal Reserve System,
the Alabama Banking Department and the Georgia Department of Banking and Finance
and the satisfaction of certain other conditions described in this Agreement.
It is the intention of the parties to this Agreement that the Merger for federal
income tax purposes shall qualify as a "reorganization" within the meaning of
Section 368(a) of the Internal Revenue Code.
Following the Closing of the Merger, Southland Bank, a wholly-owned Alabama
state bank subsidiary of TARGET, will be operated as a separate subsidiary of
PURCHASER.
NOW, THEREFORE, in consideration of the above and the mutual warranties,
representations, covenants and agreements set forth herein, the parties agree as
follows:
ARTICLE 1
TERMS OF MERGER
---------------
1.1 MERGER. Subject to the terms and conditions of this Agreement, at
------
the Effective Time, TARGET shall be merged with and into PURCHASER in accordance
with the provisions of Section 14-2-1101 of the GBCC and Section 10-2B-11.05 of
the ABCA and with the effect provided in Section 14-2-1106 of the GBCC (the
"Merger"). PURCHASER shall be the Surviving Corporation resulting from the
Merger. The Merger shall be consummated pursuant to the terms of this
Agreement, which has been approved and adopted by the respective Boards of
Directors of TARGET and PURCHASER.
<PAGE>
1.2 TIME AND PLACE OF CLOSING. The Closing shall take place at 10:00
-------------------------
a.m. on the date that the Effective Time occurs or at such other time as the
Parties, acting through their chief executive officers or chief financial
officers, may mutually agree (the "Closing Date"). The place of Closing shall
be at the offices of Rogers & Hardin, Atlanta, Georgia, or such other place as
may be mutually agreed upon by the Parties.
1.3 EFFECTIVE TIME. The Merger and other transactions contemplated by
--------------
this Agreement shall become effective on the date and at the time the Articles
of Merger reflecting the Merger shall become effective with the Secretary of
State of the State of Georgia and the Secretary of State of the State of Alabama
in accordance with the relevant provisions of the GBCC and the ABCA,
respectively. (the "Effective Time"). Subject to the terms and conditions
hereof, unless otherwise mutually agreed upon in writing by the chief executive
officers of each Party, the Parties shall use their reasonable efforts to cause
the Effective Time to occur on (a) the last business day of the month in which
occurs the last to occur of (i) the effective date (including expiration of any
applicable waiting period) of the last required Consent of any Regulatory
Authority having authority over and approving or exempting the Merger and (ii)
the date on which the shareholders of TARGET approve this Agreement to the
extent such approval is required by applicable Law; or (b) such later date as
may be mutually agreed upon in writing by the chief executive officers or chief
financial officers of each Party.
ARTICLE 2
ARTICLES, BYLAWS, MANAGEMENT
----------------------------
2.1 ARTICLES OF INCORPORATION. The Articles of Incorporation of
-------------------------
PURCHASER in effect immediately prior to the Effective Time shall be the
Articles of Incorporation of the Surviving Corporation until otherwise amended
or repealed.
2.2 BYLAWS. The Bylaws of PURCHASER in effect immediately prior to the
------
Effective Time shall be the Bylaws of the Surviving Corporation until otherwise
amended or repealed.
2.3 DIRECTORS AND OFFICERS. The directors of PURCHASER in office
----------------------
immediately prior to the Effective Time shall serve as the directors of the
Surviving Corporation from and after the Effective Time in accordance with the
Bylaws of the Surviving Corporation. The officers of PURCHASER in office
immediately prior to the Effective Time, together with such additional persons
as may thereafter be elected, shall serve as the officers of PURCHASER from and
after the Effective Time in accordance with the Bylaws of PURCHASER.
ARTICLE 3
MANNER OF CONVERTING AND EXCHANGING SHARES
------------------------------------------
3.1 CONVERSION OF SHARES. Subject to the provisions of this Article 3,
--------------------
at the Effective Time, by virtue of the Merger and without any action on the
part of the holders thereof, the shares of PURCHASER and TARGET shall be
converted as follows:
2
<PAGE>
(a) Each share of PURCHASER Common Stock issued and outstanding
immediately prior to the Effective Time shall remain issued and outstanding from
and after the Effective Time.
(b) Subject to the remaining provisions of this Section 3.1, each
share of TARGET Common Stock (including any shares currently subject to options
which are exercised prior to the Effective Time, if any) outstanding immediately
prior to the Effective Time, other than shares with respect to which statutory
dissenters' rights have been perfected (the "Dissenting Shares") and shares held
by TARGET or any of TARGET Subsidiaries or by PURCHASER or any of PURCHASER
Subsidiaries, in each case other than in a fiduciary capacity or as a result of
debts previously contracted (the "Outstanding TARGET Shares"), shall
automatically be converted at the Effective Time into the right to receive cash
and whole shares of PURCHASER Common Stock, plus cash in lieu of fractional
shares pursuant to subparagraph (j) below, if applicable, in an amount equal to
(i) 1.8 multiplied by the Book Value of TARGET as of the close of business on
the day immediately preceding the Closing Date (the "Valuation Date"), divided
(ii) by the aggregate number of Outstanding TARGET Shares (the "Merger
Consideration"). In accordance with the provisions of this Section 3.1 each
TARGET shareholder who does not dissent may elect to receive (i) cash in an
amount equal to the Merger Consideration times the number of Outstanding TARGET
Shares such shareholder holds as of the Effective Time (the "Cash
Consideration"), (ii) the number of shares, or such fractions of a share
(subject to paragraph (j) below), of PURCHASER Common Stock which shall be equal
to the Merger Consideration divided by the Base Period Trading Price (the
"Exchange Ratio"), multiplied by the number of outstanding TARGET Shares such
shareholder holds as of the Effective Time (the "Stock Consideration"), or (iii)
a combination of Cash Consideration and Stock Consideration.
(c) The number of shares of TARGET Common Stock (including
fractional shares) to be converted into the right to receive Cash Consideration
(or cash pursuant to Section 3.1(j) hereof) shall not be less than 35% of the
number of the Outstanding TARGET Shares (the "Minimum Cash Election Number")
and, together with any shares of TARGET Common Stock as to which dissenters'
rights have been perfected as contemplated by Section 3.1(l) hereof, shall not
be greater than 49% of the Outstanding TARGET Shares (the "Maximum Cash Election
Number"). The number of shares of TARGET Common Stock to be converted into the
right to receive Stock Consideration shall be not less than 51% of the number of
Outstanding TARGET Shares (the "Minimum Stock Election Number") and not greater
than 65% of the number of Outstanding TARGET Shares (the "Maximum Stock Election
Number").
(d) Subject to the proration and election procedures set forth in
this Section 3.1, each TARGET shareholder will be entitled to elect to receive
in exchange for his or her Outstanding TARGET Shares the applicable amount of
Merger Consideration in the form of (a) Cash Consideration for all such shares
(a "Cash Election"), (b) Stock Consideration for all such shares (a "Stock
Election"), or (c) Cash Consideration and Stock Consideration for such shares in
the relative proportions specified by such TARGET shareholder (a "Combination
Election"). All such elections shall be made on a form designed for that purpose
(a "Form of Election"). TARGET shareholders who hold such shares as nominees,
trustees or in other representative capacities (a "Representative") may submit
multiple Forms of Election, provided that such Representative certifies that
each such
3
<PAGE>
Form of Election covers all the shares of TARGET Common Stock held by each such
Representative for a particular beneficial owner.
(e) PURCHASER and TARGET shall each use its best efforts to mail
the Form of Election to all Persons who are holders of TARGET Common Stock on
the record date fixed for the Shareholders' Meeting (the "Record Date"). A Form
of Election must be received by the Exchange Agent no later than by the close of
business five (5) days prior to the Effective Date (the "Election Deadline") in
order to be effective. All elections shall be irrevocable.
(f) Prior to the Effective Time, PURCHASER shall select a bank or
trust company reasonably acceptable to TARGET to act as exchange agent (the
"Exchange Agent") to effectuate the delivery of the Merger Consideration to
holders of TARGET Common Stock. Elections shall be made by holders of TARGET
Common Stock by mailing, faxing or otherwise delivering to the Exchange Agent a
Form of Election. To be effective, a Form of Election must be properly
completed, signed and submitted to the Exchange Agent. PURCHASER shall have the
discretion, which it may delegate in whole or in part to the Exchange Agent, to
determine whether Forms of Election have been properly completed, signed and
submitted and to disregard immaterial defects in Forms of Election. The
decision of PURCHASER (or the Exchange Agent) in such matters shall be
conclusive and binding. Neither PURCHASER nor the Exchange Agent will be under
any obligation to notify any Person of any defect in a Form of Election.
(g) A holder of TARGET Common Stock who does not submit a Form of
Election which is received by the Exchange Agent prior to the Election Deadline
shall be deemed to have made a Combination Election to receive 51% of the
applicable amount of the Merger Consideration in the form of Stock Consideration
and 49% of the applicable amount of the Merger Consideration in the form of Cash
Consideration for his or her TARGET Shares. If PURCHASER or the Exchange Agent
shall determine that any purported Cash Election or Stock Election was not
properly made, such purported Cash Election or Stock Election shall be deemed to
be of no force and effect, and the TARGET shareholder making such purported Cash
Election or Stock Election shall for purposes hereof be deemed to have made a
Combination Election to receive 51% of the applicable amount of the Merger
Consideration in the form of Stock Consideration and 49% of the applicable
amount of the Merger Consideration in the form of Cash Consideration for his or
her TARGET Shares.
(h) All shares of TARGET Common Stock which are subject to Cash
Elections or the cash portion of Combination Elections are referred to herein as
"Cash Election Shares". All shares of TARGET Common Stock which are subject to
Stock Elections or the stock portion of Combination Elections are referred to
herein as "Stock Election Shares". If, after the results of the Forms of
Election are calculated, the number of shares of TARGET Common Stock to be
converted into shares of PURCHASER Common Stock exceeds the Maximum Stock
Election Number, then the Exchange Agent shall determine the number of Stock
Election Shares which must be redesignated as Cash Election Shares and all
TARGET Shareholders who have Stock Election Shares (other than any TARGET
Shareholder who has made a Combination Election to receive no more than 65% and
no less than 51% of the applicable Merger Consideration in the form of Stock
Consideration for his or her TARGET Shares) shall, on a prorata basis, have such
number of their Stock Election Shares redesignated as Cash Election Shares so
that the Maximum Stock Election Number and the Minimum
4
<PAGE>
Cash Election Number are achieved. If, after the result of the Forms of
Election are calculated, the number of shares of TARGET Common Stock to be
converted into cash exceeds the Maximum Cash Election Number, then the Exchange
Agent shall determine the number of Cash Election Shares which must be
redesignated as Stock Election Shares and all TARGET Shareholders who have Cash
Election Shares (other than any TARGET Shareholder who has made a Combination
Election to receive no more than 49% and no less than 35% of the applicable
Merger Consideration in the form of Cash Consideration for his or her TARGET
Shares) shall, on a prorata basis, have such number of their Cash Election
Shares redesignated as Stock Election Shares so that the Maximum Cash Election
Number and Minimum Stock Election Number are achieved. PURCHASER or the
Exchange Agent shall make all computations contemplated by this Section 3.1 and
all such computations shall be conclusive and binding on the holders of TARGET
Common Stock.
(i) After the redesignation procedure set forth in paragraph (h)
above is completed, all Cash Election Shares shall be converted into the right
to receive the Cash Consideration, and all Stock Election Shares shall be
converted into the right to receive the Stock Consideration. Such certificates
previously evidencing shares of TARGET Common Stock ("Old Certificates") shall
be exchanged for (a) certificates evidencing the Stock Consideration or (b) the
Cash Consideration, multiplied in each case by the number of shares previously
evidenced by the canceled certificate, upon the surrender of such certificates
in accordance with the provisions of Section 3.2, without interest.
Notwithstanding the foregoing, however, no fractional shares of PURCHASER Common
Stock shall be issued, and, in lieu thereof, a cash payment shall be made
pursuant to Paragraph (j) below.
(j) Notwithstanding any other provision of this Agreement, each
holder of shares of TARGET Common Stock exchanged pursuant to the Merger who
would otherwise have been entitled to receive a fraction of a share of PURCHASER
Common Stock (after taking into account all certificates delivered by such
holder) shall receive, in lieu thereof, cash (without interest) in an amount
equal to such fractional part of a share of PURCHASER Common Stock multiplied by
the Base Period Trading Price. No such holder will be entitled to dividends,
voting rights, or any other rights as a shareholder in respect of any fractional
shares.
(k) Each share of the TARGET Common Stock that is not an
Outstanding TARGET Share as of the Effective Time shall be cancelled without
consideration therefor.
(l) Outstanding TARGET Shares held by TARGET shareholders who,
prior to the Effective Time, have met the requirements of Article 13 of the ABCA
with respect to shareholders dissenting from the Merger ("Dissenting TARGET
Shareholders") shall not be converted in the Merger, but all such shares shall
be cancelled and the holders thereof shall thereafter have only such rights as
are granted to dissenting shareholders under Article 13 of the ABCA; provided,
however, that if any such shareholder fails to perfect his or her rights as a
dissenting shareholder with respect to his or her Outstanding TARGET Shares in
accordance with Article 13 of the ABCA, such shares held by such shareholder
shall, upon the happening of that event, be treated the same as all other
holders of TARGET Common Stock who have not dissented as to the Merger.
5
<PAGE>
3.2 EXCHANGE OF SHARES. TARGET shall send or cause to be sent to each
------------------
holder of Outstanding TARGET Shares as of the RECORD DATE a form of letter of
transmittal (the "Letter of Transmittal") for use in exchanging Old Certificates
for cash and certificates representing PURCHASER Common Stock which shall be
deposited with the Exchange Agent by PURCHASER as of the Effective Time. The
Letter of Transmittal shall be mailed within five (5) business days following
the date of the Shareholders' Meeting. The Letter of Transmittal will contain
instructions with respect to the surrender of Old Certificates and the
distribution of cash and certificates representing PURCHASER Common Stock. If
any certificates for shares of PURCHASER Common Stock are to be issued in a name
other than that for which an Old Certificate surrendered or exchanged is issued,
the Old Certificate so surrendered shall be properly endorsed and otherwise in
proper form for transfer and the person requesting such exchange shall affix any
requisite stock transfer tax stamps to the Old Certificate surrendered or
provide funds for their purchase or establish to the satisfaction of the
Exchange Agent that such taxes are not payable. Unless and until Old
Certificates (or evidence that such certificates have been lost, stolen or
destroyed accompanied by such security or indemnity as shall be requested by
TARGET) are presented to the Exchange Agent, the holder thereof shall not be
entitled to the consideration to be paid in exchange therefor pursuant to the
Merger, to any dividends payable on any PURCHASER Common Stock to which he or
she is entitled, or to exercise any rights as a shareholder of PURCHASER Common
Stock. Subject to applicable law and to the extent that the same has not yet
been paid to a public official pursuant to applicable abandoned property laws,
upon surrender of his or her Old Certificates, the holder thereof shall be paid
the consideration to which he or she is entitled. All such property, if held by
the Exchange Agent for payment or delivery to the holders of unsurrendered Old
Certificates and unclaimed at the end of one (1) year from the Effective Time,
shall at such time be paid or redelivered by the Exchange Agent to PURCHASER and
after such time any holder of an Old Certificate who has not surrendered such
certificate shall, subject to applicable laws and to the extent that the same
has not yet been paid to a public official pursuant to applicable abandoned
property laws, look as a general creditor only to PURCHASER for payment or
delivery of such property. In no event will any holder of TARGET Common Stock
exchanged in the Merger be entitled to receive any interest on any amounts held
by the Exchange Agent or PURCHASER.
3.3 ANTI-DILUTION PROVISIONS. In the event TARGET or PURCHASER changes
------------------------
the number of shares of TARGET Common Stock or PURCHASER Common Stock,
respectively, issued and outstanding prior to the Effective Time as a result of
a stock split, stock dividend or similar recapitalization with respect to such
stock and the record date therefor (in the case of a stock dividend) or the
effective date therefor (in the case of a stock split or similar
recapitalization) shall be prior to the Effective Time, the Exchange Ratio shall
be proportionately adjusted.
3.4 SHARES HELD BY TARGET OR PURCHASER. Each of the shares of TARGET
----------------------------------
Common Stock held by any TARGET Company or by any PURCHASER Company, in each
case other than in a fiduciary capacity or as a result of debts previously
contracted, shall be canceled and retired at the Effective Time and no
consideration shall be issued in exchange therefor.
3.5 TARGET BANK. After consummation of the Merger, TARGET Bank shall be
-----------
a separate subsidiary of PURCHASER.
6
<PAGE>
3.6 RIGHTS OF FORMER TARGET SHAREHOLDERS. At the Effective Time, the
------------------------------------
stock transfer books of TARGET shall be closed as to holders of TARGET Common
Stock immediately prior to the Effective Time and no transfer of TARGET Common
Stock by any such holder shall thereafter be made or recognized. Until
surrendered for exchange in accordance with the provisions of Section 3.2 of
this Agreement, each Old Certificate (other than shares to be canceled pursuant
to Section 3.1(f) of this Agreement) shall from and after the Effective Time
represent for all purposes only the right to receive the consideration provided
in Section 3.1 of this Agreement in exchange therefor. To the extent permitted
by Law, former shareholders of record of TARGET shall be entitled to vote after
the Effective Time at any meeting of PURCHASER shareholders the number of whole
shares of PURCHASER Common Stock into which their respective shares of TARGET
Common Stock are converted, regardless of whether such holders have exchanged
their certificates representing TARGET Common Stock for certificates
representing PURCHASER Common Stock in accordance with the provisions of this
Agreement. Whenever a dividend or other distribution is declared by PURCHASER
on the PURCHASER Common Stock, the record date for which is at or after the
Effective Time, the declaration shall include dividends or other distributions
on all shares issuable pursuant to this Agreement, but no dividend or other
distribution payable to the holders of record of PURCHASER Common Stock as of
any time subsequent to the Effective Time shall be delivered to the holder of
any certificate representing shares of TARGET Common Stock issued and
outstanding at the Effective Time until such holder surrenders such certificate
for exchange as provided in Section 3.2 of this Agreement. However, upon
surrender of such TARGET Common Stock certificate, both the PURCHASER Common
Stock certificate (together with all such undelivered dividends or other
distributions without interest) and any undelivered cash payments to be paid for
fractional share interests (without interest) shall be delivered and paid with
respect to each share represented by such certificate.
3.7 OPTIONS. Each warrant, stock option or other right, if any, to
-------
purchase shares of TARGET Common Stock issued and outstanding immediately prior
to the Effective Time shall be cancelled (whether or not such warrant, option or
other right is then exercisable), and all rights in respect thereof shall cease
to exist, without any conversion thereof or payment of any consideration
therefor.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF TARGET
----------------------------------------
TARGET hereby represents and warrants to PURCHASER as follows:
4.1 ORGANIZATION, STANDING AND POWER. TARGET is a corporation duly
--------------------------------
organized, validly existing, and in good standing under the Laws of the State of
Alabama, and is duly registered as a bank holding company under the BHC Act.
TARGET has the corporate power and authority to carry on its business as now
conducted and to own, lease and operate its Assets. TARGET is duly qualified or
licensed to transact business as a foreign corporation in good standing in the
States of the United States and foreign jurisdictions where the character of its
assets or the nature or conduct of its business requires it to be so qualified
or licensed, except for such jurisdictions in which the failure to be so
qualified or licensed is not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on TARGET.
7
<PAGE>
4.2 AUTHORITY; NO BREACH.
--------------------
(a) TARGET has the corporate power and authority necessary to
execute, deliver and perform its obligations under this Agreement and to
consummate the transactions contemplated hereby. The execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated herein, including the Merger, have been duly and validly authorized
by all necessary corporate action in respect thereof on the part of TARGET,
subject to the approval of this Agreement by the holders of a majority of the
outstanding TARGET Common Stock. Subject to such requisite shareholder approval,
this Agreement represents a legal, valid, and binding obligation of TARGET,
enforceable against TARGET in accordance with its terms (except in all cases as
such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, or similar Laws affecting the enforcement of
creditors' rights generally and except that the availability of the equitable
remedy of specific performance or injunctive relief is subject to the discretion
of the court before which any proceeding may be brought).
(b) Neither the execution and delivery of this Agreement by TARGET,
nor the consummation by TARGET of the transactions contemplated hereby, nor
compliance by TARGET with any of the provisions hereof will (i) conflict with or
result in a breach of any provision of TARGET's Articles of Incorporation or
Bylaws, or (ii) constitute or result in a Default under, or require any Consent
pursuant to, or result in the creation of any Lien on any Asset of any TARGET
Company under, any Contract or Permit of any TARGET Company, where such Default
or Lien, or any failure to obtain such Consent, is reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on TARGET, or, (iii)
subject to receipt of the requisite approvals referred to in Section 8.1(b) of
this Agreement, violate any Law or Order applicable to any TARGET Company or any
of their respective Assets.
(c) Other than in connection or compliance with the provisions of
the Securities Laws, applicable state corporate and securities Laws, and other
than Consents required from Regulatory Authorities, and other than notices to or
filings with the Internal Revenue Service or the Pension Benefit Guaranty
Corporation with respect to any employee benefit plans, and other than Consents,
filings or notifications which, if not obtained or made, are not reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
TARGET, no notice to, filing with, or Consent of any public body or authority is
necessary for the consummation by TARGET of the Merger and the other
transactions contemplated in this Agreement.
4.3 CAPITAL STOCK.
-------------
(a) The authorized capital stock of TARGET consists of 1,800,000
shares of TARGET Common Stock, of which 488,082 shares are issued and
outstanding as of the date of this Agreement, 360 shares of Class B Common
Stock, $8.50 par value, none of which are issued and outstanding as of the date
of this Agreement, and 6,000 shares of Class A Preferred Stock, $5.00 par value,
none of which are issued and outstanding as of the date of this Agreement. All
of the issued and outstanding shares of capital stock of TARGET are duly and
validly issued and outstanding and are fully paid and nonassessable under the
ABCA. None of the outstanding shares of capital stock of TARGET has been issued
in violation of any preemptive rights of the current or
8
<PAGE>
past shareholders of TARGET. TARGET has outstanding options to purchase not
more than 17,461 shares of TARGET Common Stock.
(b) Except as set forth in Section 4.3(a) of this Agreement or as
Previously Disclosed, there are no shares of capital stock or other equity
securities of TARGET outstanding and no outstanding options, warrants, scrip,
rights to subscribe to, calls, or commitments of any character whatsoever
relating to, or securities or rights convertible into or exchangeable for,
shares of the capital stock of TARGET or contracts, commitments, understandings,
or arrangements by which TARGET is or may be bound to issue additional shares of
its capital stock or options, warrants, or rights to purchase or acquire any
additional shares of its capital stock.
4.4 TARGET SUBSIDIARIES. TARGET has Previously Disclosed all of the
-------------------
TARGET Subsidiaries as of the date of this Agreement. TARGET owns all of the
issued and outstanding shares of capital stock of TARGET Bank, and TARGET Bank
owns all of the issued and outstanding stock of each other TARGET Subsidiary.
No equity securities of any TARGET Subsidiary are or may become required to be
issued (other than to a TARGET Company) by reason of any options, warrants,
scrip, rights to subscribe to, calls, or commitments of any character whatsoever
relating to, or securities or rights convertible into or exchangeable for,
shares of the capital stock of any such Subsidiary, and there are no Contracts
by which any TARGET Subsidiary is bound to issue (other than to a TARGET
Company) additional shares of its capital stock or options, warrants, or rights
to purchase or acquire any additional shares of its capital stock or by which
any TARGET Company is or may be bound to transfer any shares of the capital
stock of any TARGET Subsidiary (other than to a TARGET Company). There are no
Contracts relating to the rights of any TARGET Company to vote or to dispose of
any shares of the capital stock of any TARGET Subsidiary. All of the shares of
capital stock of each TARGET Subsidiary held by a TARGET Company are fully paid
and nonassessable under the applicable corporation Law of the jurisdiction in
which such Subsidiary is incorporated or organized and are owned by the TARGET
Company free and clear of any Lien. Each TARGET Subsidiary is either a bank or
a corporation, and is duly organized, validly existing, and (as to corporations)
in good standing under the Laws of the jurisdiction in which it is incorporated
or organized, and has the corporate power and authority necessary for it to own,
lease and operate its Assets and to carry on its business as now conducted.
Each TARGET Subsidiary is duly qualified or licensed to transact business as a
foreign corporation in good standing in the States of the United States and
foreign jurisdictions where the character of its Assets or the nature or conduct
of its business requires it to be so qualified or licensed, except for such
jurisdictions in which the failure to be so qualified or licensed is not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on TARGET. Each TARGET Subsidiary that is a depository institution is an
insured institution as defined in the Federal Deposit Insurance Act and
applicable regulations thereunder.
4.5 FINANCIAL STATEMENTS. TARGET has Previously Disclosed, and
--------------------
delivered to PURCHASER prior to the execution of this Agreement, copies of all
TARGET Financial Statements for periods ended prior to the date hereof and will
deliver to PURCHASER copies of all TARGET Financial Statements prepared
subsequent to the date hereof. The TARGET Financial Statements (as of the dates
thereof and for the periods covered thereby) (a) are or, if dated after the date
of this Agreement, will be in accordance with the books and records of the
TARGET Companies, which
9
<PAGE>
are or will be, as the case may be, complete and correct in all material
respects and which have been or will have been, as the case may be, maintained
in accordance with good business practices, and (b) present or will present, as
the case may be, fairly the consolidated financial position of the TARGET
Companies as of the dates indicated and the consolidated results of operations,
changes in shareholders' equity, and cash flows of the TARGET Companies for the
periods indicated, in accordance with GAAP (subject to any exceptions as to
consistency specified therein or as may be indicated in the notes thereto or, in
the case of interim financial statements, to normal recurring year-end
adjustments that are not material).
4.6 ABSENCE OF UNDISCLOSED LIABILITIES. Except as Previously Disclosed,
----------------------------------
no TARGET Company has any Liabilities that are reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on TARGET, except
Liabilities which are accrued or reserved against in the consolidated balance
sheets of TARGET as of December 31, 1994 and September 30, 1995 included in the
TARGET Financial Statements or reflected in the notes thereto. Except as
Previously Disclosed, no TARGET Company has incurred or paid any Liability since
September 30, 1995, except for such Liabilities incurred or paid in the ordinary
course of business consistent with past business practice and which are not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on TARGET.
4.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as Previously
------------------------------------
Disclosed, since September 30, 1995, (a) there have been no events, changes or
occurrences which have had, or are reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on TARGET, and (b) the TARGET Companies
have not taken any action, or failed to take any action, prior to the date of
this Agreement, which action or failure, if taken after the date of this
Agreement, would represent or result in a material breach or violation of any of
the covenants and agreements of TARGET provided in Article 7 of this Agreement.
4.8 TAX MATTERS.
-----------
(a) All Tax returns required to be filed by or on behalf of any of
the TARGET Companies have been duly filed or requests for extensions have been
timely filed, granted, and have not expired for periods ended on or before
December 31, 1994, and on or before the date of the most recent fiscal year end
immediately preceding the Effective Time, except to the extent that all such
failures to file, taken together, are not reasonably likely to have a Material
Adverse Effect on TARGET, and all returns filed are complete and accurate to the
Knowledge of TARGET. All Taxes shown on filed returns have been paid. As of the
date of this Agreement, there is no audit examination, deficiency, or refund
Litigation with respect to any Taxes that is reasonably likely to result in a
determination that would have, individually or in the aggregate, a Material
Adverse Effect on TARGET, except as reserved against in the TARGET Financial
Statements delivered prior to the date of this Agreement. All Taxes and other
Liabilities due with respect to completed and settled examinations or concluded
Litigation have been paid.
(b) None of the TARGET Companies has executed an extension or
waiver of any statute of limitations on the assessment or collection of any Tax
due that is currently in effect, and no unpaid tax deficiency has been asserted
in writing against or with respect to any TARGET
10
<PAGE>
Company, which deficiency is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on TARGET.
(c) Adequate provision for any Taxes due or to become due for any
of the TARGET Companies for the period or periods through and including the date
of the respective TARGET Financial Statements has been made and is reflected on
such TARGET Financial Statements.
(d) Deferred Taxes of the TARGET Companies have been provided for
in accordance with GAAP.
(e) Each of the TARGET Companies is in compliance with, and its
records contain all information and documents (including, without limitation,
properly completed IRS Forms W-9) necessary to comply with, all applicable
information reporting and Tax withholding requirements under federal, state and
local Tax Laws, and such records identify with specificity all accounts subject
to backup withholding under Section 3406 of the Internal Revenue Code, except
for such instances of noncompliance and such omissions as are not reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
TARGET.
(f) Effective January 1, 1993, TARGET adopted Financial Accounting
Standards Board Statement 109, "Accounting for Income Taxes."
4.9 TARGET ALLOWANCE FOR POSSIBLE LOAN LOSSES. The allowance for
-----------------------------------------
possible loan or credit losses (the "TARGET Allowance") shown on the
consolidated balance sheets of TARGET included in the most recent TARGET
Financial Statements dated prior to the date of this Agreement was, and the
TARGET Allowance shown on the consolidated balance sheets of TARGET included in
the TARGET Financial Statements as of dates subsequent to the execution of this
Agreement will be, maintained in accordance with, and are in the amounts
required by GAAP and applicable regulatory requirements or guidelines as of the
dates thereof except where the failure of such TARGET Allowance to be so
maintained is not reasonably likely to have a Material Adverse Effect on TARGET.
4.10 ASSETS. Except as Previously Disclosed or as disclosed or reserved
------
against in the TARGET Financial Statements, or where the failure to own good and
marketable title is not reasonably likely to have a Material Adverse Effect on
TARGET, the TARGET Companies have good and marketable title, free and clear of
all Liens, to all of their respective Assets. All material tangible properties
used in the businesses of the TARGET Companies are in good condition, reasonable
wear and tear excepted, and are usable in the ordinary course of business
consistent with TARGET's past practices. All Assets which are material to
TARGET's business on a consolidated basis, held under leases or subleases by any
of the TARGET Companies are held under valid Contracts enforceable in accordance
with their respective terms (except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, or other Laws
affecting the enforcement of creditors' rights generally and except that the
availability of the equitable remedy of specific performance or injunctive
relief is subject to the discretion of the court before which any proceedings
may be brought), and each such Contract is in full force and effect. The
policies of fire, theft, liability, and other insurance maintained with respect
to the Assets or businesses of the
11
<PAGE>
TARGET Companies provide adequate coverage under current industry practices
against loss or Liability, and the fidelity and blanket bonds in effect as to
which any of the TARGET Companies is a named insured are reasonably sufficient.
The Assets of the TARGET Companies include all assets required to operate the
business of the TARGET Companies as presently conducted.
4.11 ENVIRONMENTAL MATTERS. Except as Previously Disclosed:
---------------------
(a) Each TARGET Company, its Participation Facilities and its Loan
Properties are, and have been, in compliance with all Environmental Laws, except
for violations which are not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on TARGET.
(b) There is no Litigation pending or, to the Knowledge of TARGET,
threatened before any court, governmental agency or authority or other forum in
which any TARGET Company or any of its Participation Facilities has been or,
with respect to threatened Litigation, may be named as a defendant (i) for
alleged noncompliance (including by any predecessor) with any Environmental Law
or (ii) relating to the release into the environment of any Hazardous Material
or oil, whether or not occurring at, on, under or involving a site owned, leased
or operated by any TARGET Company or any of its Participation Facilities, except
for such Litigation pending or, to the Knowledge of TARGET, threatened that is
not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on TARGET.
(c) There is no Litigation pending which TARGET has received proper
notice or service thereof or, to the Knowledge of TARGET, threatened before any
court, governmental agency or board or other forum in which any of its Loan
Properties (or any TARGET Company in respect of such Loan Property) has been or,
with respect to threatened litigation, may be named as a defendant or
potentially responsible party (i) for alleged noncompliance (including by any
predecessor) with any Environmental Law or (ii) relating to the release into the
environment of any Hazardous Material or oil, whether or not occurring at, on,
under or involving a Loan Property, except for such Litigation pending or, to
the Knowledge of TARGET, threatened that is not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on TARGET.
(d) To the Knowledge of TARGET, there is no reasonable basis for
any Litigation of a type described in subsections (b) or (c), except such as is
not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on TARGET.
(e) During the period of (i) any TARGET Company's ownership or
operation of any of their respective current properties, (ii) any TARGET
Company's participation in the management of any Participation Facility, or
(iii) any TARGET Company's holding of a security interest in a Loan Property,
there have been no releases of Hazardous Material or oil in, on, under or
affecting any such property, Participation Facility, or to the Knowledge of
TARGET Loan Property, except such as are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on TARGET.
12
<PAGE>
(f) Prior to the period of (i) any TARGET Company's ownership or
operation of any of their respective current properties, (ii) any TARGET
Company's participation in the management of any Participation Facility, or
(iii) any TARGET Company's holding of a security interest in a Loan Property, to
the Knowledge of TARGET, there were no releases of Hazardous Material or oil in,
on, under or affecting any such property, Participation Facility or Loan
Property, except such as are not reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on TARGET.
4.12 COMPLIANCE WITH LAWS.
--------------------
(a) TARGET is duly registered as a bank holding company under the
BHC Act. Each TARGET Company has in effect all Permits necessary for it to own,
lease or operate its Assets and to carry on its business as now conducted,
except for those Permits the absence of which are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on TARGET, and there
has occurred no Default under any such Permit, other than Defaults which are not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on TARGET.
(b) Except as Previously Disclosed, no TARGET Company:
(i) is in violation of any Laws, Orders or Permits applicable
to its business or employees conducting its business, except for violations
which are not reasonably likely to have, individually or in the aggregate,
a Material Adverse Effect on TARGET; and
(ii) has received any notification or communication from any
agency or department of federal, state, or local government or any
Regulatory Authority or the staff thereof (A) asserting that any TARGET
Company is not in compliance with any of the Laws or Orders which such
governmental authority or Regulatory Authority enforces, where such
noncompliance is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on TARGET, (B) threatening to revoke
any Permits, the revocation of which is reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on TARGET, or
(C) requiring any TARGET Company to enter into or consent to the issuance
of a cease and desist order, formal agreement, directive, commitment or
memorandum of understanding, or to adopt any Board resolution or similar
undertaking, which restricts materially the conduct of its business, or in
any manner relates to its capital adequacy, its credit or reserve policies,
its management, or the payment of dividends.
4.13 LABOR RELATIONS. No TARGET Company is the subject of any Litigation
---------------
asserting that it or any other TARGET Company has committed an unfair labor
practice (within the meaning of the National Labor Relations Act or comparable
state law) or seeking to compel it or any other TARGET Company to bargain with
any labor organization as to wages or conditions of employment, nor is there any
strike or other labor dispute involving any TARGET Company, pending or, to its
Knowledge, threatened, or to its Knowledge, is there any activity involving any
TARGET Company's employees seeking to certify a collective bargaining unit or
engaging in any other organization activity.
13
<PAGE>
4.14 EMPLOYEE BENEFIT PLANS.
----------------------
(a) TARGET has Previously Disclosed, and delivered or made
available to PURCHASER prior to the execution of this Agreement, copies in each
case of all pension, retirement, profit-sharing, deferred compensation, stock
option, employee stock ownership, severance pay, vacation, bonus, or other
incentive plans all other written employee programs, arrangements, or
agreements, all medical, vision, dental, or other health plans, all life
insurance plans, and all other employee benefit plans or fringe benefit plans,
including, without limitation, "employee benefit plans," as that term is defined
in Section 3(3) of ERISA, currently adopted, maintained by, sponsored in whole
or in part by, or contributed to by any TARGET Company or Affiliate thereof for
the benefit of employees, retirees, dependents, spouses, directors, independent
contractors, or other beneficiaries and under which employees, retirees,
dependents, spouses, directors, independent contractors, or other beneficiaries
are eligible to participate (collectively, the "TARGET Benefit Plans"). Any of
the TARGET Benefit Plans which is an "employee pension benefit plan," as that
term is defined in Section 3(2) of ERISA, is referred to herein as a "TARGET
ERISA Plan." Each TARGET ERISA Plan which is also a "defined benefit plan" (as
defined in Section 414(j)) of the Internal Revenue Code) is referred to herein
as a "TARGET Pension Plan." No TARGET Pension Plan is or has been a multi-
employer plan within the meaning of Section 3(37) of ERISA.
(b) All TARGET Benefit Plans are, in all material respects, in
compliance with the applicable terms of ERISA, the Internal Revenue Code, and
any other applicable Laws the breach or violation of which are reasonably likely
to have, individually or in the aggregate, a Material Adverse Effect on TARGET.
Each TARGET ERISA Plan which is intended to be qualified under Section 401(a) of
the Internal Revenue Code has received a favorable determination letter from the
Internal Revenue Service, and TARGET is not aware of any circumstances likely to
result in revocation of any such favorable determination letter. To the
Knowledge of TARGET, no TARGET Company has engaged in a transaction with respect
to any TARGET Benefit Plan that, assuming the taxable period of such transaction
expired as of the date hereof would subject any TARGET Company to a tax or
penalty imposed by either Section 4975 of the Internal Revenue Code or Section
502(i) of ERISA in amounts which are reasonably likely to have, individually or
in the aggregate, a Material Adverse Effect on TARGET.
(c) No TARGET ERISA Plan which is a defined benefit pension plan
has any "unfunded current liability," as that term is defined in Section
302(d)(8)(A) of ERISA, based on actuarial assumptions set forth for such plan's
most recent actuarial valuation. Since the date of the most recent actuarial
valuation, there has been (i) no material change in the financial position of
any TARGET Pension Plan, (ii) no change in the actuarial assumptions with
respect to any TARGET Pension Plan, and (iii) no increase in benefits under any
TARGET Pension Plan as a result of plan amendments or changes in applicable law,
which is reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on TARGET or materially adversely affect the funding status of
any such plan. Neither any TARGET Pension Plan nor any "single-employer plan,"
within the meaning of Section 4001(a)(15) of ERISA, currently or formerly
maintained by any TARGET Company, or the single-employer plan of any entity
which is considered one employer with TARGET under Section 4001 of ERISA or
Section 414 of the Internal Revenue Code or Section 302 of ERISA (whether or not
waived) (an "ERISA Affiliate") has an "accumulated funding deficiency" within
the meaning of Section 412 of the Internal Revenue Code or Section 302 of ERISA,
which
14
<PAGE>
is reasonably likely to have a Material Adverse Effect on TARGET. No TARGET
Company has provided, or is required to provide, security to a TARGET Pension
Plan or to any single-employer plan of an ERISA Affiliate pursuant to Section
401(a)(29) of the Code.
(d) Within the six-year period preceding the Effective Time, no
Liability under Subtitle C or D of Title IV or ERISA has been or is expected to
be incurred by any TARGET Company with respect to any ongoing, frozen or
terminated single-employer plan or the single-employer plan of any ERISA
Affiliate, which Liability is reasonably likely to have a Material Adverse
Effect on TARGET. Except as Previously Disclosed, no TARGET Company has
incurred any withdrawal Liability with respect to a multi-employer plan under
Subtitle B of Title TV or ERISA (regardless of whether based on contributions of
an ERISA Affiliate), which Liability is reasonably likely to have a Material
Adverse Effect on TARGET. No notice of a "reportable event," within the meaning
of Section 4043 of ERISA for which the 30-day reporting requirement has not been
waived, has been required to be filed for any TARGET Pension Plan or by any
ERISA Affiliate within the 12-month period ending on the date hereof.
(e) No TARGET Company has any obligations for retiree health and
life benefits under any of the TARGET Benefit Plans and there are no
restrictions on the rights of such TARGET Company to amend or terminate any such
Plan without incurring any Liability thereunder, which Liability is reasonably
likely to have a Material Adverse Effect on TARGET.
(f) Except as Previously Disclosed, neither the execution and
delivery of this Agreement nor the consummation of the transactions contemplated
hereby will (i) result in any payment (including, without limitation, severance,
unemployment compensation, golden parachute or otherwise) becoming due to any
director or any employee of any TARGET Company from any TARGET Company under any
TARGET Benefit Plan or otherwise, (ii) increase any benefits otherwise payable
under any TARGET Benefit Plan, or (iii) result in any acceleration of the time
of payment or vesting of any such benefit.
(g) The actuarial present values of all accrued deferred
compensation entitlements (including, without limitation, entitlements under any
executive compensation, supplemental retirement, or employment agreement) of
employees and former employees of any TARGET Company and their respective
beneficiaries, other than entitlements accrued pursuant to funded retirement
plans subject to the provisions of Section 412 of the Internal Revenue Code or
Section 302 of ERISA, have been fully reflected on the TARGET Financial
Statements to the extent required by and in accordance with GAAP.
4.15 MATERIAL CONTRACTS. Except as Previously Disclosed or otherwise
------------------
reflected in the TARGET Financial Statements, none of the TARGET Companies, nor
any of their respective Assets, businesses or operations, is a party to, or is
bound or affected by, or receives benefits under, (a) any employment, severance,
termination, consulting or retirement Contract providing for aggregate payments
to any Person in any calendar year in excess of $50,000, (b) any Contract
relating to the borrowing of money by any TARGET Company or the guarantee by any
TARGET Company of any such obligation (other than Contracts evidencing deposit
liabilities, purchases of federal funds, fully secured repurchase agreements,
trade payables, and Contracts relating to borrowings or guarantees made in the
ordinary course of business), and (c) any Contracts between
15
<PAGE>
or among TARGET Companies (together with all Contracts referred to in Sections
4.10 and 4.14(a) of this Agreement, the "TARGET Contracts"). None of the TARGET
Companies is in Default under any TARGET Contract, other than Defaults which are
not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on TARGET. All of the indebtedness of any TARGET Company for
money borrowed is prepayable at any time by such TARGET Company without penalty
or premium.
4.16 LEGAL PROCEEDINGS. Except as Previously Disclosed, there is no
-----------------
Litigation instituted or pending or, to the Knowledge of TARGET, threatened (or
unasserted but considered probable of assertion and which, if asserted, would
have at least a reasonable probability of an unfavorable outcome) against any
TARGET Company, or against any Asset, interest, or right of any of them, that is
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on TARGET, nor are there any Orders of any Regulatory Authorities, other
governmental authorities, or arbitrators outstanding against any TARGET Company,
that are reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on TARGET.
4.17 REPORTS. Except as Previously Disclosed, since January 1, 1993,
-------
each TARGET Company has timely filed all reports and statements, together with
any amendments required to be made with respect thereto, that it was required to
file with all Regulatory Authorities. As of their respective dates, each of
such reports and documents, including the financial statements, exhibits, and
schedules thereto, complied in all material respects with all applicable Laws.
As of their respective dates, none of such reports or documents contained any
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements made therein, in light
of the circumstances under which they were made, not misleading.
4.18 STATEMENTS TRUE AND CORRECT. No statement, certificate, instrument
---------------------------
or other writing furnished or to be furnished by any TARGET Company or any
Affiliate thereof to PURCHASER pursuant to this Agreement or any other document,
agreement or instrument referred to herein contains or will contain any untrue
statement of material fact or will omit to state a material fact necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading. None of the information supplied or to be supplied by any
TARGET Company or any Affiliate thereof for inclusion in the Registration
Statement to be filed by PURCHASER with the SEC, will, when the Registration
Statement becomes effective, be false or misleading with respect to any material
fact, or omit to state any material fact necessary to make the statements
therein not misleading. None of the information supplied or to be supplied by
any TARGET Company or any Affiliate thereof for inclusion in the Proxy Statement
to be mailed to TARGET's shareholders in connection with the Shareholders'
Meeting, and any other documents to be filed by any TARGET Company or any
Affiliate thereof with the SEC or any other Regulatory Authority in connection
with the transactions contemplated hereby, will, at the respective time such
documents are filed, and with respect to the Proxy Statement, when first mailed
to the shareholders of TARGET, be false or misleading with respect to any
material fact, or omit to state any material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, or, in the case of the Proxy Statement or any amendment thereof
or supplement thereto, at the time of the Shareholders' Meeting, be false or
misleading with respect to any material fact, or omit to state any material fact
necessary to correct any statement in any earlier communication with respect to
the solicitation of any proxy for the Shareholders' Meeting. All
16
<PAGE>
documents that any TARGET Company or any Affiliate thereof is responsible for
filing with any Regulatory Authority in connection with the transactions
contemplated hereby will comply as to form in all material respects with the
provisions of applicable Law.
4.19 ACCOUNTING, TAX AND REGULATORY MATTERS. Except as Previously
--------------------------------------
Disclosed, no TARGET Company or any Affiliate thereof has taken any action or
has any Knowledge of any fact or circumstance that is reasonably likely to (a)
prevent the transactions contemplated hereby, including the Merger, from
qualifying as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code, or (b) materially impede or delay receipt of any Consents
of Regulatory Authorities referred to in Section 8.1 (b) of this Agreement or
result in the imposition of a condition or restriction of the referred to in
the second sentence of such Section. To the Knowledge of TARGET, there exists
no fact, circumstance, or reason why the requisite Consents referred to in
Section 8.1(b) of this Agreement cannot be received in a timely manner without
the imposition of any condition or restriction of the type described in the
second sentence of such Section 8.1(b).
4.20 CHARTER PROVISIONS. Each TARGET Company has taken all action so
------------------
that the entering into of this Agreement and the consummation of the Merger and
the other transactions contemplated by this Agreement do not and will not result
in the grant of any rights to any Person under the Articles of Incorporation,
Bylaws or other governing instruments of any TARGET Company or restrict or
impair the ability of PURCHASER to vote, or otherwise to exercise the rights of
a shareholder with respect to, shares of any TARGET Company that may be acquired
or controlled by it.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF PURCHASER
-------------------------------------------
PURCHASER hereby represents and warrants to TARGET as follows:
5.1 ORGANIZATION, STANDING AND POWER. PURCHASER is a corporation duly
--------------------------------
organized, validly existing, and in good standing under the laws of the State of
Georgia, and is duly registered as a bank holding company under the BHC Act.
PURCHASER has the corporate power and authority to carry on its business as now
conducted and to own, lease and operate its Assets. PURCHASER is duly qualified
or licensed to transact business as a foreign corporation in good standing in
the States of the United States and foreign jurisdictions where the character of
its Assets or the nature or conduct of its business requires it to be so
qualified or licensed, except for such jurisdictions in which the failure to be
so qualified or licensed is not reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on PURCHASER.
5.2 AUTHORITY; NO BREACH.
--------------------
(a) PURCHASER has the corporate power and authority necessary to
execute, deliver and perform its obligations under this Agreement and to
consummate the transactions contemplated hereby. The execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated herein, including the Merger, have been duly and validly authorized
by all necessary corporate action in respect thereof on the part of PURCHASER.
17
<PAGE>
This Agreement represents a legal, valid, and binding obligation of PURCHASER,
enforceable against PURCHASER in accordance with its terms (except in all cases
as such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, or similar Laws affecting the enforcement of
creditors' rights generally and except that the availability of the equitable
remedy of specific performance or injunctive relief is subject to the discretion
of the court before which any proceeding may be brought).
(b) Neither the execution and delivery of this Agreement by
PURCHASER, nor the consummation by PURCHASER of the transactions contemplated
hereby, nor compliance by PURCHASER with any of the provisions hereof will (i)
conflict with or result in a breach of any provision of PURCHASER's Articles of
Incorporation or Bylaws, or (ii) constitute or result in a Default under, or
require any Consent pursuant to, or result in the creation of any Lien on any
Asset of any PURCHASER Company under, any Contract or Permit of any PURCHASER
Company, where such Default or Lien, or any failure to obtain such Consent, is
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on PURCHASER, or, (iii) subject to receipt of the requisite approvals
referred to in Section 8.1(b) of this Agreement, violate any Law or Order
applicable to any PURCHASER Company or any of their respective Assets.
(c) Other than in connection or compliance with the provisions of
the Securities Laws, applicable state corporate and securities Laws, and rules
of the NASD, and other than Consents required from Regulatory Authorities, and
other than notices to or filings with the Internal Revenue Service or the
Pension Benefit Guaranty Corporation with respect to any employee benefit plans,
and other than Consents, filings or notifications which, if not obtained or
made, are not reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on PURCHASER, no notice to, filing with, or Consent of
any public body or authority is necessary for the consummation by PURCHASER of
the Merger and the other transactions contemplated in this Agreement.
5.3 CAPITAL STOCK.
-------------
(a) The authorized capital stock of PURCHASER consists of (i)
10,000,000 shares of PURCHASER Common Stock, of which 3,379,192 shares are
issued and outstanding as of the date of this Agreement and (ii) 5,000,000
shares of Preferred Stock, none of which are issued or outstanding as of the
date of this Agreement. All of the issued and outstanding shares of PURCHASER
Common Stock are, and all of the shares of PURCHASER Common Stock to be issued
in exchange for shares of TARGET Common Stock upon consummation of the Merger,
when issued in accordance with the terms of this Agreement, will be, duly and
validly issued and outstanding and fully paid and nonassessable under the GBCC.
None of the outstanding shares of PURCHASER Common Stock has been, and none of
the shares of PURCHASER Common Stock to be issued in exchange for shares of
TARGET Common Stock upon consummation of the Merger will be, issued in violation
of any preemptive rights of the current or past shareholders of PURCHASER.
PURCHASER has reserved 6,667 shares of PURCHASER Common Stock for issuance under
the PURCHASER Stock Plans, pursuant to which options to purchase not more than
6,667 shares of PURCHASER Common Stock are outstanding as of the date of this
Agreement.
18
<PAGE>
(b) Except as set forth in Section 5.3(a) of this Agreement, or as
Previously Disclosed, there are no shares of capital stock or other equity
securities of PURCHASER outstanding and no outstanding options, warrants, scrip,
rights to subscribe to, calls, or commitments of any character whatsoever
relating to, or securities or rights convertible into or exchangeable for,
shares of the capital stock of PURCHASER or contracts, commitments,
understandings, or arrangements by which PURCHASER is or may be bound to issue
additional shares of its capital stock or options, warrants, or rights to
purchase or acquire any additional shares of its capital stock.
5.4 PURCHASER SUBSIDIARIES. PURCHASER has Previously Disclosed all of
----------------------
the PURCHASER Subsidiaries as of the date of this Agreement. PURCHASER owns all
of the issued and outstanding shares of capital stock of each PURCHASER
Subsidiary. No equity securities of any PURCHASER Subsidiary are or may become
required to be issued (other than to a PURCHASER Company) by reason of any
options, warrants, scrip, rights to subscribe to, calls, or commitments of any
character whatsoever relating to, or securities or rights convertible into or
exchangeable for, shares of the capital stock of any such Subsidiary, and there
are no Contracts by which any PURCHASER Subsidiary is bound to issue (other than
to a PURCHASER Company) additional shares of its capital stock or options,
warrants, or rights to purchase or acquire any additional shares of its capital
stock or by which any PURCHASER Company is or may be bound to transfer any
shares of the capital stock of any PURCHASER Subsidiary (other than to a
PURCHASER Company). There are no Contracts relating to the rights of any
PURCHASER Company to vote or to dispose of any shares of the capital stock of
any PURCHASER Subsidiary. All of the shares of capital stock of each PURCHASER
Subsidiary held by a PURCHASER Company are fully paid and nonassessable under
the applicable corporation Law of the jurisdiction in which such Subsidiary is
incorporated or organized and are owned by the PURCHASER Company free and clear
of any Lien. Each PURCHASER Subsidiary is either a bank or a corporation, and
is duly organized, validly existing, and (as to corporations) in good standing
under the Laws of the jurisdiction in which it is incorporated or organized, and
has the corporate power and authority necessary for it to own, lease and operate
its Assets and to carry on its business as now conducted. Each PURCHASER
Subsidiary is duly qualified or licensed to transact business as a foreign
corporation in good standing in the States of the United States and foreign
jurisdictions where the character of its Assets or the nature or conduct of its
business requires it to be so qualified or licensed, except for such
jurisdictions in which the failure to be so qualified or licensed is not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on PURCHASER. Each PURCHASER Subsidiary that is a depository institution
is an insured institution as defined in the Federal Deposit Insurance Act and
applicable regulations thereunder.
5.5 FINANCIAL STATEMENTS. PURCHASER has Previously Disclosed and
--------------------
delivered to TARGET prior to the execution of this Agreement copies of all
PURCHASER Financial Statements for periods ended prior to the date hereof and
will deliver to TARGET copies of all PURCHASER Financial Statements prepared
subsequent to the date hereof. The PURCHASER Financial Statements (as of the
dates thereof and for the periods covered thereby) (a) are or, if dated after
the date of this Agreement, will be in accordance with the books and records of
the PURCHASER Companies, which are or will be, as the case may be, complete and
correct in all material respects and which have been or will have been, as the
case may be, maintained in accordance with good business practices, and (b)
present or will present, as the case may be, fairly the consolidated financial
position of the PURCHASER Companies as of the dates indicated and the
consolidated
19
<PAGE>
results of operations, changes in shareholders' equity, and cash flows of the
PURCHASER Companies for the periods indicated, in accordance with GAAP (subject
to exceptions as to consistency specified therein or as may be indicated in the
notes thereto or, in the case of interim financial statements, to normal
recurring year-end adjustments that are not material).
5.6 ABSENCE OF UNDISCLOSED LIABILITIES. No PURCHASER Company has any
----------------------------------
Liabilities that are reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on PURCHASER, except Liabilities which are
accrued or reserved against in the consolidated balance sheets of PURCHASER as
of December 31, 1994 and September 30, 1995 included in the PURCHASER Financial
Statements or reflected in the notes thereto. No PURCHASER Company has incurred
or paid any Liability since September 30, 1995, except for such Liabilities
incurred or paid in the ordinary course of business consistent with past
business practice and which are not reasonably likely to have, individually or
in the aggregate, a Material Adverse Effect on PURCHASER.
5.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since September 30, 1995,
------------------------------------
except as disclosed in SEC Documents filed by PURCHASER prior to the date of
this Agreement, (a) there have been no events, changes or occurrences which have
had, or are reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on PURCHASER, and (b) the PURCHASER Companies have not
taken any action, or failed to take any action, prior to the date of this
Agreement, which action or failure, if taken after the date of this Agreement,
would represent or result in a material breach or violation of any of the
covenants and agreements of PURCHASER provided in Article 7 of this Agreement.
5.8 TAX MATTERS.
-----------
(a) All Tax returns required to be filed by or on behalf of any of
the PURCHASER Companies have been timely filed or requests for extensions have
been timely filed, granted, and have not expired for periods ended on or before
December 31, 1994, and on or before the date of the most recent fiscal year end
immediately preceding the Effective Time, except to the extent that all such
failures to file, taken together, are not reasonably likely to have a Material
Adverse Effect on PURCHASER, and all returns filed are complete and accurate to
the Knowledge of PURCHASER. All Taxes shown on filed returns have been paid. As
of the date of this Agreement, there is no audit examination, deficiency, or
refund Litigation with respect to any Taxes that is reasonably likely to result
in a determination that would have, individually or in the aggregate, a Material
Adverse Effect on PURCHASER, except as reserved against in the PURCHASER
Financial Statements delivered prior to the date of this Agreement. All Taxes
and other Liabilities due with respect to completed and settled examinations or
concluded Litigation have been paid.
(b) None of the PURCHASER Companies has executed an extension or
waiver of any statute of limitations on the assessment or collection of any Tax
due that is currently in effect, and no unpaid tax deficiency has been asserted
in writing against or with respect to any PURCHASER Company, which deficiency is
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on PURCHASER.
20
<PAGE>
(c) Adequate provision for any Taxes due or to become due for
any of the PURCHASER Companies for the period or periods through and including
the date of the respective PURCHASER Financial Statements has been made and is
reflected on such PURCHASER Financial Statements.
(d) Deferred Taxes of the PURCHASER Companies have been provided
for in accordance with GAAP.
(e) Effective January 1, 1993, PURCHASER adopted Financial
Accounting Standards Board Statement 109, "Accounting for Income Taxes."
5.9 PURCHASER ALLOWANCE FOR POSSIBLE LOAN LOSSES. The allowance for
--------------------------------------------
possible loan or credit losses (the "PURCHASER Allowance") shown on the
consolidated balance sheets of PURCHASER included in the most recent PURCHASER
Financial Statements dated prior to the date of this Agreement was, and the
PURCHASER Allowance shown on the consolidated balance sheets of PURCHASER
included in the PURCHASER Financial Statements as of dates subsequent to the
execution of this Agreement will be, as of the dates thereof, adequate (within
the meaning of GAAP and applicable regulatory requirements or guidelines) to
provide for losses relating to or inherent in the loan and lease portfolios
(including accrued interest receivables) of the PURCHASER Companies and other
extensions of credit (including letters of credit and commitments to make loans
or extend credit) by the PURCHASER Companies as of the dates thereof except
where the failure of such PURCHASER Allowance to be so adequate is not
reasonably likely to have a Material Adverse Effect on PURCHASER.
5.10 ASSETS. Except as Previously Disclosed or as disclosed or reserved
------
against in the PURCHASER Financial Statements, the PURCHASER Companies have good
and marketable title, free and clear of all Liens, to all of their respective
Assets. All material tangible properties used in the businesses of the
PURCHASER Companies are in good condition, reasonable wear and tear excepted,
and are usable in the ordinary course of business consistent with PURCHASER's
past practices. All Assets which are material to PURCHASER's business on a
consolidated basis, held under leases or subleases by any of the PURCHASER
Companies, are held under valid Contracts enforceable in accordance with their
respective terms (except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, or other Laws affecting the
enforcement of creditors' rights generally and except that the availability of
the equitable remedy of specific performance or injunctive relief is subject to
the discretion of the court before which any proceedings may be brought), and
each such Contract is in full force and effect. The policies of fire, theft,
liability, and other insurance maintained with respect to the Assets or
businesses of the PURCHASER Companies provide adequate coverage under current
industry practices against loss or Liability, and the fidelity and blanket bonds
in effect as to which any of the PURCHASER Companies is a named insured are
reasonably sufficient. The Assets of the PURCHASER Companies include all assets
required to operate the business of the PURCHASER Companies as presently
conducted.
21
<PAGE>
5.11 ENVIRONMENTAL MATTERS.
---------------------
(a) Each PURCHASER Company, its Participation Facilities and its
Loan Properties are, and have been, in compliance with all Environmental Laws,
except for violations which are not reasonably likely to have, individually or
in the aggregate, a Material Adverse Effect on PURCHASER.
(b) There is no Litigation pending or, to the Knowledge of
PURCHASER, threatened before any court, governmental agency or authority or
other forum in which any PURCHASER Company or any of its Participation
Facilities has been or, with respect to threatened Litigation, may be named as a
defendant (i) for alleged noncompliance (including by any predecessor) with any
Environmental Law or (ii) relating to the release into the environment of any
Hazardous Material (as defined below) or oil, whether or not occurring at, on,
under or involving a site owned, leased or operated by any PURCHASER Company or
any of its Participation Facilities, except for such Litigation pending or, to
the Knowledge of Purchaser, threatened that is not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on PURCHASER.
(c) There is no Litigation pending or, to the Knowledge of
Purchaser, threatened before any court, governmental agency or board or other
forum in which any of its Loan Properties (or any PURCHASER Company in respect
of such Loan Property) has been or, with respect to threatened Litigation, may
be named as a defendant or potentially responsible party (i) for alleged
noncompliance (including by any predecessor), with any Environmental Law or (ii)
relating to the release into the environment of any Hazardous Material or oil,
whether or not occurring at, on, under or involving a Loan Property, except for
such Litigation pending or, to the Knowledge of Purchaser, threatened that is
not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on PURCHASER.
(d) To the Knowledge of PURCHASER, there is no reasonable basis for
any Litigation of a type described in subsections (b) or (c), except such as is
not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on PURCHASER.
(e) During the period of (i) any PURCHASER Company's ownership or
operation of any of their respective current properties, (ii) any PURCHASER
Company's participation in the management of any Participation Facility, or
(iii) any PURCHASER Company's holding of a security interest in a Loan Property,
there have been no releases of Hazardous Material or oil in, on, under or
affecting such property, Participation Facility or Loan Property, except such as
are not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on PURCHASER.
(f) Prior to the period of (i) any PURCHASER Company's ownership or
operation of any of their respective current properties, (ii) any PURCHASER
Company's participation in the management of any Participation Facility, or
(iii) any PURCHASER Company's holding of a security interest in a Loan Property,
to the Knowledge of PURCHASER, there were no releases of Hazardous Material or
oil in, on, under or affecting any such property, Participation
22
<PAGE>
Facility or Loan Property, except such as are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on PURCHASER.
5.12 COMPLIANCE WITH LAWS. PURCHASER is duly registered as a bank
--------------------
holding company under the BHC Act. Each PURCHASER Company has in effect all
Permits necessary for it to own, lease or operate its Assets and to carry on its
business as now conducted, except for those Permits the absence of which are not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on PURCHASER, and there has occurred no Default under any such Permit,
other than Defaults which are not reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on PURCHASER.
(a) No PURCHASER Company:
(i) is in violation of any Laws, Orders or Permits applicable
to its business or employees conducting its business, except for violations
which are not reasonably likely to have, individually or in the aggregate,
a Material Adverse Effect on PURCHASER; or
(ii) has received any notification or communication from any
agency or department of federal, state, or local government or any
Regulatory Authority or the staff thereof (A) asserting that any PURCHASER
Company is not in compliance with any of the Laws or Orders which such
governmental authority or Regulatory Authority enforces, where such
noncompliance is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on PURCHASER, (B) threatening to
revoke any Permits, the revocation of which is reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on PURCHASER,
or (C) requiring any PURCHASER Company to enter into or consent to the
issuance of a cease and desist order, formal agreement, directive,
commitment or memorandum of understanding, or to adopt any Board resolution
or similar undertaking, which restricts materially the conduct of its
business, or in any manner relates to its capital adequacy, its credit or
reserve policies, its management, or the payment of dividends.
5.13 LABOR RELATIONS. No PURCHASER Company is the subject of any
---------------
Litigation asserting that it or any other PURCHASER Company has committed an
unfair labor practice (within the meaning of the National Labor Relations Act or
comparable state law) or seeking to compel it or any other PURCHASER Company to
bargain with any labor organization as to wages or conditions of employment, nor
is there any strike or other labor dispute involving any PURCHASER Company,
pending or, to its Knowledge, threatened, or to its Knowledge, is there any
activity involving any PURCHASER Company's employees seeking to certify a
collective bargaining unit or engaging in any other organization activity.
5.14 EMPLOYEE BENEFIT PLANS.
----------------------
(a) PURCHASER has Previously Disclosed and delivered or made
available to TARGET prior to the execution of this Agreement copies in each case
of all pension, retirement, profit-sharing, deferred compensation, stock option,
employee stock ownership, severance pay, vacation, bonus, or other incentive
plans, all other written employee programs, arrangements, or
23
<PAGE>
agreements, all medical, vision, dental, or other health plans, all life
insurance plans, and all other employee benefit plans or fringe benefit plans,
including, without limitation, "employee benefit plans," as that term is defined
in Section 3(3) of ERISA, currently adopted, maintained by, sponsored in whole
or in part by, or contributed to by any PURCHASER Company or Affiliate thereof
for the benefit of employees, retirees, dependents, spouses, directors,
independent contractors, or other beneficiaries and under which employees,
retirees, dependents, spouses, directors, independent contractors, or other
beneficiaries are eligible to participate (collectively, the "PURCHASER Benefit
Plans). Any of the PURCHASER Benefit Plans which is an "employee pension benefit
plan," as that term is defined in Section 3(2) of ERISA, is referred to herein
as a "PURCHASER ERISA Plan." Each PURCHASER ERISA Plan which is also a "defined
benefit plan" (as defined in Section 414(j)) of the Internal Revenue Code) is
referred to herein as a "PURCHASER Pension Plan." No PURCHASER Pension Plan is
or has been a multi-employer plan within the meaning of Section 3(37) of ERISA.
(b) All PURCHASER Benefit Plans are in compliance with the
applicable terms of ERISA, the Internal Revenue Code, and any other applicable
Laws the breach or violation of which are reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on PURCHASER. Each
PURCHASER ERISA Plan which is intended to be qualified under Section 401(a) of
the Internal Revenue Code has received a favorable determination letter from the
Internal Revenue Service, and PURCHASER is not aware of any circumstances likely
to result in revocation of any such favorable determination letter. To the
Knowledge of PURCHASER, no PURCHASER Company has engaged in a transaction with
respect to any PURCHASER Benefit Plan that, assuming the taxable period of such
transaction expired as of the date hereof would subject any PURCHASER Company to
a tax or penalty imposed by either Section 4975 of the Internal Revenue Code or
Section 502(i) of ERISA in amounts which are reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on PURCHASER.
(c) No PURCHASER ERISA Plan which is a defined benefit pension plan
has any "unfunded current liability," as that term is defined in Section
302(d)(8)(A) of ERISA, based on actuarial assumptions set forth for such plan's
most recent actuarial valuation. Since the date of the most recent actuarial
valuation, there has been (i) no material change in the financial position of
any PURCHASER Pension Plan, (ii) no change in the actuarial assumptions with
respect to any PURCHASER Pension Plan, and (iii) no increase in benefits under
any PURCHASER Pension Plan as a result of plan amendments or changes in
applicable Law which is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on PURCHASER or materially adversely affect
the funding status of any such plan. Neither any PURCHASER Pension Plan nor any
"single-employer plan," within the meaning of Section 4001(a)(15) of ERISA,
currently or formerly maintained by any PURCHASER Company, or the single-
employer plan of any ERISA Affiliate has an "accumulated funding deficiency"
within the meaning of Section 412 of the Internal Revenue Code or Section 302 of
ERISA, which is reasonably likely to have a Material Adverse Effect on
PURCHASER. No PURCHASER Company has provided, or is required to provide,
security to a PURCHASER Pension Plan or to any single-employer plan of an ERISA
Affiliate pursuant to Section 401(a)(29) of the Code.
(d) No Liability under Subtitle C or D of Title IV or ERISA has
been or is expected to be incurred by any PURCHASER Company with respect to any
ongoing, frozen or
24
<PAGE>
terminated single-employer plan or the single-employer plan of any ERISA
Affiliate, which Liability is reasonably likely to have a Material Adverse
Effect on PURCHASER. No PURCHASER Company has incurred any withdrawal Liability
with respect to a multi-employer plan under Subtitle B of Title IV or ERISA
(regardless of whether based on contributions of an ERISA Affiliate), which
Liability is reasonably likely to have a Material Adverse Effect on PURCHASER.
No notice of a "reportable event" within the meaning of Section 4043 of ERISA
for which the 30-day reporting requirement has not been waived, has been
required to be filed for any PURCHASER Pension Plan or by any ERISA Affiliate
within the 12-month period ending on the date hereof
(e) Except as Previously Disclosed, (i) no PURCHASER Company has
any obligations for retiree health and life benefits under any of the PURCHASER
Benefit Plans and (ii) there are no restrictions on the rights of such PURCHASER
Company to amend or terminate any such Plan without incurring any Liability
thereunder, which Liability is reasonably likely to have a Material Adverse
Effect on PURCHASER.
(f) Except as Previously Disclosed, neither the execution and
delivery of this Agreement nor the consummation of the transactions contemplated
hereby will (i) result in any payment (including, without limitation, severance,
unemployment compensation, golden parachute or otherwise) becoming due to any
director or any employee of any PURCHASER Company from any PURCHASER Company
under any PURCHASER Benefit Plan or otherwise, (ii) increase any benefits
otherwise payable under any PURCHASER Benefit Plan, or (iii) result in any
acceleration of the time of payment or vesting of any such benefit.
(g) The actuarial present values of all accrued deferred
compensation entitlements (including, without limitation, entitlements under any
executive compensation, supplemental retirement, or employment agreement) of
employees and former employees of any PURCHASER Company and their respective
beneficiaries, other than entitlements accrued pursuant to funded retirement
plans subject to the provisions of Section 412 of the Internal Revenue Code or
Section 302 of ERISA, have been fully reflected on the PURCHASER Financial
Statements to the extent required by and in accordance with GAAP.
5.15 LEGAL PROCEEDINGS. There is no Litigation instituted or pending,
-----------------
or, to the Knowledge of PURCHASER, threatened (or unasserted but considered
probable of assertion and which if asserted would have at least a reasonable
probability of an unfavorable outcome) against any PURCHASER Company, or against
any Asset, interest, or right of any of them, that is reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on PURCHASER, nor
are there any Orders of any Regulatory Authorities, other governmental
authorities, or arbitrators outstanding against any PURCHASER Company, that are
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on PURCHASER.
5.16 REPORTS. Since January 1, 1993, each PURCHASER Company has timely
-------
filed all reports and statements, together with any amendments required to be
made with respect thereto, that it was required to file with (a) the SEC,
including, but not limited to, Forms 10-K, Forms 10-Q, Forms 8-K, and proxy
statements, (b) other Regulatory Authorities, and (c) any applicable state
securities or banking authorities (except, in the case of state securities
authorities, failures to file which are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect
25
<PAGE>
on PURCHASER). As of their respective dates, each of such reports and
documents, including the financial statements, exhibits, and schedules thereto,
complied in all material respects with all applicable Laws. As of its
respective date, none of such reports and documents contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements made therein, in light of the
circumstances under which they were made, not misleading.
5.17 STATEMENTS TRUE AND CORRECT. No statement, certificate, instrument
---------------------------
or other writing furnished or to be furnished by any PURCHASER Company or any
Affiliate thereof to TARGET pursuant to this Agreement or any other document,
agreement or instrument referred to herein contains or will contain any untrue
statement of material fact or will omit to state a material fact necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading. None of the information supplied or to be supplied by any
PURCHASER Company or any Affiliate thereof for inclusion in the Registration
Statement to be filed by PURCHASER with the SEC, will, when the Registration
Statement becomes effective, be false or misleading with respect to any material
fact, or omit to state any material fact necessary to make the statements
therein not misleading. None of the information supplied or to be supplied by
any PURCHASER Company or any Affiliate thereof for inclusion in the Proxy
Statement to be mailed to TARGET's shareholders in connection with the
Shareholders' Meeting, and any other documents to be filed by any PURCHASER
Company or any Affiliate thereof with the SEC or any other Regulatory Authority
in connection with the transactions contemplated hereby, will, at the respective
time such documents are filed, and with respect to the Proxy Statement, when
first mailed to the shareholders of TARGET, be false or misleading with respect
to any material fact, or omit to state any material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, or, in the case of the Proxy Statement or any amendment thereof
or supplement thereto, at the time of the Shareholders' Meeting, be false or
misleading with respect to any material fact, or omit to state any material fact
necessary to correct any statement in any earlier communication with respect to
the solicitation of any proxy for the Shareholders' Meeting. All documents that
any PURCHASER Company or any Affiliate thereof is responsible for filing with
any Regulatory Authority in connection with the transactions contemplated hereby
will comply as to form in all material respects with the provisions of
applicable Law.
5.18 ACCOUNTING, TAX AND REGULATORY MATTERS. No PURCHASER Company or any
--------------------------------------
Affiliate thereof has taken any action or has any Knowledge of any fact or
circumstance that is reasonably likely to (a) prevent the transactions
contemplated hereby, including the Merger, from qualifying as a reorganization
within the meaning of Section 368(a) of the Internal Revenue Code, or (b)
materially impede or delay receipt of any Consents of Regulatory Authorities
referred to in Section 9.1(b) of this Agreement or result in the imposition of a
condition or restriction of the type referred to in the second sentence of such
Section. To the Knowledge of PURCHASER, there exists no fact, circumstance, or
reason why the requisite Consents referred to in Section 9.1(b) of this
Agreement cannot be received in a timely manner without the imposition of any
condition or restriction of the type described in the second sentence of such
Section 9.1(b).
5.19 CHARTER PROVISIONS. Each PURCHASER Company has taken all action so
------------------
that the entering into of this Agreement and the consummation of the Merger and
the other transactions contemplated by this Agreement do not and will not result
in the grant of any rights to any Person
26
<PAGE>
under the Articles of Incorporation, Bylaws or other governing instruments of
any PURCHASER Company or restrict or impair the ability of any TARGET
shareholder to vote, or otherwise to exercise the rights of a shareholder with
respect to, shares of PURCHASER Common Stock that may be acquired or controlled
by it.
ARTICLE 6
CONDUCT OF BUSINESS PENDING CONSUMMATION
----------------------------------------
6.1 AFFIRMATIVE COVENANTS OF TARGET. Unless the prior written consent
-------------------------------
of PURCHASER shall have been obtained, and except as otherwise contemplated
herein, TARGET shall, and shall cause each of its Subsidiaries: (a) to operate
its business in the usual, regular, and ordinary course; (b) to preserve intact
its business organization and Assets and maintain its rights and franchises; (c)
to use its reasonable efforts to cause its representations and warranties to be
correct at all times; and (d) to take no action which would (i) adversely affect
the ability of any Party to obtain any Consents required for the transactions
contemplated hereby without imposition of a condition or restriction of the type
referred to in the second sentence of Section 8.1(b) of this Agreement or (ii)
adversely affect in any material respect the ability of either Party to perform
its covenants and agreements under this Agreement.
6.2 NEGATIVE COVENANTS OF TARGET. From the date of this Agreement until
----------------------------
the earlier of the Effective Time or the termination of this Agreement, TARGET
covenants and agrees that it will not do or agree or commit to do, or permit any
of its Subsidiaries to do or agree or commit to do, any of the following without
the prior written consent of the chief executive officer or chief financial
officer of PURCHASER, which consent shall not be unreasonably withheld:
(a) amend the Articles of Incorporation, Bylaws or other governing
instruments of any TARGET Company; or
(b) incur any additional debt obligation or other obligation for
borrowed money (other than indebtedness of a TARGET Company to another TARGET
Company) in excess of an aggregate of $50,000 (for the TARGET Companies on a
consolidated basis) except in the ordinary course of the business of TARGET
Companies consistent with past practices (which shall include, for TARGET
Subsidiaries that are depository institutions, creation of deposit liabilities,
purchases of federal funds, and entry into repurchase agreements fully secured
by U.S. government or agency securities), or impose, or suffer the imposition,
on any share of stock held by any TARGET Company of any Lien or permit any such
Lien to exist, except with regard to Liens on the stock of TARGET Bank
Previously Disclosed; or
(c) repurchase, redeem, or otherwise acquire or exchange (other
than exchanges in the ordinary course under employee benefit plans), directly or
indirectly, any shares, or any securities convertible into any shares, of the
capital stock of any TARGET Company, or declare or pay any dividend or make any
other distribution in respect of TARGET's capital stock; or
27
<PAGE>
(d) except for this Agreement, or pursuant to the exercise of stock
options outstanding as of the date hereof and pursuant to the terms thereof in
existence on the date hereto, or as Previously Disclosed, issue, sell, pledge,
encumber, authorize the issuance of, or enter into any Contract to issue, sell,
pledge, encumber, or authorize the issuance of or otherwise permit to become
outstanding, any additional shares of TARGET Common Stock or any other capital
stock of any TARGET Company, or any stock appreciation rights, or any option,
warrant, conversion, or other right to acquire any such stock, or any security
convertible into any such stock; or
(e) adjust, split, combine or reclassify any capital stock of any
TARGET Company or issue or authorize the issuance of any other securities in
respect of or in substitution for shares of TARGET Common Stock or sell, lease,
mortgage or otherwise dispose of or otherwise encumber (i) any shares of capital
stock of any TARGET Subsidiary (unless any such shares of stock are sold or
otherwise transferred to another TARGET Company) or (ii) any Asset having a book
value in excess of $50,000 other than in the ordinary course of business for
reasonable and adequate consideration; or
(f) acquire direct or indirect control over any Person, other than
in connection with (i) internal reorganizations or consolidations involving
existing Subsidiaries, (ii) foreclosures in the ordinary course of business, or
(iii) acquisitions of control by a depository institution Subsidiary in its
fiduciary capacity; or
(g) grant any increase in compensation or benefits to the employees
or officers of any TARGET Company (including such discretionary increases as may
be contemplated by existing employment agreements), except in accordance with
past practice Previously Disclosed or as required by Law; pay any bonus except
in accordance with past practice Previously Disclosed or the provisions of any
applicable program or plan adopted by its Board of Directors prior to the date
of this Agreement; enter into or amend any severance agreements with officers of
any TARGET Company; grant any increase in fees or other increases in
compensation or other benefits to directors of any TARGET Company except in
accordance with past practice Previously Disclosed; or
(h) except with regard to the employment agreements referenced in
Section 6.2(g), enter into or amend any employment Contract between any TARGET
Company and any Person (unless such amendment is required by Law) that the
TARGET Company does not have the unconditional right to terminate without
Liability (other than Liability for services already rendered), at any time on
or after the Effective Time; or
(i) adopt any new employee benefit plan of any TARGET Company or
make any material change in or to any existing employee benefit plans of any
TARGET Company other than any such change that is required by Law or that, in
the opinion of counsel, is necessary or advisable to maintain the tax qualified
status of any such plan; or
(j) make any significant change in any accounting methods or
systems of internal accounting controls, except as may be appropriate to conform
to changes in regulatory accounting requirements or GAAP; or
28
<PAGE>
(k) commence any Litigation other than in accordance with past
practice, settle any Litigation involving any Liability of any TARGET Company
for money damages in excess of $50,000 or which involves material restrictions
upon the operations of any TARGET Company; or
(l) except in the ordinary course of business, modify, amend or
terminate any material Contract or waive, release, compromise or assign any
material rights or claims.
6.3 COVENANTS OF PURCHASER. From the date of this Agreement until the
----------------------
earlier of the Effective Time or the termination of this Agreement, PURCHASER
covenants and agrees that it shall continue to conduct its business and the
business of its Subsidiaries in a manner designed in its reasonable judgment, to
enhance the long-term value of the PURCHASER Common Stock and the business
prospects of the PURCHASER Companies and, to the extent consistent therewith, to
use all reasonable efforts to preserve intact the PURCHASER Companies' core
businesses and goodwill with their respective employees and the communities they
serve.
6.4 ADVERSE CHANGES IN CONDITION. Each Party agrees to give written
----------------------------
notice promptly to the other Party upon becoming aware of the occurrence or
impending occurrence of any event or circumstance relating to it or any of its
Subsidiaries which (a) is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on it or (b) is reasonably likely to cause
or constitute a material breach of any of its representations, warranties, or
covenants contained herein, and to use its best efforts to prevent or promptly
to remedy the same.
6.5 REPORTS. Each Party and its Subsidiaries shall file all reports
-------
required to be filed by it with Regulatory Authorities between the date of this
Agreement and the Effective Time and shall deliver to the other Party copies of
all such reports promptly after the same are filed. If financial statements are
contained in any such reports filed with the SEC, such financial statements will
fairly present the consolidated financial position of the entity filing such
statements as of the dates indicated and the consolidated results of operations,
changes in shareholders' equity, and cash flows for the periods then ended in
accordance with GAAP (subject in the case of interim financial statements to
normal recurring year-end adjustments that are not material). As of their
respective dates, such reports filed with the SEC will comply in all material
respects with the Securities Laws and will not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading. Any financial statements contained
in any other reports to another Regulatory Authority shall be prepared in
accordance with Laws applicable to such reports.
ARTICLE 7
ADDITIONAL AGREEMENTS
---------------------
7.1 REGISTRATION STATEMENT; PROXY STATEMENT; SHAREHOLDER APPROVAL. As
-------------------------------------------------------------
soon as practicable after execution of this Agreement, PURCHASER shall file the
Registration Statement with the SEC, and shall use its best efforts to cause the
Registration Statement to become effective under the 1933 Act and take any
action required to be taken under the applicable state Blue Sky or securities
Laws in connection with the issuance of the shares of PURCHASER Common Stock
upon
29
<PAGE>
consummation of the Merger. TARGET shall furnish all information concerning it
and the holders of its capital stock as PURCHASER may reasonably request in
connection with such action. TARGET shall call a Shareholders' Meeting, to be
held as soon as reasonably practicable after the Registration Statement is
declared effective by the SEC, for the purpose of voting upon approval of the
Merger and this Agreement and such other related matters as it deems
appropriate. In connection with the Shareholders' Meeting, (a) PURCHASER shall
prepare and file on TARGET's behalf a Proxy Statement (which shall be included
in the Registration Statement) with the SEC and mail it to its shareholders, (b)
the Parties shall furnish to each other all information concerning them that
they may reasonably request in connection with such Proxy Statement, (c) the
Board of Directors of TARGET shall recommend (subject to compliance with their
fiduciary duties as advised by counsel) to its shareholders that they approve
this Agreement, and (d) the Board of Directors and officers of TARGET shall use
their reasonable efforts to obtain such shareholders' approval (subject to
compliance with their fiduciary duties as advised by counsel).
7.2 LISTING. PURCHASER shall use its best efforts to list, prior to the
-------
Effective Time, on the NASDAQ/NMS, the shares of PURCHASER Common Stock to be
issued to the holders of TARGET Common Stock pursuant to the Merger.
7.3 APPLICATIONS. PURCHASER shall promptly prepare and file, and TARGET
------------
shall cooperate in the preparation and, where appropriate, filing of,
applications with all Regulatory Authorities having jurisdiction over the
transactions contemplated by this Agreement seeking the requisite Consents
necessary to consummate the transactions contemplated by this Agreement.
7.4 FILINGS WITH STATE OFFICES. Upon the terms and subject to the
--------------------------
conditions of this Agreement, PURCHASER shall execute and file the Articles of
Merger with the Secretary of State of the State of Georgia in connection with
the Closing.
7.5 AGREEMENT AS TO EFFORTS TO CONSUMMATE. Subject to the terms and
-------------------------------------
conditions of this Agreement, each Party agrees to use, and to cause its
Subsidiaries to use, its best efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, all things necessary, proper, or
advisable under applicable Laws, as promptly as practicable so as to permit
consummation of the Merger at the earliest possible date and to otherwise enable
consummation of the transactions contemplated hereby and shall cooperate fully
with the other Party hereto to that end (it being understood that any amendments
to the Registration Statement filed by PURCHASER in connection with the
PURCHASER Common Stock to be issued in the Merger or a resolicitation of proxies
as a consequence of an acquisition agreement by PURCHASER or any of its
Subsidiaries shall not violate this covenant), including, without limitation,
using its efforts to lift or rescind any Order adversely affecting its ability
to consummate the transactions contemplated herein and to cause to be satisfied
the conditions referred to in Article 9 of this Agreement. Each Party shall
use, and shall cause each of its Subsidiaries to use, its best efforts to obtain
all Consents necessary or desirable for the consummation of the transactions
contemplated by this Agreement.
7.6 INVESTIGATION AND CONFIDENTIALITY.
---------------------------------
(a) Prior to the Effective Time, each Party will keep the other
Party advised of all material developments relevant to its business and to
consummation of the Merger and shall
30
<PAGE>
permit the other Party to make or cause to be made such investigation of the
business and properties of it and its Subsidiaries and of their respective
financial and legal conditions as the other Party reasonably requests, provided
that such investigation shall be reasonably related to the transactions
contemplated hereby and shall not interfere unnecessarily with normal
operations. No investigation by a Party shall affect the representations and
warranties of the other Party.
(b) Except as may be required by applicable law or legal process,
and except for such disclosure to those of its directors, officers, employees
and representatives as may be appropriate or required in connection with the
transactions contemplated hereby, each Party shall hold in confidence all
nonpublic information obtained from the other Party (including work papers and
other material derived therefrom) as a result of this Agreement or in connection
with the transactions contemplated hereby (whether so obtained before or after
the execution hereof) until such time as the Party providing such information
consents to its disclosure or such information becomes otherwise publicly
available. Promptly following any termination of this Agreement, each of the
Parties agrees to use its best efforts to cause its respective directors,
officers, employees and representatives to destroy or return to the providing
party all such nonpublic information (including work papers and other material
retrieved therefrom), including all copies thereof. Each Party shall, and shall
cause its advisers and agents to, maintain the confidentiality of all
confidential information furnished to it by the other Party concerning its and
its Subsidiaries' businesses, operations, and financial positions and shall not
use such information for any purpose except in furtherance of the transactions
contemplated by this Agreement. If this Agreement is terminated prior to the
Effective Time, each Party shall promptly return all documents and copies
thereof and all work papers containing confidential information received from
the other Party, except one copy of certain materials that can be retained for
legal files in accordance with the provisions of the Confidentiality Agreements.
(c) Each Party agrees to give the other Party notice as soon as
practicable after any determination by it of any fact or occurrence relating to
the other Party which it has discovered through the course of its investigation
and which represents, or is reasonably likely to represent, either a material
breach of any representation, warranty, covenant or agreement of the other Party
or which has had or is reasonably likely to have a Material Adverse Effect on
the other Party.
7.7 PRESS RELEASES. Prior to the Effective Time, TARGET and PURCHASER
--------------
shall consult with each other as to the form and substance of any press release
or other public disclosure materially related to this Agreement or any other
transaction contemplated hereby; provided, however, that nothing in this Section
7.7 shall be deemed to prohibit any Party from making any disclosure which its
counsel deems necessary or advisable in order to satisfy such Party's disclosure
obligations imposed by Law.
7.8 NO SOLICITATION.
---------------
(a) TARGET shall not, nor shall it permit any of its Subsidiaries
to, nor shall it authorize or permit any officer, director of employee of, or
any investment banker, attorney or other advisor or representative of, TARGET or
any of its Subsidiaries to, (i) solicit or initiate, or encourage the submission
of, any takeover proposal or (ii) participate in any discussions or negotiations
regarding, or furnish to any person any information with respect to, or take any
other
31
<PAGE>
action to facilitate any inquiries or the making of any proposal that
constitutes, or may reasonably be expected to lead to, any takeover proposal;
provided, however, that, if in the opinion of its Board of Directors, after
consultation with counsel, such failure to act would be inconsistent with its
fiduciary duties to stockholders under applicable law, TARGET may, in response
to an unsolicited takeover proposal, and subject to compliance with subparagraph
(c) below, (A) furnish information with respect to TARGET to any Person pursuant
to a confidentiality agreement and (B) participate in negotiations regarding
such takeover proposal. Without limiting the foregoing, it is understood that
any violation of the restrictions set forth in the immediately preceding
sentence by any executive officer of TARGET or any of its Subsidiaries or any
investment banker, attorney or other advisor or representative of TARGET or any
of its Subsidiaries, whether or not such person is purporting to act on behalf
of TARGET or any of its Subsidiaries or otherwise, shall be deemed to be a
breach of this Section 7.8 by TARGET. For purposes of this Agreement, "takeover
proposal" means an inquiry, proposal or acquisition or purchase of a substantial
amount of assets of TARGET or any of its Subsidiaries (other than investors in
the ordinary course of business) or of over 20% of any class of equity
securities of TARGET or any of its Subsidiaries or any tender offer or exchange
offer that if consummated would result in any Person beneficially owning 20% or
more of any class of equity securities of TARGET or any of its Subsidiaries, or
any merger, consolidation, business combination, sale of substantially all
assets, recapitalization, liquidation, dissolution or similar transaction
involving TARGET or any of its Subsidiaries other than the transactions
contemplated by this Agreement, or any other transaction the consummation of
which would reasonably be expected to impede, interfere with, prevent or
materially delay the Merger or which would reasonably be expected to dilute
materially the benefits to PURCHASER of the transactions contemplated hereby.
(b) Except as set forth herein, neither the Board of Directors of
TARGET nor any committee thereof shall (i) withdraw or modify, or propose to
withdraw or modify, in a manner adverse to PURCHASER, the approval or
recommendation of such Board of Directors or any such committee of this
Agreement or the Merger, (ii) approve or recommend, or propose to approve or
recommend, any takeover proposal or (iii) enter into any agreement with respect
to any takeover proposal. Notwithstanding the foregoing, if in the opinion of
the TARGET Board of Directors, after consultation with counsel, failure to do so
would be inconsistent with its fiduciary duties to TARGET stockholders under
applicable law, then, prior to the Shareholders' Meeting, the TARGET Board of
Directors may (subject to the terms of this and the following sentences)
withdraw or modify its approval or recommendation of this Agreement or the
Merger, approve or recommend a superior proposal, or enter into an agreement
with respect to a superior proposal, in each case at any time after the second
business day following PURCHASER'S receipt of written notice (a "Notice of
Superior Proposal") advising PURCHASER that the TARGET Board of Directors has
received a superior proposal, specifying the material terms and conditions of
such superior proposal and identifying the Person making such superior proposal;
provided that TARGET shall not enter into an agreement with respect to a
superior proposal unless TARGET shall have furnished PURCHASER with written
notice no later than 12:00 noon one (1) day in advance of any date that it
intends to enter into such agreement. In addition, if TARGET proposes to enter
into an agreement with respect to any takeover proposal, it shall concurrently
with entering into such agreement pay, or cause to be paid, to PURCHASER the
Expenses (as defined in Section 10.2(a) and to the extent provided by Section
10.2(b)) and the Termination Fee (as defined in Section 10.2(b)). For purposes
of this Agreement, a "superior proposal" means any bona fide takeover proposal
to acquire, directly
32
<PAGE>
or indirectly, for consideration consisting of cash and/or securities, more than
50% of the shares of TARGET Common Stock or TARGET Bank then outstanding or all
or substantially all of the assets of TARGET or TARGET Bank and otherwise on
terms which the TARGET Board of Directors determines in its good faith judgment
(based on the advice of a financial advisor of nationally recognized reputation)
to be more favorable to its shareholders than the Merger.
(c) In addition to the obligations of TARGET set forth in paragraph
(b) above, TARGET shall immediately advise PURCHASER orally and in writing of
any request for information or of any takeover proposal, or any inquiry with
respect to or which could lead to any takeover proposal, the material terms and
conditions of such request, takeover proposal or inquiry, and the identity of
the person making any takeover proposal or inquiry. TARGET shall keep PURCHASER
fully informed of the status and details (including amendments or proposed
amendments) of any such request, takeover proposal or inquiry.
(d) Nothing contained in this Section 7.8 shall prohibit TARGET
from making any disclosure to TARGET's shareholders if, in the opinion of the
TARGET Board of Directors, after consultation with counsel, failure to so
disclose would be inconsistent with its fiduciary duties to its shareholders
under applicable law; provided that TARGET does not, except as permitted by
subparagraph (b) above, withdraw or modify, or propose to withdraw or modify,
its position with respect to the Merger or approve or recommend, or propose to
approve or recommend, a takeover proposal.
7.9 TAX TREATMENT. Each of the Parties undertakes and agrees to use its
-------------
reasonable efforts to cause the Merger, and to take no action which would cause
the Merger not, to qualify for treatment as a "reorganization" within the
meaning of Section 368(a) of the Internal Revenue Code for federal income tax
purposes.
7.10 AGREEMENT OF AFFILIATES. TARGET has Previously Disclosed all
-----------------------
Persons whom it reasonably believes are "affiliates" of TARGET for purposes of
Rule 145 under the 1933 Act. TARGET shall use its reasonable efforts to cause
each such Person to deliver to PURCHASER not later than thirty (30) days after
the date of this Agreement, a written agreement, substantially in the form of
Exhibit 1 hereto, providing that such Person will not sell, pledge, transfer, or
otherwise dispose of the shares of TARGET Common Stock held by such Person
except as contemplated by such agreement or by this Agreement and will not sell,
pledge, transfer, or otherwise dispose of the shares of PURCHASER Common Stock
to be received by such Person upon consummation of the Merger except in
compliance with applicable provisions of the 1933 Act and the rules and
regulations thereunder. Regardless of whether each such affiliate has provided
the written agreement referred to in this Section, PURCHASER shall be entitled
to place restrictive legends upon certificates for shares of PURCHASER Common
Stock issued to affiliates of TARGET pursuant to this Agreement to enforce the
provisions of this Section. PURCHASER shall not be required to maintain the
effectiveness of the Registration Statement under the 1933 Act for the purposes
of resale of PURCHASER Common Stock by such affiliates, except as may be
expressly set forth herein.
7.11 EMPLOYEE BENEFITS AND CONTRACTS. Following the Effective Time,
-------------------------------
PURCHASER shall provide generally to officers and employees of the TARGET
Companies employee benefits under employee benefit plans (other than stock
option or other plans involving the potential issuance
33
<PAGE>
of PURCHASER Common Stock), on terms and conditions which when taken as a whole
are substantially similar to those currently provided by the PURCHASER Companies
to their similarly situated officers and employees, provided that for a period
of twelve (12) months after the Effective Time, PURCHASER shall provide
generally to officers and employees of TARGET Companies severance benefits in
accordance with the policies of either (i) TARGET as Previously Disclosed, or
(ii) PURCHASER, whichever of (i) or (ii) will provide the greater benefit to the
officer or employee. For purposes of participation and vesting under such
employee benefit plans, the service of the employees of the TARGET Companies
prior to the Effective Time shall be treated as service with a PURCHASER Company
participating in such employee benefit plans. PURCHASER also shall honor in
accordance with their terms all employment, severance, consulting and other
compensation Contracts Previously Disclosed to PURCHASER between any TARGET
Company and any current or former director, officer, or employee thereof and all
provisions for vested benefits or other vested amounts earned or accrued through
the Effective Time under the TARGET Benefit Plans.
7.12 LARGE DEPOSITS. Prior to the Closing, TARGET will provide PURCHASER
--------------
with a list of all certificates of deposit or checking, savings or other
deposits owned by persons who, to the Knowledge of the TARGET, had deposits
aggregating more than $100,000 and a list of all certificates of deposit or
checking, savings or other deposits owned by directors and officers of TARGET
and the Bank and their affiliates in an amount aggregating more than $100,000 as
of the last day of the calendar month immediately prior to the Closing.
7.13 INDEMNIFICATION AGAINST CERTAIN LIABILITIES. PURCHASER agrees that
-------------------------------------------
all rights to indemnification and all limitations of liability existing in favor
of the officers and directors of TARGET and TARGET Bank ("Indemnified Parties")
as provided in their respective articles of incorporation and bylaws as of the
date hereof with respect to matters occurring prior to the Effective Time shall
survive the Merger and shall continue in full force and effect, without any
amendment thereto, for a period of not less than six (6) years from the
Effective Time; provided, however, that all rights to any indemnification in
respect of any claim asserted or made within such period shall continue until
the final disposition of such claim.
7.14 REGISTRATION RIGHTS AND ELECTION AGREEMENT. Concurrent with the
------------------------------------------
execution hereof, Winn F. Martin shall execute and deliver a Registration Rights
and Election Agreement substantially in the from of Exhibit 3 hereto.
7.15 IRREVOCABLE PROXIES. Concurrent with the execution hereof, TARGET
-------------------
shall obtain and deliver to PURCHASER irrevocable proxies in substantially the
form of Exhibit 6 hereto from Affiliates of TARGET holding in the aggregate 51%
of the Outstanding TARGET Shares.
7.16 RESERVE FOR SNEAD ANNUITY. Prior to the Closing, PURCHASER shall
-------------------------
cause Mauldin & Jenkins ("M&J") and TARGET shall cause KPMG Peat Marwick ("Peat
Marwick") to determine the amount of the reserve which TARGET should establish
with respect to the annuity payable to Thomas Snead and/or Jacqueline Tew Snead
pursuant to that certain Agreement in Principle by and between TARGET and Mr.
and Mrs. Snead dated as of August 17, 1989 (the "Snead Reserve"). If the amount
of the Snead Reserve determined by M&J and the amount of the Snead Reserve
determined by Peat Marwick are within $25,000 of each other, then the amount of
34
<PAGE>
the Snead Reserve shall be equal to the average of the amounts so determined.
If the amounts of the Snead Reserve so determined differ by more than $25,000,
then M&J and Peat Marwick shall mutually select and appoint a third independent
accounting firm to determine the amount of the Snead Reserve, in which event the
amount of the Snead Reserve shall be equal to the result obtained by averaging
the two of the three amounts which deviate the least from the average of the
first two amounts so determined. Each party will bear equally the fees and
expenses of the independent accounting firm mutually selected, but each party
shall be solely responsible for the fees and expenses of any independent
accounting firm selected solely by such party. Upon the final determination of
the amount of the Snead Reserve, TARGET shall establish a reserve on its books
in an amount equal to fifty percent (50%) of the amount of the Snead Reserve
determined in accordance herewith.
ARTICLE 8
CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE
-------------------------------------------------
8.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY. The respective obligations
---------------------------------------
of each Party to perform this Agreement and consummate the Merger and the other
transactions contemplated hereby are subject to the satisfaction of the
following conditions, unless waived by both Parties pursuant to Section 10.6 of
this Agreement:
(a) SHAREHOLDER APPROVAL. The shareholders of TARGET shall have
--------------------
approved this Agreement, and the consummation of the transactions contemplated
hereby, including the Merger, as and to the extent required by Law or by the
provisions of any governing instruments.
(b) REGULATORY APPROVALS. All Consents of, filings and
--------------------
registrations with, and notifications to, all Regulatory Authorities required
for consummation of the Merger shall have been obtained or made and shall be in
full force and effect, and all waiting periods required by Law shall have
expired. No Consent obtained from any Regulatory Authority which is necessary to
consummate the transactions contemplated hereby shall be conditioned or
restricted in a manner (including, without limitation, requirements relating to
the raising of additional capital or the disposition of Assets) which, in the
reasonable judgment of the Board of Directors of either Party, would so
materially adversely impact the economic or business benefits of the
transactions contemplated by this Agreement so as to render inadvisable the
consummation of the Merger; provided, however, that no such condition or
restriction shall be deemed to be materially adverse unless it materially
differs from terms and conditions customarily imposed by any Regulatory
Authority in connection with similar transactions.
(c) CONSENTS AND APPROVALS. Each Party shall have obtained any and
----------------------
all Consents required for consummation of the Merger (other than those referred
to in Section 8.1(b) of this Agreement) or for the preventing of any Default
under any Contract or Permit of such Party which, if not obtained or made, is
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on such Party.
(d) LEGAL PROCEEDINGS. No court or governmental or regulatory
-----------------
authority of competent jurisdiction shall have enacted, issued, promulgated,
enforced or entered any Law or
35
<PAGE>
Order (whether temporary, preliminary or permanent) or taken any other action
which prohibits, materially restricts or makes illegal consummation of the
transactions contemplated by this Agreement.
(e) REGISTRATION STATEMENT. The Registration Statement shall be
----------------------
effective under the 1933 Act, no stop orders suspending the effectiveness of the
Registration Statement shall have been issued, no action, suit, proceeding or
investigation by the SEC to suspend the effectiveness thereof shall have been
initiated and be continuing, and all necessary approvals under state securities
Laws or the 1933 Act or 1934 Act relating to the issuance or trading of the
shares of PURCHASER Common Stock issuable pursuant to the Merger shall have been
received.
(f) NASD LISTING. The shares of PURCHASER Common Stock issuable
------------
pursuant to the Merger shall have been approved for listing on the NASDAQ/NMS.
(g) TAX MATTERS. TARGET shall have received a written opinion of
-----------
counsel from Rogers & Hardin, in form reasonably satisfactory to it,
substantially to the effect that for federal income tax purposes (a) the Merger
will constitute a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code, and (b) the exchange in the Merger of TARGET Common Stock
for PURCHASER Common Stock will not give rise to gain or loss to the
stockholders of TARGET with respect to such exchange (except to the extent of
any cash received).
8.2 CONDITIONS TO OBLIGATIONS OF PURCHASER. The obligations of
--------------------------------------
PURCHASER to perform this Agreement and consummate the Merger and the other
transactions contemplated hereby are subject to the satisfaction of the
following conditions, unless waived by PURCHASER pursuant to Section 10.6(a) of
this Agreement:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
------------------------------
warranties of TARGET set forth or referred to in this Agreement shall be true
and correct in all respects as of the date of this Agreement and as of the
Effective Time with the same effect as though all such representations and
warranties had been made on and as of the Effective Time (provided that
representations and warranties which are confined to a specified date shall
speak only as of such date), except (i) as expressly contemplated by this
Agreement, or (ii) for representations and warranties (other than the
representations and warranties set forth in Section 4.3 of this Agreement, which
shall be true in all respects) the inaccuracies of which relate to matters that
are not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on TARGET.
(b) PERFORMANCE OF AGREEMENTS AND COVENANTS. Each and all of the
---------------------------------------
agreements and covenants of TARGET to be performed and complied with pursuant to
this Agreement and the other agreements contemplated hereby prior to the
Effective Time shall have been duly performed and complied with in all material
respects.
(c) CERTIFICATES. TARGET shall have delivered to PURCHASER (i) a
------------
certificate, dated as of the Effective Time and signed on its behalf by its
chief executive officer, to the effect that the conditions of its obligations
set forth in Sections 8.2(a) and 8.2(b) of this Agreement have been satisfied in
all material respects, and (ii) certified copies of resolutions duly adopted by
TARGET's Board of Directors and shareholders evidencing the taking of all
corporate
36
<PAGE>
action necessary to authorize the execution, delivery and performance of this
Agreement, and the consummation of the transactions contemplated hereby, all in
such reasonable detail as PURCHASER and its counsel shall reasonably request.
(d) OPINION OF COUNSEL. TARGET shall have delivered to PURCHASER
------------------
an opinion of Balch & Bingham, counsel to TARGET, dated as of the Closing, in
substantially the form of Exhibit 2 hereto.
(e) ACCOUNTANT'S LETTERS. PURCHASER shall have received from KPMG
--------------------
Peat Marwick letters dated not more than five (5) days prior to (i) the date of
the Proxy Statement and (ii) the Effective Time, with respect to certain
financial information regarding TARGET, in form and substance reasonably
satisfactory to PURCHASER, which letters shall be based upon customary specified
procedures undertaken by such firm.
(f) EMPLOYMENT AGREEMENT. John E. Meyer, Jr. shall have executed
--------------------
and delivered an Employment Agreement substantially in the form of Exhibit 4
hereto, and TARGET and Mr. Meyer shall have cancelled and terminated, to the
satisfaction of PURCHASER, that certain Employment Agreement between them dated
as of November 17, 1993, as amended.
8.3 CONDITIONS TO OBLIGATIONS OF TARGET. The obligations of TARGET to
-----------------------------------
perform this Agreement and consummate the Merger and the other transactions
contemplated hereby are subject to the satisfaction of the following conditions,
unless waived by TARGET pursuant to Section 10.6(b) of this Agreement:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
------------------------------
warranties of PURCHASER set forth or referred to in this Agreement shall be true
and correct in all respects as of the date of this Agreement and as of the
Effective Time with the same effect as though all such representations and
warranties had been made on and as of the Effective Time (provided that
representations and warranties which are confined to a specified date shall
speak only as of such date), except (i) as expressly contemplated by this
Agreement, or (ii) for representations and warranties (other than the
representations and warranties set forth in Section 5.3 of this Agreement, which
shall be true in all respects) the inaccuracies of which relate to matters that
are not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on PURCHASER.
(b) PERFORMANCE OF AGREEMENTS AND COVENANTS. Each and all of the
---------------------------------------
agreements and covenants of PURCHASER to be performed and complied with pursuant
to this Agreement and the other agreements contemplated hereby prior to the
Effective Time shall have been duly performed and complied with in all material
respects.
(c) CERTIFICATES. PURCHASER shall have delivered to TARGET (i) a
------------
certificate, dated as of the Effective Time and signed on its behalf by its
chief executive officer and its chief financial officer, to the effect that the
conditions of its obligations set forth in Section 8.3(a) and 8.3(b) of this
Agreement have been satisfied in all material respects, and (ii) certified
copies of resolutions duly adopted by PURCHASER's Board of Directors evidencing
the taking of all corporate action necessary to authorize the execution,
delivery and performance of this Agreement,
37
<PAGE>
and the consummation of the transactions contemplated hereby, all in such
reasonable detail as TARGET and its counsel shall reasonably request.
(d) OPINION OF COUNSEL. PURCHASER shall have delivered to TARGET
------------------
an opinion of Rogers & Hardin, counsel to PURCHASER, dated as of the Closing, in
substantially the form of Exhibit 5 hereto.
ARTICLE 9
TERMINATION
-----------
9.1 TERMINATION. Notwithstanding any other provision of this Agreement,
-----------
and notwithstanding the approval of this Agreement by the shareholders of
TARGET, this Agreement may be terminated and the Merger abandoned at any time
prior to the Effective Time:
(a) By mutual consent of the Board of Directors of PURCHASER and
the Board of Directors of TARGET; or
(b) By the Board of Directors of either Party (provided that the
terminating Party is not then in material breach of any representation,
warranty, covenant, or other agreement contained in this Agreement) in the event
of a material breach by the other Party of any representation or warranty
contained in this Agreement which cannot be or has not been cured within thirty
(30) days after the giving of written notice to the breaching Party of such
breach and which breach would provide the non-breaching party the ability to
refuse to consummate the Merger under the standard set forth in Section 8.2(a)
of this Agreement in the case of PURCHASER and Section 8.3(a) of this Agreement
in the case of TARGET; or
(c) By the Board of Directors of either Party (provided that the
terminating Party is not then in material breach of any representation,
warranty, covenant, or other agreement contained in this Agreement) in the event
of a material breach by the other Party of any covenant or agreement contained
in this Agreement which cannot be or has not been cured within (30) days after
the giving of written notice to the breaching Party of such breach; or
(d) By the Board of Directors of either Party (provided that the
terminating Party is not then in material breach of any representation,
warranty, covenant, or other agreement contained in this Agreement) in the event
(i) any Consent of any Regulatory Authority required for consummation of the
Merger and the other transactions contemplated hereby has been denied by final
nonappealable action of such authority or if any action taken by such authority
is not appealed within the time limit for appeal, or (ii) if the shareholders of
TARGET fail to approve this Agreement and the transactions contemplated hereby
as required by the ABCA at the Shareholders' Meetings where the transactions
were presented to such shareholders for approval and voted upon; or
(e) By the Board of Directors of either Party in the event that the
Merger shall not have been consummated by June 1, 1996, but only if the failure
to consummate the transactions contemplated hereby on or before such date is not
caused by any breach of this Agreement by the Party electing to terminate
pursuant to this Section 9.1 (e); or
38
<PAGE>
(f) By the Board of Directors of either Party (provided that the
terminating Party is not then in material breach of any representation,
warranty, covenant, or other agreement contained in this Agreement) in the event
that any of the conditions precedent to the obligations of such Party to
consummate the Merger cannot be satisfied or fulfilled by the date specified in
Section 9.1(e) of this Agreement.
(g) By the Board of Directors of TARGET in connection with entering
into a definitive agreement in accordance with Section 7.8(b), provided that it
has complied with all provisions thereof, including the notice provisions
therein, and that it makes simultaneous payment of the Expenses and the
Termination Fee.
9.2 EFFECT OF TERMINATION. In the event of the termination and
---------------------
abandonment of this Agreement pursuant to Section 9.1 of this Agreement, this
Agreement shall become void and have no effect, except that (i) the provisions
of this Section 9.2 and Sections 7.6(b), 7.8(b) and 10.2 of this Agreement shall
survive any such termination and abandonment, and (ii) a termination pursuant to
Section 9.1 of this Agreement shall not relieve the breaching Party from
Liability for an uncured willful breach of a representation, warranty, covenant,
or agreement giving rise to such termination.
ARTICLE 10
MISCELLANEOUS
-------------
10.1 DEFINITIONS. Except as otherwise provided herein, the capitalized
-----------
terms set forth below (in their singular and plural forms as applicable) shall
have the following meanings:
"ABCA" shall mean the Alabama Business Corporation Act.
"Acquisition Proposal" with respect to a Party shall mean any tender offer
or exchange offer or any proposal for a merger, acquisition of all of the stock
or Assets of, or other business combination involving such Party or any of its
Subsidiaries or the acquisition of a substantial equity interest in, or a
substantial portion of the Assets of, such Party or any of its Subsidiaries.
"Affiliate" of a Person shall mean: (a) any other Person directly, or
indirectly through one or more intermediaries, controlling, controlled by or
under common control with such Person or (b) any officer, director, partner,
employer, or direct or indirect beneficial owner of any 10% or greater equity or
voting interest of such Person.
"Agreement" shall mean this Agreement and Plan of Merger and the Exhibits
delivered pursuant hereto and incorporated herein by reference.
"Assets" of a Person shall mean all of the assets, properties, businesses
and rights of such Person of every kind, nature, character and description,
whether real, personal or mixed, tangible or intangible, accrued or contingent,
or otherwise relating to or utilized in such Person's business, directly or
indirectly, in whole or in part, whether or not carried on the books and records
of such
39
<PAGE>
Person, and whether or not owned in the name of such Person or any Affiliate of
such Person and wherever located.
"Base Period Trading Price" shall mean (i) $13.88 plus (B) the average of
the daily closing sales price of a share of PURCHASER Common Stock as reported
on NASDAQ/NMS for the twenty (20) consecutive trading days immediately preceding
five (5) consecutive calendar days immediately preceding the Effective Time (the
"Pre-Closing Base Period Trading Price"), divided by (ii) two (2); provided,
--------
however, that for purposes of this calculation, the Pre-Closing Base Trading
- -------
Price shall be deemed to equal (i) $18.00 in the event the Pre-Closing Base
Period Trading Price is greater than $18.00 or (ii) $10.00 in the event the Pre-
Closing Base Period Trading Price is less than $10.00.
"BHC Act" shall mean the federal Bank Holding Company Act of 1956, as
amended.
"Book Value" shall mean the book value of TARGET as calculated under GAAP.
"Cash Consideration" shall have the meaning provided in Section 3.1(b) of
this Agreement.
"Cash Election" shall have the meaning provided in Section 3.1(d) of this
Agreement.
"Cash Election Shares" shall have the meaning provided in Section 3.1(h) of
this Agreement.
"Closing" shall mean the closing of the transactions contemplated hereby,
as described in Section 1.2 of this Agreement.
"Closing Date" shall have the meaning provided in Section 1.2 of this
Agreement.
"Combination Election" shall have the meaning provided in Section 3.1(d) of
this Agreement.
"Consent" shall mean any consent, approval, authorization, clearance,
exemption, waiver, or similar affirmation by any Person pursuant to any
Contract, Law, Order, or Permit.
"Contract" shall mean any written or oral agreement, arrangement,
authorization, commitment, contract, indenture, instrument, lease, obligation,
plan, practice, restriction, understanding or undertaking of any kind or
character, or other document to which any Person is a party or that is binding
on any Person or its capital stock, Assets or business.
"Default" shall mean (a) any breach or violation of or default under any
Contract, Order or Permit, (b) any occurrence of any event that with the passage
of time or the giving of notice or both would constitute a breach or violation
of or default under any Contract, Order or Permit, or (c) any occurrence of any
event that with or without the passage of or the giving of notice would give
rise to a right to terminate or revoke, change the current terms of, or
renegotiate, or to accelerate, increase, or impose any Liability under, any
Contract, Order or Permit.
"Dissenting Shares" shall have the meaning provided in Section 3.1(b) of
this Agreement.
40
<PAGE>
"Dissenting TARGET Shareholders" shall have the meaning provided in Section
3.1(l) of this Agreement.
"Effective Time" shall mean the date and time at which the Merger becomes
effective as defined in Section 1.3 of this Agreement.
"Environmental Laws" shall mean all Laws which are administered,
interpreted or enforced by the United States Environmental Protection Agency and
state and local agencies with primary jurisdiction over pollution or protection
of the environment.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Plan" shall have the meaning provided in Section 4.14 of this
Agreement.
"Exchange Agent" shall have the meaning provided in Section 3.1(f) of this
Agreement.
"Exchange Ratio" shall have the meaning provided in Section 3.1(b) of this
Agreement.
"Exhibits" 1 through 6, inclusive, shall mean the Exhibits so marked,
copies of which are attached to this Agreement. Such Exhibits are hereby
incorporated by reference herein and made a part hereof and may be referred to
in this Agreement and any other related instrument or document without being
attached hereto.
"Expenses" shall have the meaning provided in Section 10.2 of this
Agreement.
"Form of Election" shall have the meaning provided in Section 3.1(d) of
this Agreement.
"GAAP" shall mean generally accepted accounting principles, consistently
applied during the periods involved.
"Georgia Articles of Merger" shall mean the Articles of Merger to be
executed by PURCHASER and filed with the Secretary of State of the State of
Georgia relating to the Merger as contemplated by Section 1.1 of this Agreement.
"GBCC" shall mean the Georgia Business Corporation Code.
"Hazardous Material" shall mean any pollutant, contaminant, or hazardous
substance within the meaning of the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, 42 U.S.C. (S) 9601 et seq.,
or any similar federal, state or local Law.
"Internal Revenue Code" shall mean the Internal Revenue Code of 1986, as
amended, and the rules and regulations promulgated thereunder.
"IRS" shall mean the Internal Revenue Service.
41
<PAGE>
"Knowledge" as used with respect to a Person shall mean the Knowledge after
reasonable due inquiry of the Chairman, President, Chief Financial Officer,
Chief Accounting Officer, Chief Credit Officer, or any Senior or Executive Vice
President of such Person.
"Law" shall mean any code, law, ordinance, regulation, reporting or
licensing requirement, rule, or statute applicable to a Person or its Assets,
Liabilities or business, including, without limitation, those promulgated,
interpreted or enforced by any of the Regulatory Authorities.
"Letter of Transmittal" shall have the meaning provided in Section 3.2 of
this Agreement.
"Liability" shall mean any direct or indirect, primary or secondary,
liability, indebtedness, obligation, penalty, cost or expense (including,
without limitation, costs of investigation, collection and defense), claim,
deficiency, guaranty or endorsement of or by any Person (other than endorsements
of notes, bills, checks, and drafts presented for collection or deposit in the
ordinary course of business) of any type, whether accrued, absolute or
contingent, liquidated or unliquidated, matured or unmatured, or otherwise.
"Lien" shall mean any conditional sale agreement, default of title,
easement, encroachment, encumbrance, hypothecation, infringement, lien,
mortgage, pledge, reservation, restriction, security interest, title retention
or other security arrangement, or any adverse right or interest, charge, or
claim of any nature whatsoever of, on, or with respect to any property or
property interest, other than (i) Liens for current property Taxes not yet due
and payable, (ii) for depository institution Subsidiaries of a Party, pledges to
secure deposits and other Liens incurred in the ordinary course of the banking
business, and (iii) Liens which are not reasonably likely to have, individually
or in the aggregate, a Material Adverse Effect on a Party.
"Litigation" shall mean any action, arbitration, cause of action, claim,
complaint, criminal prosecution, demand letter, governmental or other
examination or investigation, hearing, inquiry, administrative or other
proceeding, or notice (written or oral) by any Person alleging potential
Liability or requesting information relating to or affecting a Party, its
business, its Assets (including, without limitation, Contracts related to it),
or the transactions contemplated by this Agreement, but shall not include
regular, periodic examinations of depository institutions and their Affiliates
by Regulatory Authorities.
"Loan Property" shall mean any property owned by the Party in question or
by any of its Subsidiaries or in which such Party or Subsidiary holds a security
interest, and, where required by the context, includes the owner or operator of
such property, but only with respect to such property.
"Material" for purposes of this Agreement shall be determined in light of
the facts and circumstances of the matter in question, provided that any
specific monetary amount stated in this Agreement shall determine materiality in
that instance.
"Material Adverse Effect" on a Party shall mean an event, change or
occurrence which has a material adverse impact on (a) the financial position,
business, or results of operations of such Party and its Subsidiaries, taken as
a whole, or (b) the ability of such Party to perform its obligations under this
Agreement or to consummate the Merger or the other transactions contemplated by
this
42
<PAGE>
Agreement, provided that "material adverse impact" shall not be deemed to
include the impact of (x) changes in banking and similar Laws of general
applicability or interpretations thereof by courts or governmental authorities,
(y) changes in generally accepted accounting principles or regulatory accounting
principles generally applicable to banks and their holding companies, and (z)
the Merger and compliance with the provisions of this Agreement on the operating
performance of the Parties.
"Maximum Cash Election Number" shall have the meaning provided in Section
3.1(c) of this Agreement.
"Maximum Stock Election Number" shall have the meaning provided in Section
3.1(c) of this Agreement.
"Merger" shall mean the merger of TARGET with and into PURCHASER referred
to in Section 1.1 of this Agreement.
"Merger Consideration" shall have the meaning provided in Section 3.1(b) of
this Agreement.
"Minimum Cash Election Number" shall have the meaning provided in Section
3.1(c) of this Agreement.
"Minimum Stock Election Number" shall have the meaning provided in Section
3.1(c) of this Agreement.
"NASD" shall mean the National Association of Securities Dealers, Inc.
"NASDAQ/NMS" shall mean the National Market System of the National
Association of Securities Dealers Automated Quotations System.
"1933 Act" shall mean the Securities Act of 1933, as amended.
"1934 Act" shall mean the Securities Exchange Act of 1934, as amended.
"Old Certificates" shall have the meaning provided in Section 3.1(i) of
this Agreement.
"Order" shall mean any administrative decision or award, decree,
injunction, judgment, order, quasi-judicial decision or award, ruling, or writ
of any federal, state, local or foreign or other court, arbitrator, mediator,
tribunal, administrative agency or Regulatory Authority.
"Outstanding TARGET Shares" shall have the meaning provided in Section
3.1(b) of this Agreement.
"Participation Facility" shall mean any facility or property in which the
Party in question or any of its Subsidiaries participates in the management
(including any property or facility held in a joint venture) and, where required
by the context, said term means the owner or operator of such facility or
property, but only with respect to such facility or property.
43
<PAGE>
"Party" shall mean either TARGET or PURCHASER, and "Parties" shall mean
both TARGET and PURCHASER.
"Permit" shall mean any federal, state, local, and foreign governmental
approval, authorization, certificate, easement, filing, franchise, license,
notice, permit, or right to which any, Person is a party or that is or may be
binding upon or inure to the benefit of any Person or its capital stock, Assets,
Liabilities, or business.
"Person" shall mean a natural person or any legal, commercial or
governmental entity, such as, but not limited to, a corporation, general
partnership, joint venture, limited partnership, limited liability company,
trust, business association, group acting in concert, or any person acting in a
representative capacity.
"Previously Disclosed" shall mean information (a) delivered in writing
prior to the date of this Agreement in the manner and to the Party and counsel
described in Section 10.8 of this Agreement and describing in reasonable detail
the matters contained therein, provided that in the case of Subsidiaries
acquired after the date of this Agreement, such information may be so delivered
by the acquiring Party to the other Party prior to the date of such acquisition,
or (b) disclosed prior to the date of this Agreement by one Party to the other
in an SEC Document delivered to such other Party in which the specific
information has been identified by the Party making the disclosure.
"Proxy Statement" shall mean the proxy statement used by TARGET to solicit
the approval of its shareholders of the transactions contemplated by this
Agreement and shall include the prospectus of PURCHASER relating to shares of
PURCHASER Common Stock to be issued to the shareholders of TARGET.
"PURCHASER Allowance" shall have the meaning provided in Section 5.9 of
this Agreement.
"PURCHASER Benefit Plans" shall have the meaning set forth in Section 5.14
of this Agreement.
"PURCHASER Common Stock" shall mean the $1.00 par value common stock of
PURCHASER.
"PURCHASER Companies" shall mean, collectively, PURCHASER and all PURCHASER
Subsidiaries.
"PURCHASER Financial Statements" shall mean (i) the consolidated statements
of condition (including related notes and schedules, if any) of PURCHASER as of
September 30, 1995, and as of December 31, 1994 and 1993, and the related
statements of income, changes in shareholders' equity, and cash flows (including
related notes and schedules, if any) for the nine months ended September 30,
1995, and for each of the three years ended December 31, 1994, 1993, and 1992,
as filed by PURCHASER in SEC Documents and (ii) the consolidated statements of
condition of PURCHASER (including related notes and schedules, if any) and
related statements of income,
44
<PAGE>
changes in shareholders' equity, and cash flows (including related notes and
schedules, if any) included in SEC Documents filed with respect to periods ended
subsequent to September 30, 1995.
"PURCHASER Stock Plans" shall mean the existing stock option and other
stock-based compensation plans.
"PURCHASER Subsidiaries" shall mean the Subsidiaries of PURCHASER.
"Record Date" shall have the meaning provided in Section 3.1(e) of this
Agreement.
"Registration Statement" shall mean the Registration Statement on Form S-4,
or other appropriate form, filed with the SEC by PURCHASER under the 1933 Act in
connection with the transactions contemplated by this Agreement.
"Regulatory Authorities" shall mean, collectively, the Federal Trade
Commission, the United States Department of Justice, the Board of the Governors
of the Federal Reserve System, the Office of the Comptroller of the Currency,
the Federal Deposit Insurance Corporation, all state banking and other
regulatory agencies having jurisdiction over the Parties and their respective
Subsidiaries, the NASD, and the SEC.
"Representative" shall have the meaning provided in Section 3.1(d) of this
Agreement.
"SEC Documents" shall mean all reports and registration statements filed,
or required to be filed, by a Party or any of its Subsidiaries with any
Regulatory Authority pursuant to the Securities Laws.
"Securities Laws" shall mean the 1933 Act, the 1934 Act, the Investment
Company Act of 1940, as amended, the Investment Advisors Act of 1940, as
amended, the Trust Indenture Act of 1939, as amended, state blue sky laws, and
the rules and regulations of any Regulatory Authority promulgated thereunder.
"Shareholders' Meeting" shall mean the meeting of the shareholders of
TARGET to be held pursuant to Section 7.1 of this Agreement, including any
adjournment or adjournments thereof.
"Stock Consideration" shall have the meaning provided in Section 3.1(b) of
this Agreement.
"Stock Election" shall have the meaning provided in Section 3.1(d) of this
Agreement.
"Subsidiaries" shall mean all those corporations, banks, associations, or
other entities of which the entity in question owns or controls 5% or more of
the outstanding equity securities either directly or through an unbroken chain
of entities as to each of which 5 % or more of the outstanding equity securities
is owned directly or indirectly by its parent; provided, however, there shall
not be included any such entity acquired through foreclosure or any such entity
the equity securities of which are owned or controlled in a fiduciary capacity.
45
<PAGE>
"Surviving Corporation" shall mean PURCHASER as the surviving corporation
resulting from the Merger.
"TARGET Allowance" shall have the meaning provided in Section 4.9 of this
Agreement.
"TARGET Bank" shall mean Southland Bank, an Alabama state-chartered bank
and a TARGET Subsidiary.
"TARGET Benefit Plans" shall have the meaning set forth in Section 5.14 of
this Agreement.
"TARGET Common Stock" shall mean the no par value, Class A Common Stock of
TARGET.
"TARGET Companies" shall mean, collectively, TARGET and all TARGET
Subsidiaries.
"TARGET Financial Statements" shall mean (a) the consolidated balance
sheets (including related notes and schedules, if any) of TARGET as of September
30, 1995, and as of December 31, 1994 and 1993, and the related statements of
income, changes in shareholders' equity, and cash flows (including related notes
and schedules, if any) for the nine months ended September 30, 1995, and for
each of the three fiscal years ended December 31, 1994, 1993, 1992, as
previously furnished by TARGET to Purchaser, and (b) the consolidated balance
sheets of TARGET (including related notes and schedules, if any) and related
statements of income, changes in shareholders' equity, and cash flows (including
related notes and schedules, if any) with respect to periods ended subsequent to
September 30, 1993.
"TARGET Stock Plans" shall mean the existing stock option and other stock-
based compensation plans of TARGET.
"TARGET Subsidiaries" shall mean the Subsidiaries of TARGET, which shall
include the TARGET Subsidiaries described in Section 4.4 of this Agreement and
any Person acquired as a Subsidiary of TARGET in the future and owned by TARGET
at the Effective Time.
"Taxes" shall mean any federal, state, county, local, foreign and other
taxes, assessments, charges, fares, and impositions, including interest and
penalties thereon or with respect thereto.
"Termination Fee" shall have the meaning provided in Section 10.2 of this
Agreement.
"Valuation Date" shall have the meaning provided in Section 3.1(b) of this
Agreement.
46
<PAGE>
10.2 EXPENSES.
--------
(a) Except as otherwise provided in this Section 10.2, each of the
Parties shall bear and pay all direct costs and expenses incurred by it or on
its behalf in connection with the transactions contemplated hereunder, including
filing, registration and application fees, printing fees, and fees and expenses
of its own financial or other consultants, investment bankers, accountants, and
counsel (the "Expenses"), except that each of the Parties shall bear and pay
one-half of the filing fees payable in connection with the Registration
Statement and the Proxy Statement and printing costs incurred in connection with
the printing of the Registration Statement and the Proxy Statement.
(b) TARGET shall pay, or cause to be paid, in same day funds to
PURCHASER the sum of (i) all of PURCHASER'S Expenses, not to exceed $100,000,
plus (ii) $350,000 (the "Termination Fee") upon demand if (A) TARGET terminates
this Agreement pursuant to Section 9.1(g) or (B) prior to the termination of
this Agreement (other than by TARGET pursuant to Section 9.1(b)), a takeover
proposal shall have been made and within one (1) year of such termination,
TARGET enters into an agreement with respect to, or approves or recommends or
takes any action to facilitate, such takeover proposal. The amount of Expenses
so payable shall be the amount set forth in an estimate delivered by PURCHASER,
subject to an upward or downward adjustment (not to be in excess of the amount
set forth in clause (i) above) upon delivery of reasonable documentation
therefor.
10.3 BROKERS AND FINDERS. Except as Previously Disclosed, each of the
-------------------
Parties represents and warrants that neither it nor any of its officers,
directors, employees, or Affiliates has employed any broker or finder or
incurred any Liability for any financial advisory fees, investment bankers'
fees, brokerage fees, commissions, or finders' fees in connection with this
Agreement or the transactions contemplated hereby. In the event of a claim by
any broker or finder based upon its representing or being retained by or
allegedly representing or being retained by TARGET or PURCHASER, each of TARGET
and PURCHASER, as the case may be, agrees to indemnify and hold the other Party
harmless of and from any Liability in respect of any such claim.
10.4 ENTIRE AGREEMENT. Except as otherwise expressly provided herein,
----------------
this Agreement (including the documents and instruments referred to herein)
constitutes the entire agreement between the Parties with respect to the
transactions contemplated hereunder and supersedes all prior arrangements or
understandings with respect thereto, written or oral (except, as to Section
8.6(b) of this Agreement, with respect to the Confidentiality Agreements).
Nothing in this Agreement expressed or implied, is intended to confer upon any
Person, other than the Parties or their respective successors, any rights,
remedies, obligations, or liabilities under or by reason of this Agreement,
other than as provided in Section 7.13 of this Agreement.
10.5 AMENDMENTS. To the extent permitted by Law, this Agreement may be
----------
amended by a subsequent writing signed by each of the Parties upon the approval
of the Boards of Directors of each of the Parties; provided, however, that after
any such approval by the holders of TARGET Common Stock, there shall be made no
amendment decreasing the consideration to be received by TARGET shareholders
without the further approval of such shareholders.
47
<PAGE>
10.6 WAIVERS.
-------
(a) Prior to or at the Effective Time, PURCHASER, acting through
its Board of Directors, chief executive officer or other authorized officer,
shall have the right to waive any Default in the performance of any term of this
Agreement by TARGET, to waive or extend the time for the compliance or
fulfillment by TARGET of any and all of its obligations under this Agreement,
and to waive any or all of the conditions precedent to the obligations of
PURCHASER under this Agreement, except any condition which, if not satisfied,
would result in the violation of any Law. No such waiver shall be effective
unless in writing signed by a duly authorized officer of PURCHASER.
(b) Prior to or at the Effective Time, TARGET, acting through its
Board of Directors, chief executive officer or other authorized officer, shall
have the right to waive any Default in the performance of any term of this
Agreement by PURCHASER, to waive or extend the time for the compliance or
fulfillment by PURCHASER of any and all of its obligations under this Agreement,
and to waive any or all of the conditions precedent to the obligations of TARGET
under this Agreement, except any condition which, if not satisfied, would result
in the violation of any Law. No such waiver shall be effective unless in
writing signed by a duly authorized officer of TARGET.
(c) The failure of any Party at any time or times to require
performance of any provision hereof shall in no manner affect the right of such
Party at a later time to enforce the same or any other provision of this
Agreement. No waiver of any condition or of the breach of any term contained in
this Agreement in one or more instances shall be deemed to be or construed as a
further or continuing waiver of such condition or breach or a waiver of any
other condition or of the breach of any other term of this Agreement.
10.7 ASSIGNMENT. Except as expressly contemplated hereby, neither this
----------
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by any Party hereto (whether by operation of Law or otherwise) without
the prior written consent of the other Party. Subject to the immediately
preceding sentence, this Agreement will be binding upon, inure to the benefit
of, and be enforceable by the Parties and their respective successors and
assigns.
10.8 NOTICES. All notices or other communications which are required or
-------
permitted hereunder shall be in writing and sufficient if delivered by hand, by
facsimile transmission, by registered or certified mail, postage pre-paid, or by
courier or overnight carrier, to the persons at the addresses set forth below
(or at such other address as may be provided hereunder), and shall be deemed to
have been delivered as of the date so delivered:
PURCHASER: ABC Bancorp
310 First Street, S.E.
Moultrie, Georgia 31768
Telecopy Number: (912) 890-2235
Attention: President
48
<PAGE>
Copy to Counsel: Rogers & Hardin
2700 Cain Tower, Peachtree Center
229 Peachtree Street, N.E.
Atlanta, Georgia 30303
Telecopy Number: (404) 525-2224
Attention: Steven E. Fox
TARGET: Southland Bancorporation
P.O. Box 5676
Dothan, Alabama 36302
Telecopy Number: (334) 671-7814
Attention: President
Copy to Counsel: Balch & Bingham
1901 Sixth Avenue North
Birmingham, Alabama 35203
Telecopy Number: (205) 252-1074
Attention: T. Kurt Miller
10.9 GOVERNING LAW. This Agreement shall be governed by and construed in
-------------
accordance with the Laws of the State of Georgia, without regard to any
applicable conflicts of Laws, except to the extent that the federal laws of the
United States may apply to the Merger.
10.10 COUNTERPARTS. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
10.11 CAPTIONS. The captions contained in this Agreement are for
--------
reference purposes only and are not part of this Agreement.
10.12 ENFORCEMENT OF AGREEMENT. The Parties hereto agree that irreparable
------------------------
damage would occur in the event that any of the provisions of this Agreement was
not performed in accordance with its specific terms or was otherwise breached.
It is accordingly agreed that the Parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions hereof in any court of the United States or any state
having jurisdiction, this being in addition to any other remedy to which they
are entitled at law or in equity.
10.13 SEVERABILITY. Any term or provision of this Agreement which is
------------
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of
this Agreement is so broad as to be unenforceable, the provision shall be
interpreted to be only so broad as is enforceable.
49
<PAGE>
10.14 SURVIVAL. The respective representations, warranties, obligations,
--------
covenants and agreements of the Parties shall not survive the Effective Time or
the termination and abandonment of this Agreement except that (i) Articles Two,
Three and Ten and Sections 7.6(b), 7.9, 7.10, 7.11, 7.13 and 7.14 of this
Agreement shall survive the Effective Time; and (ii) Sections 7.6(b), 7.8(b),
9.2, 10.2 and 10.14 shall survive the termination and abandonment of this
Agreement.
IN WITNESS WHEREOF, each of the Parties has caused this Agreement to be
executed on its behalf and its corporate seal to be hereunto affixed and
attested by its officers as of the day and year first above written.
ATTEST: ABC BANCORP
/S/ SARA R. HALL By: /S/ KENNETH J. HUNNICUTT
- ---------------- ------------------------
Secretary President
[CORPORATE SEAL]
ATTEST: SOUTHLAND BANCORPORATION
/S/ PAM H. ADAMS By: /S/ JOHN E. MEYER, JR.
- ---------------- ----------------------
Secretary President
[CORPORATE SEAL]
50
<PAGE>
EXHIBIT 1
---------
AFFILIATE AGREEMENT
-------------------
ABC Bancorp
310 First Street, S.E.
Moultrie, Georgia 31768
Attention: President
Ladies and Gentlemen:
The undersigned is a shareholder of Southland Bancorporation ("Target"), a
corporation organized under the laws of the State of Alabama and located in
Dothan, Alabama, and will become a shareholder of ABC Bancorp ("Purchaser")
pursuant to the transactions described in the Agreement and Plan of Merger,
dated as of December 18, 1995 (the "Agreement"), by and between Target and
Purchaser. Under the terms of the Agreement, Target will be merged into and
with Purchaser (the "Merger"), and the shares of the no par value, Class A
common stock of Target ("Target Common Stock") will be converted into and
exchanged for a combination of shares of the $1.00 par value common stock of
Purchaser ("Purchaser Common Stock") and cash. This Affiliate Agreement
represents an agreement between the undersigned and Purchaser regarding certain
rights and obligations of the undersigned in connection with the shares of
Purchaser to be received by the undersigned as a result of the Merger.
In consideration of the Merger and the mutual covenants contained herein,
the undersigned and Purchaser hereby agree as follows:
1. Affiliate Status. The undersigned understands and agrees that as to
----------------
Target the undersigned is an "affiliate" under Rule 145(c) as defined in Rule
405 of the Rules and Regulations of the Securities and Exchange Commission
("SEC") under the Securities Act of 1933, as amended ("1933 Act"), and the
undersigned anticipates that the undersigned will be such an "affiliate" at the
time of the Merger.
2. Covenants and Warranties of Undersigned. The undersigned
---------------------------------------
represents, warrants and agrees that:
(a) The Purchaser Common Stock received by the undersigned as a
result of the Merger will be taken for his or her own account and not for
others, directly or indirectly, in whole or in part.
(b) Purchaser has informed the undersigned that any distribution by
the undersigned of Purchaser Common Stock has not been registered under the 1933
Act and that shares of Purchaser Common Stock received pursuant to the Merger
can only be sold by the undersigned (i) following registration under the 1933
Act, or (ii) in conformity with the volume and other
<PAGE>
requirements of Rule 145(d) promulgated by the SEC as the same now exist or may
hereafter be amended, or (iii) to the extent some other exemption from
registration under the 1933 Act might be available. The undersigned understands
that Purchaser is under no obligation to file a registration statement with the
SEC covering the disposition of the undersigned's shares of Purchaser Common
Stock.
3. Restrictions on Transfer.
------------------------
(a) The undersigned understands and agrees that stop transfer
instructions with respect to the shares of Purchaser Common Stock received by
the undersigned pursuant to the Merger will be given to Purchaser's Transfer
Agent and that there will be placed on the certificates for such shares, or
shares issued in substitution thereof, a legend stating in substance:
"The shares represented by this certificate may not be sold,
transferred or otherwise disposed of except or unless (i) covered by
an effective registration statement under the Securities Act of
1933, as amended, (ii) in accordance with (x) Rule 145(d) (in the
case of shares issued to an individual who is not an affiliate of
---
Purchaser) or (y) Rule 144 (in the case of shares issued to an
individual who is an affiliate of Purchaser) of the Rules and
Regulations of such Act, or (iii) in accordance with a legal opinion
satisfactory to counsel for Purchaser that such sale or transfer is
otherwise exempt from the registration requirements of such Act."
(b) Such legend will also be placed on any certificate representing
Purchaser securities issued subsequent to the original issuance of the Purchaser
Common Stock pursuant to the Merger as a result of any stock dividend, stock
split, or other recapitalization as long as the Purchaser Common Stock issued to
the undersigned pursuant to the Merger has not been transferred in such manner
to justify the removal of the legend therefrom. In addition, if the provisions
of Rules 144 and 145 are amended to eliminate restrictions applicable to the
Purchaser Common Stock received by the undersigned pursuant to the Merger, or at
the expiration of the restrictive period set forth in Rule 145(d), Purchaser,
upon the request of the undersigned, will cause the certificates representing
the shares of Purchaser Common Stock issued to the undersigned in connection
with the Merger to be reissued free of any legend relating to the restrictions
set forth in Rules 144 and 145(d) upon receipt by Purchaser of an opinion of its
counsel to the effect that such legend may be removed.
4. Understanding of Restrictions on Dispositions. The undersigned has
---------------------------------------------
carefully read the Agreement and this Affiliate Agreement and discussed their
requirements and impact upon his or her ability to sell, transfer, or otherwise
dispose of the shares of Purchaser Common Stock received by the undersigned in
connection with the Merger, to the extent he or she believes necessary, with his
or her counsel or counsel for Target.
5. Filing of Reports by Purchaser. Purchaser agrees for a period of
------------------------------
three years after the effective date of the Merger, to file on a timely basis
all reports required to be filed by it
2
<PAGE>
pursuant to Section 13 of the Securities Exchange Act of 1934, as amended, so
that the public information provisions of Rule 145(d) promulgated by the SEC as
the same are presently in effect will be available to the undersigned in the
event the undersigned desires to transfer any shares of Purchaser Common Stock
issued to the undersigned pursuant to the Merger.
6. Transfer Under Rule 145(d). If the undersigned desires to sell or
--------------------------
otherwise transfer the shares of Purchaser Common Stock received by him or her
in connection with the Merger at any time during the restrictive period set
forth in Rule 145(d), the undersigned will provide the necessary representation
letter to the Transfer Agent for Purchaser Common Stock, together with such
additional information as the Transfer Agent may reasonably request. If
Purchaser's counsel concludes that such proposed sale or transfer complies with
the requirements of Rule 145(d), Purchaser shall cause such counsel to provide
such opinions as may be necessary to Purchaser's Transfer Agent so that the
undersigned may complete the proposed sale or transfer.
7. Acknowledgments. The undersigned recognizes and agrees that the
---------------
foregoing provisions also apply with respect to Target Common Stock held by, and
Purchaser Common Stock issued in connection with the Merger to, (a) the
undersigned's spouse, (b) any relative of the undersigned or of the
undersigned's spouse who has the same home as the undersigned, (c) any trust or
estate in which the undersigned, the undersigned's spouse, and any such relative
collectively own at least a 10% beneficial interest or of which any of the
foregoing serves as trustee, executor or in any similar capacity, and (d) any
corporation or other organization in which the undersigned, the undersigned's
spouse and any such relative collectively own at least 10% of any class of
equity securities or of the equity interest. The undersigned further recognizes
that, in the event that the undersigned is a director or executive officer of
Purchaser or becomes a director or executive officer of Purchaser upon
consummation of the Merger, among other things, any sale of Purchaser Common
Stock by the undersigned within a period of less than six months following the
effective time of the Merger may subject the undersigned to liability pursuant
to Section 16(b) of the Securities Exchange Act of 1934, as amended.
8. Miscellaneous. This Affiliate Agreement is the complete agreement
-------------
between Purchaser and the undersigned concerning the subject matter hereof. Any
notice required to be sent to any parry hereunder shall be sent by registered or
certified mail, return receipt requested, using the addresses set forth herein
or such other address as shall be furnished in writing by the parties. This
Affiliate Agreement shall be governed by the laws of the State of Georgia.
(Signatures on Next Page)
3
<PAGE>
This Affiliate Agreement is executed as of the _____ day of ______________,
199___.
Very truly yours,
____________________________
Signature
____________________________
Print Name
____________________________
____________________________
____________________________
____________________________
Address
____________________________
Telephone No.
AGREED TO AND ACCEPTED as of
____________________, 199___
ABC BANCORP
By:_________________________
Its:_____________________
4
<PAGE>
EXHIBIT 2
---------
MATTERS AS TO WHICH
BALCH & BINGHAM WILL OPINE
[Subject to standard assumptions, limitations, restrictions and matters
disclosed in the Agreement and its schedules, including principles of equity and
remedies, such as specific performance and fiduciary out provisions.]
1. Target is a corporation duly organized, existing and in good
standing under the laws of the State of Georgia with corporate power and
authority (a) to conduct its business as described in the proxy statement used
to solicit the approval by the stockholders of Target of the transactions
contemplated by the Agreement ("Proxy Statement"), and (b) to own and use its
Assets.
2. Target Bank is an Alabama chartered state bank duly organized and
validly existing under the laws of the State of Alabama with all requisite power
and authority to conduct its business as described in the Proxy Statement, and
to own and use its Assets. The deposits of Target Bank are insured by the
Federal Deposit Insurance Corporation to the extent provided by law.
3. Target's authorized shares consist of 1,800,000 shares of Class A
Common Stock, of which ________ shares were outstanding as of ________________,
________ shares of Class B Common Stock, $8.50 par value, none of which were
outstanding as of ______________, and _______ shares of Class A Preferred Stock,
none of which were outstanding as of _____________. The outstanding shares of
Target Common Stock have been duly authorized and validly issued, were not
issued in violation of any statutory preemptive rights of shareholders, and are
fully paid and nonassessable. To our Knowledge, except as Previously Disclosed,
there are no options, subscriptions, warrants, calls, rights or commitments
obligating Target to issue equity securities or acquire its equity securities.
4. Target owns directly or indirectly all the issued and outstanding
shares of the capital stock of Target Bank. To our knowledge, there are no
options, subscriptions, warrants, calls, rights or commitments obligating Target
Bank to issue equity securities or acquire its equity securities.
5. The execution and delivery by Target of the Agreement do not, and if
Target were now to perform its obligations under the Agreement such performance
would not, result in any violation of the Articles of Incorporation or Bylaws of
Target or the Articles of Incorporation or Bylaws of Target Bank or, to our
Knowledge, result in any breach of, or default or acceleration under, any
material Contract or Order to which Target or Target Bank is a party or by which
Target or Target Bank is bound.
6. Target has duly authorized the execution and delivery of the
Agreement and all performance by Target thereunder and has duly executed and
delivered the Agreement.
7. Assuming that the Agreement is governed by and interpreted in
accordance with the laws of the State of Alabama, the Agreement is enforceable
against Target.
<PAGE>
EXHIBIT 3
---------
REGISTRATION RIGHTS AND ELECTION AGREEMENT
THIS REGISTRATION RIGHTS AND ELECTION AGREEMENT (the "Agreement"), dated as
of December 18, 1995, is between WINN F. MARTIN, an individual resident of the
State of Alabama ("Martin"), and ABC BANCORP, a Georgia corporation ("Company").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Martin is a major shareholder of Southland Bancorporation
("Southland"), which has agreed to merge with and into the Company (the
"Merger") pursuant to an Agreement and Plan of Merger (the "Merger Agreement")
dated even herewith;
WHEREAS, as a result of his position with Southland, any sale by Martin of
the shares of the Company's common stock, $1.00 par value per share, acquired by
Martin (if any) pursuant to the Merger (the "Merger Shares") will be subject to
the provisions of Rule 145 promulgated under the Securities Act of 1933, as
amended (the "Securities Act"); and
WHEREAS, the Company requires that this Agreement be made as a condition
precedent to the Merger;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements set forth herein and for other good and valuable
consideration the receipt and sufficiency of which are hereby acknowledged, the
parties, intending to be legally bound hereby, agree as follows:
ARTICLE I
REPRESENTATIONS AND WARRANTIES
SECTION 1.1 REPRESENTATIONS AND WARRANTIES OF MARTIN. Martin hereby
----------------------------------------
represents and warrants to the Company as follows:
(a) Martin has the requisite power and authority to enter into and perform
this Agreement. This Agreement is a valid and binding obligation of Martin
enforceable against Martin in accordance with its terms, except that such
enforcement may be subject to (i) bankruptcy, fraudulent conveyance, insolvency,
reorganization, moratorium or other similar law now or hereafter in effect
relating to creditors' rights generally and (ii) general principles of equity
(regardless of whether such enforcement is considered in a proceeding in equity
or at law).
<PAGE>
(b) Neither the execution and delivery of this Agreement by Martin nor the
consummation by Martin of the transactions contemplated hereby conflicts with or
constitutes a violation of or default under any statute, law, regulation, order
or decree applicable to Martin, or any contract, commitment, agreement,
arrangement or restriction of any kind to which Martin is a party or by which
Martin is bound.
SECTION 1.2 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
---------------------------------------------
hereby represents and warrants to Martin as follows:
(a) The Company has the requisite corporate power and authority to enter
into and perform this Agreement. The execution and delivery of this Agreement
by the Company and the consummation by the Company of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on behalf of the Company. This Agreement is a valid and binding obligation of
the Company enforceable against the Company in accordance with its terms, except
that such enforcement may be subject to (i) bankruptcy, fraudulent conveyance,
insolvency, reorganization, moratorium or other similar laws now or hereafter in
effect relating to creditors's rights generally and (ii) general principles of
equity (regardless of whether such enforcement is considered in a proceeding in
equity or at law).
(b) Neither the execution and delivery of this Agreement by the Company
nor the consummation by the Company of the transactions contemplated hereby
conflicts with or constitutes a violation of or default under the charter or
bylaws of the Company, any statute, law, regulation, order or decree applicable
to the Company, or any contract, commitment, agreement, arrangement or
restriction of any kind to which the Company is a party or by which the Company
is bound.
ARTICLE II
AGREEMENT WITH RESPECT TO CASH ELECTION
In connection with the Merger, Martin agrees to make a Cash Election (as
defined in the Merger Agreement).
ARTICLE III
REGISTRATION RIGHTS
SECTION 3.1 CERTAIN DEFINITIONS. The following terms shall have the
-------------------
meanings set forth below:
(a) The terms "register," "registered" and "registration" shall
refer to a registration effected by preparing and filing a registration
statement in compliance with the Securities Act, and applicable rules and
regulations thereunder and the declaration or ordering of the effectiveness of
such registration statement.
(b) "Registration Expenses" shall mean all expenses incurred in
effecting any registration pursuant to this Agreement, including, without
limitation, all registration, qualification,
2
<PAGE>
and filing fees, printing expenses, escrow fees, fees and disbursements of
counsel for the Company, blue sky fees and expenses, expenses of any regular or
special audits incident to or required by any such registration, all
underwriting discounts, selling commissions and stock transfer taxes applicable
to the sale of the Merger Shares upon any registration as contemplated hereby
and fees and disbursements of counsel for Martin, but shall not include the
compensation of regular employees of the Company, which shall be paid in any
event by the Company.
(c) "Rule 145" shall mean Rule 145 as promulgated by the
Securities and Exchange Commission (the "SEC") under the Securities Act, as such
Rule may be amended from time to time, or any similar successor rule that may be
promulgated by the SEC.
SECTION 3.2 DEMAND REGISTRATION RIGHTS. From and after the effective
--------------------------
the Merger and for so long as any sale of the Merger Shares by Martin remains
subject to the provisions of Rule 145, Martin may require the Company to
register the Merger Shares under the Securities Act on any form available to the
Company (a "Demand Registration"); provided, however, that Martin shall only be
-------- -------
entitled to one such Demand Registration and the Merger Shares shall not be
offered on a delayed or continuous basis. Upon written demand by Martin
delivered to the Company, the Company will use its best efforts to effect the
registration under the Securities Act and applicable state securities laws of
the Merger Shares which the Company has been so requested to register by Martin.
SECTION 3.3 EXPENSES OF REGISTRATION. All Registration Expenses
------------------------
incurred in connection with any registration, qualification or compliance
pursuant to this Agreement shall be borne by Martin.
SECTION 3.4 INDEMNIFICATION.
---------------
(a) The Company will indemnify Martin, each of his legal counsel
and accountants and each person controlling Martin within the meaning of Section
15 of the Securities Act, with respect to which registration, qualification, or
compliance has been effected pursuant to this Article III, and each underwriter,
if any, and each person who controls within the meaning of Section 15 of the
Securities Act any underwriter, against all expenses, claims, losses, damages
and liabilities (or actions, proceedings, or settlements in respect thereof)
arising out of or based on any untrue statement (or alleged untrue statement) of
a material fact contained in any prospectus, offering circular, or other
document (including any related registration statement, notification, or the
like) incident to any such registration, qualification, or compliance, or based
on any omission (or alleged omission) to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
or any violation by the Company of the Securities Act or any rule or regulation
thereunder applicable to the Company or relating to action or inaction required
of the Company in connection with any such registration, qualification, or
compliance, and will reimburse Martin and each such legal counsel and
accountants and each person controlling Martin, each such underwriter, and each
person who controls any such underwriter, for any legal and any other expenses
reasonably incurred in connection with investigating and defending or settling
any such claim, loss, damage, liability, or action, provided that the Company
will not be liable in any such case to the extent that any such claim, loss,
damage, liability or expense arises out of or is based on any untrue statement
or omission based upon written information furnished to the Company by
3
<PAGE>
Martin or underwriter and stated to be specifically for use therein; provided,
however, that the obligations of the Company hereunder shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability or action
if such settlement is effected without the consent of the Company (which consent
has not been unreasonably withheld or delayed).
(b) Martin will indemnify the Company, each of its directors,
officers, partners, legal counsel, and accountants and each underwriter, if any,
of the Company's securities covered by such a registration statement, each
person who controls the Company or such underwriter within the meaning of
Section 15 of the Securities Act, against all claims, losses, damages and
liabilities (or actions in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained in
any such registration statement, prospectus, offering circular, or other
document, or any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and will reimburse the Company and such directors, officers,
partners, legal counsel, and accountants, persons, underwriters, or control
persons for any legal or any other expenses reasonably incurred in connection
with investigating or defending any such claim, loss, damage, liability or
action, in each case to the extent, but only to the extent, that such untrue
statement (or alleged untrue statement) or omission (or alleged omission) is
made in such registration statement, prospectus, offering circular or other
document in reliance upon and in conformity with written information furnished
to the Company by Martin and stated to be specifically for use therein;
provided, however, that the obligations of Martin hereunder shall not apply to
amounts paid in settlement of any such claims, losses, damages, or liabilities
(or actions in respect thereof) if such settlement is effected without the
consent of Martin (which consent shall not be unreasonably withheld or delayed).
(c) Each party entitled to indemnification under this Article
III (the "Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or any litigation resulting
therefrom, shall be approved by the Indemnified Party (whose approval shall not
unreasonably be withheld), and the Indemnified Party may participate in such
defense at such party's expense, and provided further that the failure of any
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Article III, to the extent such
failure is not prejudicial. No Indemnifying Party, in the defense of any such
claim or litigation, shall, except with the consent of each Indemnified Party,
consent to entry of any judgment or enter into any settlement that does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to such Indemnified Party of a release from all liability in respect to such
claim or litigation. Each Indemnified Party shall furnish such information
regarding itself or the claim in question as an Indemnifying Party may
reasonably request in writing and as shall be reasonably required in connection
with defense of such claim and litigation resulting therefrom.
(d) If the indemnification provided for in this Article III is
held by a court of competent jurisdiction to be unavailable to an Indemnified
Party with respect to any loss, liability, claim, damage, or expense referred to
therein, then the Indemnifying Party, in lieu of indemnifying such Indemnified
Party hereunder, shall contribute to the amount paid or payable by such
4
<PAGE>
Indemnified Party as a result of such loss, liability, claim, damage or expense
in such proportion as is appropriate to reflect the relative fault of the
Indemnifying Party on the one hand and of the Indemnified Party on the other in
connection with the conduct, statements or omissions that resulted in such loss,
liability, claim, damage or expense as well as any other relevant equitable
considerations. The relative fault of the Indemnifying Party and of the
Indemnified Party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
Indemnifying Party or by the Indemnified Party and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement or omission.
(e) Notwithstanding the foregoing, to the extent that the
provisions on indemnification and contribution contained in the underwriting
agreement entered into by the Indemnifying Party and the Indemnified Party in
connection with the underwritten public offering are in conflict with the
foregoing provisions, the provisions in the underwriting agreement shall
control.
SECTION 3.5 INFORMATION BY MARTIN. Martin shall furnish to the Company
---------------------
such information regarding Martin and the distribution proposed by him as the
Company may reasonably request in writing and as shall be reasonably required in
connection with any registration, qualification, or compliance referred to in
this Article III.
SECTION 3.6 DELIVERY OF PROSPECTUS TO MARTIN. In the case of a
--------------------------------
registration of the Merger Shares effected by the Company pursuant to this
Article III, the Company will furnish to Martin such number of authorized copies
of a prospectus, including copies of any preliminary prospectus and amendments
or supplements to any prospectus, in conformity with the requirements of the
4Securities Act, and such other documents as Martin may reasonably request in
order to facilitate the public sale or other disposition of the Merger Shares.
ARTICLE IV
MISCELLANEOUS
SECTION 4.1 ENFORCEMENT.
-----------
(a) Martin, on the one hand, and the Company, on the other, acknowledges
and agrees that irreparable damage would occur if any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. Accordingly, the parties will be entitled to an injunction
or injunctions to prevent breaches of this Agreement and to enforce specifically
its provisions in any court of the United States or any state having
jurisdiction, without the necessity of furnishing a bond of any type, and the
other party hereto will not oppose the granting of such relief on the grounds
that an adequate remedy at law exists, this being in addition to any other
remedy to which they may be entitled to law in equity.
(b) No failure or delay on the part of either party in the exercise of any
power, right or privilege hereunder shall operate as a waiver thereof, nor shall
any single or partial exercise of
5
<PAGE>
any such power, right or privilege, preclude other or further exercise thereof
or of any other right, power or privilege.
SECTION 4.2 ENTIRE AGREEMENT. This Agreement, together with the
----------------
documents expressly referred to herein, constitute the entire understanding of
the parties with respect to the subject matter contained herein. This Agreement
may be amended only by an agreement in writing executed by Martin and the
Company.
SECTION 4.3 SEVERABILITY. If any provision of this Agreement is held
------------
by a court of competent jurisdiction to be unenforceable, the remaining
provisions shall remain in full force and effect. It is declared to be the
intention of the parties that they would have executed the remaining provisions
without including any that may be held unenforceable.
SECTION 4.4 HEADINGS. Descriptive headings are for convenience only and
--------
will not control or affect the meaning or construction of any provision of this
Agreement.
SECTION 4.5 COUNTERPARTS. This Agreement may be executed in two or more
------------
counterparts, and each such executed counterpart will be an original instrument.
SECTION 4.6 NOTICES. Any notices, consents, requests, instructions,
-------
approvals and other communications required or permitted to be given, served or
delivered pursuant to this Agreement shall be deemed to have been given, served
or delivered (a) on the second business day after being deposited in the United
States mail, registered or certified and with proper postage prepaid, (b) on the
first business day after being deposited with any recognized overnight courier
service with proper fees prepaid or (c) on the business day on which it is sent
and received by fax,
if to the Company: ABC Bancorp
310 First Street, S.E.
Moultrie, Georgia
Attn: Mr. Kenneth J. Hunnicutt
Fax: (912) 890-2235
with a copy to: Rogers & Hardin
2700 Cain Tower
229 Peachtree Street, N.E.
Atlanta, Georgia 30303
Attn: Steven E. Fox, Esq.
Fax: (404) 525-2224
if to Martin: Mr. Winn F. Martin
______________________
______________________
Fax:__________________
6
<PAGE>
with a copy to: ______________________
______________________
______________________
Attn:_________________
Fax:__________________
or to such other address or fax number as any party may, from time to time,
designate in a written notice given in a like manner.
SECTION 4.7 SUCCESSORS AND ASSIGNS. This Agreement shall bind, and
----------------------
inure to the benefit of, the respective successors, assigns, heirs, executors,
administrators and other legal representatives of the parties; provided,
however, that no party may assign this Agreement without the other party's prior
written consent.
SECTION 4.8 GOVERNING LAW. This Agreement will be governed by and
-------------
construed and enforced in accordance with the internal laws of the State of
Georgia, without giving effect to the conflict of laws principles thereof.
SECTION 4.9 FURTHER ASSURANCES. Each of the parties hereto agrees to
------------------
use all reasonable efforts to take, or cause to be taken, all action, and to do,
or cause to be done, all things necessary, proper or advisable to consummate and
make effective the transactions contemplated by this Agreement. If any further
action is necessary or desirable to carry out the purposes of this Agreement,
the Company or Martin, as the case may be, shall take all such necessary action.
IN WITNESS WHEREOF, Martin has executed, sealed and delivered this
Agreement, and the Company has caused this Agreement to be executed, sealed and
delivered, all as of the date first referenced to above.
ABC BANCORP
By:______________________________
Its:__________________________
________________________(SEAL)
WINN F. MARTIN
7
<PAGE>
EXHIBIT 4
---------
R&H DRAFT
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT (the "Agreement") is effective as of ___________,
1996, by and between SOUTHLAND BANK, an Alabama bank (the "Bank"), and JOHN E.
MEYER, JR., a resident of the State of Alabama (the "Executive").
WHEREAS, ABC Bancorp, a Georgia corporation ("ABC"), has acquired all of
the equity interest of the Bank by means of a merger pursuant to a Merger
Agreement dated as of December 18, 1995 the ("Merger Agreement");
WHEREAS, the Bank is now a wholly-owned subsidiary of ABC;
WHEREAS, the Executive is the President and Chief Executive Officer of the
Bank and desires to continue his employment with the Bank in such capacity;
WHEREAS, ABC desires that the Executive continue to serve in the capacity
of President and Chief Executive Officer of the Bank; and
WHEREAS, the Bank and the Executive, in conjunction with and pursuant to
the terms of the Merger Agreement, desire to set forth in writing the terms and
conditions of the Executive's continued employment with the Bank.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements contained herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereby
agree as follows:
1. EMPLOYMENT AND DUTIES.
---------------------
(a) The Bank hereby agrees to continue to employ the Executive and
the Executive agrees to continue employment in his capacity as President and
Chief Executive Officer of the Bank to act in accordance with the terms and
conditions set forth herein. The Executive also consents to serve, if elected,
as a director of the Bank without additional compensation therefor for the first
twelve (12) months of such service and thereafter at the rate then in effect for
directors of the Bank. During the term of this Agreement, the Executive agrees
that this position will be his principal employment, that he will serve the Bank
faithfully and to the best of his ability and that he will devote his full
business time, attention and skills to the operation of the business of the
Bank, subject to reasonable absences for vacation and illness, and that he will
perform such duties, functions and responsibilities in connection with such
position and consistent with the foregoing as are from time to time delegated to
the Executive by the Board of Directors of the Bank (the "Board"); provided,
--------
however, that the foregoing shall not be deemed to restrict the Executive from
- -------
devoting a reasonable amount of time and attention to the management of his
personal affairs and investments, so long as
<PAGE>
such activities do not interfere with the responsible performance of the
Executive's duties hereunder. The Executive shall provide the Board with
periodic reports on, and keep them informed on a current basis concerning, the
business and affairs of the Bank.
(b) The Bank shall provide the Executive with a private office,
secretarial and administrative assistance, office equipment, supplies and other
facilities and services suitable to the Executive's position to be located at
3299 Ross Clark Circle, N.W., Dothan, Alabama 36303, or at a comparable location
within Houston County, Alabama.
2. TERM. The term ("Term") of this Agreement shall commence on the
----
date hereof and shall continue until the second anniversary of the date hereof.
3. COMPENSATION. In consideration of the services to be rendered by
------------
the Executive to the Bank hereunder, the Bank hereby agrees to pay or otherwise
provide the Executive the following compensation and benefits, it being
understood that the Bank shall have the right to deduct therefrom all taxes
which may be required to be deducted or withheld under any provision of
applicable law (including, without limitation, Social Security payments, income
tax withholding and other required deductions now in effect or which may become
effective by law any time during the Term):
(a) SALARY. The Executive shall receive an annual salary of
------
("Salary") of $90,000.00 to be paid in equal installments in accordance with the
Bank's salary payment practices in effect from time to time for executives of
the Bank. The Bank may consider and declare from time to time increases in the
Salary it pays Executive, and shall consider and declare Salary increases based
upon the following standards:
a. Inflation;
b. Adjustments to the salaries of other senior management personnel;
and
c. Past performance of Executive and the contribution which Executive
makes to the business and profits of the Bank during the Term.
(b) BONUS PAYMENT. In addition to Salary, the Executive shall be
-------------
entitled to receive an annual bonus pursuant to any annual incentive
compensation plan adopted by the Board; provided, however, that if (i) no such
-------- -------
plan is adopted or (ii) such plan is adopted with terms materially less
favorable to the Executive than those contained in the Bank's 1995 Annual
Incentive Compensation Plan (the "1995 Plan"), then the bonus payable to the
Executive (if any) shall be determined by reference to the 1995 Plan less the
value of any compensation received by or accrued for the benefit of the
Executive pursuant to the Executive's participation in any employee benefit,
retirement and compensation plans as specified in Section 3(c) hereof.
(c) COMPENSATION PURSUANT TO PLANS. During the Term, the Executive
------------------------------
shall be included as a participant in all present and future employee benefit,
retirement and compensation plans generally available to employees of the Bank,
consistent with his Salary and his position with
-2-
<PAGE>
the Bank, including, without limitation, Employer's pension plan and
hospitalization, major medical, disability and group life insurance plans.
(d) EXPENSES. The Executive shall be entitled to receive
--------
reimbursement for all reasonable expenses incurred by him in connection with the
fulfillment of his duties hereunder, upon receipt of appropriate vouchers
therefor, provided that the Executive has complied with all reasonable policies
and procedures relating to the reimbursement of such expenses as shall, from
time to time, be established by the Bank.
4. TERMINATION.
-----------
(a) This Agreement shall terminate on the earliest to occur of the
following events: (i) on the mutual agreement of the Bank and the Executive;
(ii) the death of the Executive or Executive's voluntary retirement; (iii) the
Executive becoming unable to perform a substantial portion of his duties as
described herein due to injury, illness or disability (mental or physical) as
determined by an independent physician selected by the Bank and reasonably
satisfactory to the Executive for a period of three (3) consecutive months or
any aggregate period of six (6) months in any eighteen (18) month period
("Disability"); or (iv) immediately upon the Bank giving written notice to the
Executive of termination for Cause (as defined herein).
(b) The Bank may terminate the Executive's employment under this
Agreement at any time for Cause. The termination shall be evidenced by written
notice to the Executive, which shall specify the cause for termination. "Cause"
shall exist if: (i) the Executive is convicted of (from which no appeal may be
taken), or pleads guilty to, any act of fraud, misappropriation or embezzlement,
or any felony; (ii) in the reasonable determination of the Board, the Executive
has engaged in conduct or activity materially damaging to the business of the
Bank (it being understood, however, that unintentional physical damage to any
property of the Bank by the Executive shall not be a ground for such a
determination by the Board); or (iii) the Executive has failed, without
reasonable cause, to devote his full business time and best efforts to the
business of the Bank as provided in Section 1(a) hereof and, after written
notice from the Bank of such failure, the Executive at any time thereafter again
so fails.
5. REPRESENTATIONS AND WARRANTIES.
------------------------------
(a) The Executive represents and warrants to the Bank that: (i) he
has the full power and authority to execute, deliver and perform this Agreement,
and that he has taken all actions necessary to secure all approvals required in
connection herewith and therewith; (ii) this Agreement has been duly authorized,
executed and delivered by him and constitutes his valid and binding agreement,
enforceable against him in accordance with its terms; and (iii) the execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby will not, with the passage of time or the
giving of notice or both, violate or conflict with, constitute a breach of or
default under, result in the loss of any material benefit under, or permit the
acceleration of or entitle any party to accelerate any obligation under or
pursuant to, any material mortgage, lien, leases, agreement, instrument, order,
arbitration award, judgment or decree to which he is a party or by which he or
any of his assets are bound.
-3-
<PAGE>
(b) The Bank hereby represents and warrants to the Executive that:
(i) this Agreement has been duly authorized, executed and delivered by it, and
constitutes the valid and binding agreement of it, enforceable against it in
accordance with its terms; (ii) it has the full power authority to execute,
deliver and perform this Agreement and has taken all necessary action to secure
all approvals required in connection herewith; and (iii) the execution, delivery
and performance of this Agreement and the consummation of the transactions
contemplated hereby will not, with the passage of time or the giving of notice
or both, violate or conflict with, constitute a breach of or default under,
result in the loss of any material benefit under, or permit the acceleration of
or entitle any party to accelerate any obligation under or pursuant to, its
charter or bylaws or any material mortgage, lien, lease, agreement, instrument,
order, arbitration award, judgment or decree to which it is a party or by which
it or any of its assets are bound.
6. RESTRICTIVE COVENANTS. Acknowledging that (i) he has intimate
---------------------
knowledge of the business of the Bank which, if exploited by him, in
contravention of this Agreement, would seriously adversely and irreparably
affect the value of the Bank and the ability of ABC to continue to operate the
Bank following the consummation of the merger contemplated by the Merger
Agreement; (ii) the provisions of this Section 6 are reasonable and necessary to
protect the legitimate interests of ABC; (iii) the provisions of this Section 6
are reasonable and necessary to protect the goodwill of the Bank acquired by ABC
pursuant to the Merger Agreement; (iv) any violation of this Section 6 will
result in irreparable injury to ABC and the Bank and that damages at law would
not be reasonable or adequate compensation to ABC and the Bank for a violation
of this Section 6; and (v) that in the course of his employment with the Bank,
as contemplated by this Agreement, and as a result of the position of trust that
he will hold under this Agreement, he will obtain private and confidential
information and proprietary data relating to ABC, the Bank and other affiliates
of ABC, including, without limitation, financial information, product
information and other data that are valuable assets and property rights of the
Bank and ABC and its affiliates (collectively referred to as "Confidential
Information"), the Executive hereby agrees as follows:
(a) The Executive shall not, during the Term of this Agreement or
any time after the termination of this Agreement, either directly or indirectly,
disclose or use any Confidential Information acquired during his employment with
the Bank, unless (i) the Confidential Information has been made public through
no action or fault of the Executive, or (ii) its disclosure is requested or
compelled by applicable law or regulatory agency. The Executive further agrees
that after the termination of this Agreement, or at such other time as the Bank
requests, the Executive will return to the Bank all documents, papers and
records constituting Confidential Information, and all copies of same in the
Executive's possession and control.
(b) For a period of two (2) years after termination of the
Executive's employment hereunder for any reason, the Executive shall not
directly or indirectly provide banking or bank-related services to, or solicit
the banking or bank-related business of, any customer of the Bank at the time of
such provision of services or solicitation which the Executive served either
alone or with others while employed by the Bank in any city, town, borough,
township, village or other place in which the Executive performed services for
the Bank while employed by it, or assist any actual or potential competitor of
the Bank to provide banking or bank-related services to or solicit any such
customer's banking or bank-related business in any such place.
-4-
<PAGE>
(c) While the Executive is employed by the Bank and for a period of
two (2) years after termination of the Executive's employment hereunder for any
reason, the Executive shall not, directly or indirectly, as principal, agent, or
trustee, or through the agency of any corporation, partnership, trade
association, agent or agency, engage in any banking or bank-related business or
venture which competes with the business of the Bank as conducted during the
Executive's employment by the Bank within a radius of fifty (50) miles of the
Bank's main office.
(d) In addition to all other remedies provided at law or at equity,
the Bank may petition and obtain from a court of law or equity both temporary
and permanent injunctive relief without the necessity of proving actual damages
and without posting bond or other security to prevent a breach by the Executive
of any covenant contained in this Section 6, as well as to an equitable
accounting of all earnings and profits and other benefits arising out of any
such violations.
7. NOTICES. Any notice or other communication required or permitted to
-------
be given hereunder shall be in writing and deemed to have been given when
delivered in person or when dispatched by telegram or electronic facsimile
transfer (confirmed in writing by mail, registered or certified, return receipt
requested, postage prepaid, simultaneously dispatched) to the addresses
specified below.
If to the Executive: John E. Meyer, Jr.
_________________________
Dothan, Alabama 36303
Facsimile: (___) ____-_______
If to the Bank: Southland Bank
c/o ABC Bancorp
310 First Street, S.E.
Moultrie, Georgia 31768
Facsimile: (912) 890-2235
Attn: President
or to such other address or fax number as either party may from time to time
designate in writing to the other.
8. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
----------------
between the parties hereto relating to the subject matter hereof, and supersedes
all prior agreements and understandings, whether oral or written, with respect
to the same, including, without limitation, that certain employment agreement by
and between the Bank and the Executive dated as of November 17, 1993, as
amended, which is hereby terminated and shall be of no further force or effect.
No modification, alteration, amendment or recision of or supplement to this
Agreement shall be valid or effective unless the same is in writing and signed
by both parties hereto.
9. GOVERNING LAW. This Agreement and the rights and duties of the
-------------
parties hereunder shall be governed by, construed under and enforced in
accordance with the laws of the State Alabama.
-5-
<PAGE>
10. ASSIGNMENT. This Agreement shall inure to the benefit of and be
----------
binding upon the parties hereto and their respective heirs, personal
representatives, successors and permitted assigns. The rights, duties and
obligations under this Agreement are assignable by the Bank to a successor of
all or substantially all of the business or assets of the Bank. The rights,
duties and obligations of the Executive under this Agreement shall not be
assignable.
11. SURVIVAL. The respective obligations of the parties under Section 6
--------
hereof shall survive the termination of this Agreement.
IN WITNESS WHEREOF, the Bank has caused this Agreement to be executed and
delivered, and the Executive has executed and delivered this Agreement, all as
of the day and year first above written.
SOUTHLAND BANK
By:_________________________________
Its:__________________________
_______________________________(SEAL)
JOHN E. MEYER, JR.
-6-
<PAGE>
EXHIBIT 5
---------
MATTERS AS TO WHICH
ROGERS & HARDIN WILL OPINE
[Subject to standard assumptions, limitations, restrictions and matters
disclosed in the Agreement and its schedules, including principles of equity and
remedies, such as specific performance.]
1. Purchaser is a corporation duly organized, existing and in good
standing under the laws of the State of Georgia with corporate power and
authority (a) to conduct its business as described in the proxy statement used
to solicit the approval by the stockholders of Target of the transactions
contemplated by the Agreement ("Proxy Statement"), and (b) to own and use its
Assets.
2. Purchaser's authorized shares consist of 10,000,000 shares of Common
Stock, no par value, of which __________ shares were outstanding as of
_____________, and 5,000,000 shares of Preferred Stock, none of which were
outstanding as of ____________. The outstanding shares of Purchaser Common
Stock have been duly authorized and validly issued, were not issued in violation
of any statutory preemptive rights of shareholders, and are fully paid and
nonassessable. To our Knowledge, except as Previously Disclosed, there are no
options, subscriptions, warrants, calls, rights or commitments obligating
Purchaser to issue equity securities or acquire its equity securities. The
shares of Purchaser Common Stock to be issued to the shareholders of Target upon
consummation of the Merger have been registered under the Securities Act of
1933, as amended, and when issued in accordance with the Agreement, will be
validly issued, fully paid and nonassessable.
3. The execution and delivery by Purchaser of the Agreement do not, and
if Purchaser were now to perform its obligations under the Agreement such
performance would not, result in any violation of the Articles of Incorporation
or Bylaws of Purchaser or, to our knowledge, result in any breach of, or default
or acceleration under, any material Contract or Order to which Purchaser is a
party or by which Purchaser is bound.
4. Purchaser has duly authorized the execution and delivery of the
Agreement and all performance by Purchaser thereunder and has duly executed and
delivered the Agreement.
5. The Agreement is enforceable against Purchaser.
<PAGE>
EXHIBIT 6
---------
IRREVOCABLE PROXY
-----------------
This Irrevocable Proxy is given by the undersigned, Winn F. Martin
("Shareholder"), in favor of ABC Bancorp, a Georgia corporation ("ABC"), as of
the 18th day of December, 1995.
WHEREAS, ABC and Southland Bancorporation, an Alabama corporation
("Southland"), have entered into an Agreement and Plan of Merger dated as of
December 18, 1995 (the "Merger Agreement") (capitalized terms used but not
defined herein shall have the same meaning assigned to such terms in the Merger
Agreement), pursuant to which ABC proposes to acquire the entire equity interest
in Southland by means of a merger (the "Merger") of Southland with and into ABC
in which (a) each issued and outstanding share of common stock, $.01 par value,
of Southland (the "Southland Common Stock"), other than shares of Southland
Common Stock with respect to which statutory dissenters' rights have been
perfected and shares held by Southland (or any of its subsidiaries) or by ABC
(or any of its subsidiaries), in each case other than in a fiduciary capacity or
as a result of debt previously contracted, shall automatically be converted into
the right to receive cash and whole shares of ABC's common, $1.00 par value,
plus cash in lieu of fractional shares, in an amount equal to (i) 1.8 multiplied
by the Book Value of Southland (as defined in the Merger Agreement) as of the
close of business immediately preceding the consummation of the Merger divided
by (ii) the aggregate number of outstanding shares of Southland Common Stock;
and (b) each outstanding option to purchase Southland Common Stock not
theretofore exercised shall be cancelled;
WHEREAS, Shareholder owns, as of the date hereof, 225,968 shares of
Southland Common Stock (the "Existing Shares", together with any shares of
Southland Common Stock acquired after the date hereof and prior to the
termination hereof, hereinafter collectively referred to as the "Shares"); and
WHEREAS, ABC has entered into the Merger Agreement in reliance on
Shareholder's agreement to support the Merger, including the granting of
Shareholder's Irrevocable Proxy hereunder.
NOW, THEREFORE, with respect to the Merger Agreement and the
transactions contemplated thereby and in accordance with Section (S) 10-2B-7.22
of the Alabama Business Corporation Act, Shareholder hereby irrevocably makes,
constitutes and appoints ABC to act as Shareholder's true and lawful proxy and
attorney-in-fact in the name and on behalf of Shareholder, with full power to
appoint a substitute or substitutes. Shareholder further directs ABC, and ABC
hereby agrees, to vote all of the Shares which are entitled to vote at any
meeting of the shareholders of Southland (whether annual or special and whether
or not an adjourned meeting), or by written consent in the place and stead of
Shareholder, in favor of the Merger as set forth in the Merger Agreement. By
giving this proxy, Shareholder hereby revokes any other proxy granted by
Shareholder at any time with respect to the Shares and no subsequent proxies
will be given with respect thereto by Shareholder. THE PROXY GRANTED HEREBY IS
COUPLED WITH AN
<PAGE>
INTEREST AND IS IRREVOCABLE. The proxy granted hereby shall not be terminated
by any act of Shareholder or by operation of law, by lack of appropriate power
of authority, or by the occurrence of any other event or events and shall be
binding upon all beneficiaries, heirs at law, legatees, distributees,
successors, assigns and legal representatives of Shareholder. Shareholder
agrees to use all good faith efforts to cause any record owner of the Shares of
which Shareholder is the beneficial owner to grant to ABC a proxy of the same
effect as that contained herein. Shareholder shall perform such further acts
and execute such further documents as may be required to vest in ABC the sole
power to vote the Shares during the term of the proxy granted herein. The proxy
granted herein shall expire on the earlier of (i) the date on which ABC and
Shareholder mutually consent in writing to terminate this Irrevocable Proxy,
(ii) the date of the Closing (as defined in the Merger Agreement), or (iii) the
termination of the Merger Agreement in accordance with the terms thereof.
Notwithstanding anything herein to the contrary, the proxy granted hereby and
power herein conferred upon ABC (or any substitute or substitutes) may not be
exercised prior to the receipt by ABC and Southland of the Consents of the
Regulatory Authorities (as contemplated by the Merger Agreement).
IN WITNESS WHEREOF, Shareholder has executed and delivered this
Irrevocable Proxy as of the date set forth above.
SHAREHOLDER
WINN F. MARTIN
---------------------------
(NAME)
___________________________
(SIGNATURE)
-2-
<PAGE>
IRREVOCABLE PROXY
-----------------
This Irrevocable Proxy is given by the undersigned, Gail M. Whigham
("Shareholder"), in favor of ABC Bancorp, a Georgia corporation ("ABC"), as of
the 18th day of December, 1995.
WHEREAS, ABC and Southland Bancorporation, an Alabama corporation
("Southland"), have entered into an Agreement and Plan of Merger dated as of
December 18, 1995 (the "Merger Agreement") (capitalized terms used but not
defined herein shall have the same meaning assigned to such terms in the Merger
Agreement), pursuant to which ABC proposes to acquire the entire equity interest
in Southland by means of a merger (the "Merger") of Southland with and into ABC
in which (a) each issued and outstanding share of common stock, $.01 par value,
of Southland (the "Southland Common Stock"), other than shares of Southland
Common Stock with respect to which statutory dissenters' rights have been
perfected and shares held by Southland (or any of its subsidiaries) or by ABC
(or any of its subsidiaries), in each case other than in a fiduciary capacity or
as a result of debt previously contracted, shall automatically be converted into
the right to receive cash and whole shares of ABC's common, $1.00 par value,
plus cash in lieu of fractional shares, in an amount equal to (i) 1.8 multiplied
by the Book Value of Southland (as defined in the Merger Agreement) as of the
close of business immediately preceding the consummation of the Merger divided
by (ii) the aggregate number of outstanding shares of Southland Common Stock;
and (b) each outstanding option to purchase Southland Common Stock not
theretofore exercised shall be cancelled;
WHEREAS, Shareholder owns, as of the date hereof, 54,780 shares of
Southland Common Stock (the "Existing Shares", together with any shares of
Southland Common Stock acquired after the date hereof and prior to the
termination hereof, hereinafter collectively referred to as the "Shares"); and
WHEREAS, ABC has entered into the Merger Agreement in reliance on
Shareholder's agreement to support the Merger, including the granting of
Shareholder's Irrevocable Proxy hereunder.
NOW, THEREFORE, with respect to the Merger Agreement and the
transactions contemplated thereby and in accordance with Section (S) 10-2B-7.22
of the Alabama Business Corporation Act, Shareholder hereby irrevocably makes,
constitutes and appoints ABC to act as Shareholder's true and lawful proxy and
attorney-in-fact in the name and on behalf of Shareholder, with full power to
appoint a substitute or substitutes. Shareholder further directs ABC, and ABC
hereby agrees, to vote all of the Shares which are entitled to vote at any
meeting of the shareholders of Southland (whether annual or special and whether
or not an adjourned meeting), or by written consent in the place and stead of
Shareholder, in favor of the Merger as set forth in the Merger Agreement. By
giving this proxy, Shareholder hereby revokes any other proxy granted by
Shareholder at any time with respect to the Shares and no subsequent proxies
will be given with respect thereto by Shareholder. THE PROXY GRANTED HEREBY IS
COUPLED WITH AN INTEREST AND IS IRREVOCABLE. The proxy granted hereby shall not
be terminated by any
<PAGE>
act of Shareholder or by operation of law, by lack of appropriate power of
authority, or by the occurrence of any other event or events and shall be
binding upon all beneficiaries, heirs at law, legatees, distributees,
successors, assigns and legal representatives of Shareholder. Shareholder
agrees to use all good faith efforts to cause any record owner of the Shares of
which Shareholder is the beneficial owner to grant to ABC a proxy of the same
effect as that contained herein. Shareholder shall perform such further acts
and execute such further documents as may be required to vest in ABC the sole
power to vote the Shares during the term of the proxy granted herein. The proxy
granted herein shall expire on the earlier of (i) the date on which ABC and
Shareholder mutually consent in writing to terminate this Irrevocable Proxy,
(ii) the date of the Closing (as defined in the Merger Agreement), or (iii) the
termination of the Merger Agreement in accordance with the terms thereof.
Notwithstanding anything herein to the contrary, the proxy granted hereby and
power herein conferred upon ABC (or any substitute or substitutes) may not be
exercised prior to the receipt by ABC and Southland of the Consents of the
Regulatory Authorities (as contemplated by the Merger Agreement).
IN WITNESS WHEREOF, Shareholder has executed and delivered this
Irrevocable Proxy as of the date set forth above.
SHAREHOLDER
GAIL M. WHIGHAM
----------------------------
(NAME)
____________________________
(SIGNATURE)
-2-
<PAGE>
[PAGE LEFT INTENTIONALLY BLANK]
<PAGE>
EX 10.11
AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
ABC BANCORP
AND
CENTRAL BANKSHARES, INC.
AS OF DECEMBER 29, 1995
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
PREAMBLE ........................................................................................... 1
ARTICLE 1 TERMS OF MERGER................................................................. 1
1.1 Merger.......................................................................... 1
1.2 Time and Place of Closing....................................................... 1
1.3 Effective Time.................................................................. 2
ARTICLE 2 ARTICLES, BYLAWS, MANAGEMENT.................................................... 2
2.1 Articles of Incorporation....................................................... 2
2.2 Bylaws.......................................................................... 2
2.3 Directors and Officers.......................................................... 2
ARTICLE 3 MANNER OF CONVERTING AND EXCHANGING SHARES...................................... 2
3.1 Conversion of Shares............................................................ 2
3.2 Exchange of Shares.............................................................. 3
3.3 Anti-Dilution Provisions........................................................ 4
3.4 Shares Held by TARGET or PURCHASER.............................................. 4
3.5 TARGET Bank..................................................................... 4
3.6 Rights of Former TARGET Shareholders............................................ 5
3.7 Options......................................................................... 5
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF TARGET........................................ 5
4.1 Organization, Standing and Power................................................ 5
4.2 Authority; No Breach............................................................ 6
4.3 Capital Stock................................................................... 6
4.4 TARGET Subsidiaries............................................................. 7
4.5 Financial Statements............................................................ 7
4.6 Absence of Undisclosed Liabilities.............................................. 8
4.7 Absence of Certain Changes or Events............................................ 8
4.8 Tax Matters..................................................................... 8
4.9 TARGET Allowance for Possible Loan Losses....................................... 9
4.10 Assets.......................................................................... 9
4.11 Environmental Matters........................................................... 10
4.12 Compliance with Laws............................................................ 11
4.13 Labor Relations................................................................. 12
4.14 Employee Benefit Plans.......................................................... 12
4.15 Material Contracts.............................................................. 14
</TABLE>
i
<PAGE>
<TABLE>
<S> <C> <C>
4.16 Legal Proceedings ............................................................. 14
4.17 Reports........................................................................ 14
4.18 Statements True and Correct.................................................... 14
4.19 Accounting, Tax and Regulatory Matters......................................... 15
4.20 Charter Provisions............................................................. 15
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF PURCHASER.................................... 16
5.1 Organization, Standing and Power............................................... 16
5.2 Authority; No Breach........................................................... 16
5.3 Capital Stock.................................................................. 17
5.4 PURCHASER Subsidiaries......................................................... 17
5.5 Financial Statements........................................................... 18
5.6 Absence of Undisclosed Liabilities............................................. 18
5.7 Absence of Certain Changes or Events........................................... 18
5.8 Tax Matters.................................................................... 19
5.9 PURCHASER Allowance for Possible Loan Losses................................... 19
5.10 Assets......................................................................... 20
5.11 Environmental Matters.......................................................... 20
5.12 Compliance with Laws........................................................... 21
5.13 Labor Relations................................................................ 22
5.14 Employee Benefit Plans......................................................... 22
5.15 Legal Proceedings.............................................................. 24
5.16 Reports........................................................................ 24
5.17 Statements True and Correct.................................................... 24
5.18 Accounting, Tax and Regulatory Matters......................................... 25
5.19 Charter Provisions............................................................. 25
ARTICLE 6 CONDUCT OF BUSINESS PENDING CONSUMMATION....................................... 26
6.1 Affirmative Covenants of TARGET................................................ 26
6.2 Negative Covenants of TARGET................................................... 26
6.3 Covenants of PURCHASER......................................................... 28
6.4 Adverse Changes in Condition................................................... 28
6.5 Reports........................................................................ 28
ARTICLE 7 ADDITIONAL AGREEMENTS.......................................................... 28
7.1 Registration Statement; Proxy Statement; Shareholder Approval.................. 28
7.2 Listing........................................................................ 29
7.3 Applications................................................................... 29
7.4 Filings with State Offices..................................................... 29
7.5 Agreement as to Efforts to Consummate.......................................... 29
7.6 Investigation and Confidentiality.............................................. 29
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C> <C>
7.7 Press Releases ................................................................. 30
7.8 No Solicitation................................................................. 30
7.9 Tax Treatment................................................................... 32
7.10 Agreement of Affiliates......................................................... 32
7.11 Employee Benefits and Contracts................................................. 33
7.12 Large Deposits.................................................................. 33
7.13 Indemnification................................................................. 33
ARTICLE 8 CONDITIONS PRECEDENT TO OBLIGATIONS TO
CONSUMMATE...................................................................... 33
8.1 Conditions to Obligations of Each Party......................................... 33
8.2 Conditions to Obligations of PURCHASER.......................................... 35
8.3 Conditions to Obligations of TARGET............................................. 36
ARTICLE 9 TERMINATION..................................................................... 36
9.1 Termination..................................................................... 37
9.2 Effect of Termination........................................................... 38
ARTICLE 10 MISCELLANEOUS................................................................... 38
10.1 Definitions..................................................................... 38
10.2 Expenses........................................................................ 45
10.3 Brokers and Finders............................................................. 45
10.4 Entire Agreement................................................................ 45
10.5 Amendments...................................................................... 45
10.6 Waivers......................................................................... 46
10.7 Assignment...................................................................... 46
10.8 Notices......................................................................... 46
10.9 Governing Law................................................................... 47
10.10 Counterparts.................................................................... 47
10.11 Captions........................................................................ 47
10.12 Enforcement of Agreement........................................................ 47
10.13 Severability.................................................................... 48
</TABLE>
iii
<PAGE>
LIST OF EXHIBITS
----------------
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION
- -------------- -----------
<S> <C>
1. Form of agreement of affiliates of Central Bankshares,
Inc. ((S) 7.10).
2. Matters as to which Powell, Goldstein, Frazer & Murphy
will opine ((S) 8.2(d)).
3. Matters as to which Rogers & Hardin will opine ((S)
8.3(d)).
4. Employment Agreement between PURCHASER and Robert L. Evans
((S) 8.2(f)).
5. Employment Agreement between PURCHASER and Roxie W.
Bagwell ((S) 8.2(f)).
</TABLE>
iv
<PAGE>
AGREEMENT AND PLAN OF MERGER
----------------------------
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement") is made and entered
into as of December 29, 1995, by and between CENTRAL BANKSHARES, INC.
("TARGET"), a corporation organized and existing under the laws of the State of
Georgia, with its principal office located in Cordele, Georgia, and ABC BANCORP
("PURCHASER"), a corporation organized and existing under the laws of the State
of Georgia, with its principal office located in Moultrie, Georgia.
PREAMBLE
--------
Certain terms used in this Agreement are defined in Section 10.1 hereof.
The Boards of Directors of TARGET and PURCHASER are of the opinion that the
transactions described herein are in the best interests of the parties and their
respective shareholders. This Agreement provides for the combination of TARGET
with PURCHASER pursuant to the merger of TARGET with and into PURCHASER, as a
result of which the outstanding shares of the capital stock of TARGET shall be
converted into the right to receive shares of common stock of PURCHASER (except
as provided herein), and the shareholders of TARGET shall become shareholders of
PURCHASER (except as provided herein). The transactions described in this
Agreement are subject to the approvals of the shareholders of TARGET, the Board
of Governors of the Federal Reserve System, the Georgia Department of Banking
and Finance and the satisfaction of certain other conditions described in this
Agreement. It is the intention of the parties to this Agreement that the Merger
for federal income tax purposes shall qualify as a "reorganization" within the
meaning of Section 368(a) of the Internal Revenue Code.
Following the Closing of the Merger, Central Bank & Trust, a wholly-owned
Georgia state bank subsidiary of TARGET, will be operated as a separate
subsidiary of PURCHASER.
NOW, THEREFORE, in consideration of the above and the mutual warranties,
representations, covenants and agreements set forth herein, the parties agree as
follows:
ARTICLE 1
TERMS OF MERGER
---------------
1.1 MERGER. Subject to the terms and conditions of this Agreement, at
------
the Effective Time, TARGET shall be merged with and into PURCHASER in accordance
with the provisions of Section 14-2-1101 of the GBCC and with the effect
provided in Section 14-2-1106 of the GBCC (the "Merger"). PURCHASER shall be
the Surviving Corporation resulting from the Merger. The Merger shall be
consummated pursuant to the terms of this Agreement, which has been approved and
adopted by the respective Boards of Directors of TARGET and PURCHASER.
1.2 TIME AND PLACE OF CLOSING. The Closing shall take place at 10:00
-------------------------
a.m. on the date that the Effective Time occurs or at such other time as the
Parties, acting through their chief executive officers or chief financial
officers, may mutually agree (the "Closing Date"). The place of Closing shall
be at the offices of Rogers & Hardin, Atlanta, Georgia, or such other place as
may be mutually agreed upon by the Parties.
<PAGE>
1.3 EFFECTIVE TIME. The Merger and other transactions contemplated by
--------------
this Agreement shall become effective on the date and at the time the Georgia
Articles of Merger reflecting the Merger shall become effective with the
Secretary of State of the State of Georgia (the "Effective Time"). Subject to
the terms and conditions hereof, unless otherwise mutually agreed upon in
writing by the chief executive officers of each Party, the Parties shall use
their reasonable efforts to cause the Effective Time to occur on (a) the last
business day of the month in which occurs the last to occur of (i) the effective
date (including expiration of any applicable waiting period) of the last
required Consent of any Regulatory Authority having authority over and approving
or exempting the Merger and (ii) the date on which the shareholders of TARGET
approve this Agreement to the extent such approval is required by applicable
Law; or (b) such later date as may be mutually agreed upon in writing by the
chief executive officers or chief financial officers of each Party.
ARTICLE 2
ARTICLES, BYLAWS, MANAGEMENT
----------------------------
2.1 ARTICLES OF INCORPORATION. The Articles of Incorporation of
-------------------------
PURCHASER in effect immediately prior to the Effective Time shall be the
Articles of Incorporation of the Surviving Corporation until otherwise amended
or repealed.
2.2 BYLAWS. The Bylaws of PURCHASER in effect immediately prior to the
------
Effective Time shall be the Bylaws of the Surviving Corporation until otherwise
amended or repealed.
2.3 DIRECTORS AND OFFICERS. The directors of PURCHASER in office
----------------------
immediately prior to the Effective Time shall serve as the directors of the
Surviving Corporation from and after the Effective Time in accordance with the
Bylaws of the Surviving Corporation. The officers of PURCHASER in office
immediately prior to the Effective Time, together with such additional persons
as may thereafter be elected, shall serve as the officers of PURCHASER from and
after the Effective Time in accordance with the Bylaws of PURCHASER. The
directors and officers of TARGET Bank immediately prior to the Effective Time
shall serve as the initial directors and officers of TARGET Bank from and after
the Effective Time in accordance with the Bylaws of TARGET Bank.
ARTICLE 3
MANNER OF CONVERTING AND EXCHANGING SHARES
------------------------------------------
3.1 CONVERSION OF SHARES. Subject to the provisions of this Article 3,
--------------------
at the Effective Time, by virtue of the Merger and without any action on the
part of the holders thereof, the shares of PURCHASER and TARGET shall be
converted as follows:
(a) Each share of PURCHASER Common Stock issued and outstanding
immediately prior to the Effective Time shall remain issued and outstanding from
and after the Effective Time.
2
<PAGE>
(b) Each share of TARGET Common Stock outstanding immediately prior
to the Effective Time, other than shares with respect to which statutory
dissenters' rights have been perfected (the "Dissenting Shares") and shares held
in TARGET'S treasury which shall be cancelled without consideration at the
Effective Time (the "Outstanding TARGET Shares"), shall automatically be
converted at the Effective Time into the right to receive whole shares of
PURCHASER Common Stock, plus cash in lieu of fractional shares pursuant to
subparagraph (c) below, if applicable, in an amount equal to (i) (A) 2.0 times
the lesser of (1) 0.08 times the total assets of TARGET or (2) the Total Equity
of TARGET plus, (B) 1.0 times the amount, if any, by which the Total Equity of
----
TARGET exceeds 0.08 times the total assets of TARGET, based on the average of
the total assets of TARGET as of the close of business for each of the sixty
(60) calendar days immediately preceding the Closing Date, (ii) divided by the
aggregate number of Outstanding TARGET Shares (the "Merger Consideration"). In
accordance with the provisions of this Section 3.1, each TARGET shareholder who
does not dissent shall receive the number of shares, or such fractions of a
share (subject to paragraph (b) below), of PURCHASER Common Stock which shall be
equal to the (i) Merger Consideration divided by the Base Period Trading Price
(the "Exchange Ratio"), (ii) multiplied by the aggregate number of Outstanding
TARGET Shares such shareholder holds as of the Effective Time.
(c) Notwithstanding any other provision of this Agreement, each
holder of shares of TARGET Common Stock exchanged pursuant to the Merger who
would otherwise have been entitled to receive a fraction of a share of PURCHASER
Common Stock (after taking into account all certificates delivered by such
holder) shall receive, in lieu thereof, cash (without interest) in an amount
equal to such fractional part of a share of PURCHASER Common Stock multiplied by
the Base Period Trading Price. No such holder will be entitled to dividends,
voting rights, or any other rights as a shareholder in respect of any fractional
shares.
(d) Each share of the TARGET Common Stock that is not an
Outstanding TARGET Share as of the Effective Time shall be cancelled without
consideration therefor.
(e) Outstanding TARGET Shares held by TARGET shareholders who,
prior to the Effective Time, have met the requirements of Article 13 of the GBCC
with respect to shareholders dissenting from the Merger ("Dissenting TARGET
Shareholders") shall not be converted in the Merger, but all such shares shall
be cancelled and the holders thereof shall thereafter have only such rights as
are granted to dissenting shareholders under Article 13 of the GBCC; provided,
however, that if any such shareholder fails to perfect his or her rights as a
dissenting shareholder with respect to his or her Outstanding TARGET Shares in
accordance with Article 13 of the GBCC, such shares held by such shareholder
shall, upon the happening of that event, be treated the same as all other
holders of TARGET Common Stock who have not dissented as to the Merger.
3.2 EXCHANGE OF SHARES. Prior to the Effective Time, PURCHASER shall
------------------
select a bank or trust company reasonably acceptable to TARGET to act as
exchange agent (the "Exchange Agent") to effectuate the delivery of the Merger
Consideration to holders of TARGET Common Stock. Promptly following the
Effective Time, the Exchange Agent shall send to each holder of
3
<PAGE>
Outstanding TARGET Shares immediately prior to the Effective Time a form of
letter of transmittal (the "Letter of Transmittal") for use in exchanging
certificates previously evidencing shares of TARGET Common Stock ("Old
Certificates"). The Letter of Transmittal will contain instructions with
respect to the surrender of Old Certificates and the distribution of cash and
certificates representing PURCHASER Common Stock, which certificates shall be
deposited with the Exchange Agent by PURCHASER as of the Effective time. If any
certificates for shares of PURCHASER Common Stock are to be issued in a name
other than that for which an Old Certificate surrendered or exchanged is issued,
the Old Certificate so surrendered shall be properly endorsed and otherwise in
proper form for transfer and the person requesting such exchange shall affix any
requisite stock transfer tax stamps to the Old Certificate surrendered or
provide funds for their purchase or establish to the satisfaction of the
Exchange Agent that such taxes are not payable. Unless and until Old
Certificates (or evidence that such certificates have been lost, stolen or
destroyed accompanied by such security or indemnity as shall be requested by
TARGET) are presented to the Exchange Agent, the holder thereof shall not be
entitled to the consideration to be paid in exchange therefor pursuant to the
Merger, to any dividends payable on any PURCHASER Common Stock to which he or
she is entitled, or to exercise any rights as a shareholder of PURCHASER Common
Stock. Subject to applicable law and to the extent that the same has not yet
been paid to a public official pursuant to applicable abandoned property laws,
upon surrender of his or her Old Certificates, the holder thereof shall be paid
the consideration to which he or she is entitled. All such property, if held by
the Exchange Agent for payment or delivery to the holders of unsurrendered Old
Certificates and unclaimed at the end of one (1) year from the Effective Time,
shall at such time be paid or redelivered by the Exchange Agent to PURCHASER and
after such time any holder of an Old Certificate who has not surrendered such
certificate shall, subject to applicable laws and to the extent that the same
has not yet been paid to a public official pursuant to applicable abandoned
property laws, look as a general creditor only to PURCHASER for payment or
delivery of such property. In no event will any holder of TARGET Common Stock
exchanged in the Merger be entitled to receive any interest on any amounts held
by the Exchange Agent or PURCHASER.
3.3 ANTI-DILUTION PROVISIONS. In the event TARGET or PURCHASER changes
------------------------
the number of shares of TARGET Common Stock or PURCHASER Common Stock,
respectively, issued and outstanding prior to the Effective Time as a result of
a stock split, stock dividend or similar recapitalization with respect to such
stock and the record date therefor (in the case of a stock dividend) or the
effective date therefor (in the case of a stock split or similar
recapitalization) shall be prior to the Effective Time, the Exchange Ratio shall
be proportionately adjusted.
3.4 SHARES HELD BY TARGET OR PURCHASER. Each of the shares of TARGET
----------------------------------
Common Stock held by any TARGET Company or by any PURCHASER Company, in each
case other than in a fiduciary capacity or as a result of debts previously
contracted, shall be canceled and retired at the Effective Time and no
consideration shall be issued in exchange therefor.
3.5 TARGET BANK. After consummation of the Merger, TARGET Bank shall be
-----------
a separate subsidiary of PURCHASER.
4
<PAGE>
3.6 RIGHTS OF FORMER TARGET SHAREHOLDERS. At the Effective Time, the
------------------------------------
stock transfer books of TARGET shall be closed as to holders of TARGET Common
Stock immediately prior to the Effective Time and no transfer of TARGET Common
Stock by any such holder shall thereafter be made or recognized. Until
surrendered for exchange in accordance with the provisions of Section 3.2 of
this Agreement, each Old Certificate (other than shares to be canceled pursuant
to Section 3.1(d) of this Agreement) shall from and after the Effective Time
represent for all purposes only the right to receive the consideration provided
in Section 3.1 of this Agreement in exchange therefor. To the extent permitted
by Law, former shareholders of record of TARGET shall be entitled to vote after
the Effective Time at any meeting of shareholders of PURCHASER the number of
whole shares of PURCHASER Common Stock into which their respective shares of
TARGET Common Stock are converted, regardless of whether such holders have
exchanged their certificates representing TARGET Common Stock for certificates
representing PURCHASER Common Stock in accordance with the provisions of this
Agreement. Whenever a dividend or other distribution is declared by PURCHASER
on the PURCHASER Common Stock, the record date for which is at or after the
Effective Time, the declaration shall include dividends or other distributions
on all shares issuable pursuant to this Agreement, but no dividend or other
distribution payable to the holders of record of PURCHASER Common Stock as of
any time subsequent to the Effective Time shall be delivered to the holder of
any certificate representing shares of TARGET Common Stock issued and
outstanding at the Effective Time until such holder surrenders such certificate
for exchange as provided in Section 3.2 of this Agreement. However, upon
surrender of such TARGET Common Stock certificate, both the PURCHASER Common
Stock certificate (together with all such undelivered dividends or other
distributions without interest) and any undelivered cash payments to be paid for
fractional share interests (without interest) shall be delivered and paid with
respect to each share represented by such certificate.
3.7 OPTIONS. Each warrant, stock option or other right, if any, to
-------
purchase shares of TARGET Common Stock issued and outstanding immediately prior
to the Effective Time shall be cancelled (whether or not such warrant, option or
other right is then exercisable), and all rights in respect thereof shall cease
to exist, without any conversion thereof or payment of any consideration
therefor.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF TARGET
----------------------------------------
TARGET hereby represents and warrants to PURCHASER as follows:
4.1 ORGANIZATION, STANDING AND POWER. TARGET is a corporation duly
--------------------------------
organized, validly existing, and in good standing under the Laws of the State of
Georgia, and is duly registered as a bank holding company under the BHC Act.
TARGET has the corporate power and authority to carry on its business as now
conducted and to own, lease and operate its Assets. TARGET is duly qualified or
licensed to transact business as a foreign corporation in good standing in the
States of the United States and foreign jurisdictions where the character of its
assets or the nature or conduct of its business requires it to be so qualified
or licensed, except for such jurisdictions in
5
<PAGE>
which the failure to be so qualified or licensed is not reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on TARGET.
4.2 AUTHORITY; NO BREACH
--------------------
(a) TARGET has the corporate power and authority necessary to
execute, deliver and perform its obligations under this Agreement and to
consummate the transactions contemplated hereby. The execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated herein, including the Merger, have been duly and validly authorized
by all necessary corporate action in respect thereof on the part of TARGET,
subject to the approval of this Agreement by the holders of a majority of the
outstanding TARGET Common Stock. Subject to such requisite shareholder approval,
this Agreement represents a legal, valid and binding obligation of TARGET,
enforceable against TARGET in accordance with its terms (except in all cases as
such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, or similar Laws affecting the enforcement of
creditors' rights generally and except that the availability of the equitable
remedy of specific performance or injunctive relief is subject to the discretion
of the court before which any proceeding may be brought).
(b) Neither the execution and delivery of this Agreement by TARGET,
nor the consummation by TARGET of the transactions contemplated hereby, nor
compliance by TARGET with any of the provisions hereof, will (i) conflict with
or result in a breach of any provision of TARGET's Articles of Incorporation or
Bylaws, or (ii) constitute or result in a Default under, or require any Consent
pursuant to, or result in the creation of any Lien on any Asset of any TARGET
Company under, any Contract or Permit of any TARGET Company, where such Default
or Lien, or any failure to obtain such Consent, is reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on TARGET, or, (iii)
subject to receipt of the requisite approvals referred to in Section 8.1(b) of
this Agreement, violate any Law or Order applicable to any TARGET Company or any
of their respective Assets.
(c) Other than in connection or compliance with the provisions of
the Securities Laws, applicable state corporate and securities Laws, and other
than Consents required from Regulatory Authorities, and other than notices to or
filings with the Internal Revenue Service or the Pension Benefit Guaranty
Corporation with respect to any employee benefit plans, and other than Consents,
filings or notifications which, if not obtained or made, are not reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
TARGET, no notice to, filing with, or Consent of any public body or authority is
necessary for the consummation by TARGET of the Merger and the other
transactions contemplated in this Agreement.
4.3 CAPITAL STOCK.
-------------
(a) The authorized capital stock of TARGET consists of 10,000,000
shares of TARGET Common Stock, of which 218,130 shares are issued and
outstanding as of the date of this Agreement. All of the issued and outstanding
shares of capital stock of TARGET are duly and validly issued and outstanding
and are fully paid and nonassessable under the GBCC. None of the
6
<PAGE>
outstanding shares of capital stock of TARGET has been issued in violation of
any preemptive rights of the current or past shareholders of TARGET. TARGET has
reserved 17,100 shares of TARGET Common Stock for issuance under the TARGET
Stock Plans, pursuant to which options to purchase not more than 17,100 shares
of TARGET Common Stock are outstanding as of the date of this Agreement and at
the Effective Time.
(b) Except as set forth in Section 4.3(a) of this Agreement or as
Previously Disclosed, there are no shares of capital stock or other equity
securities of TARGET outstanding and no outstanding options, warrants, scrip,
rights to subscribe to, calls, or commitments of any character whatsoever
relating to, or securities or rights convertible into or exchangeable for,
shares of the capital stock of TARGET or contracts, commitments, understandings,
or arrangements by which TARGET is or may be bound to issue additional shares of
its capital stock or options, warrants, or rights to purchase or acquire any
additional shares of its capital stock.
4.4 TARGET SUBSIDIARIES. TARGET has Previously Disclosed all of the
-------------------
TARGET Subsidiaries as of the date of this Agreement. TARGET owns all of the
issued and outstanding shares of capital stock of TARGET Bank, and TARGET Bank
owns all of the issued and outstanding stock of each other TARGET Subsidiary.
No equity securities of any TARGET Subsidiary are or may become required to be
issued (other than to a TARGET Company) by reason of any options, warrants,
scrip, rights to subscribe to, calls, or commitments of any character whatsoever
relating to, or securities or rights convertible into or exchangeable for,
shares of the capital stock of any such Subsidiary, and there are no Contracts
by which any TARGET Subsidiary is bound to issue (other than to a TARGET
Company) additional shares of its capital stock or options, warrants, or rights
to purchase or acquire any additional shares of its capital stock or by which
any TARGET Company is or may be bound to transfer any shares of the capital
stock of any TARGET Subsidiary (other than to a TARGET Company). There are no
Contracts relating to the rights of any TARGET Company to vote or to dispose of
any shares of the capital stock of any TARGET Subsidiary. All of the shares of
capital stock of each TARGET Subsidiary held by a TARGET Company are fully paid
and nonassessable under the applicable corporation Law of the jurisdiction in
which such Subsidiary is incorporated or organized and are owned by the TARGET
Company free and clear of any Lien. Each TARGET Subsidiary is either a bank or
a corporation, and is duly organized, validly existing, and (as to corporations)
in good standing under the Laws of the jurisdiction in which it is incorporated
or organized, and has the corporate power and authority necessary for it to own,
lease and operate its Assets and to carry on its business as now conducted.
Each TARGET Subsidiary is duly qualified or licensed to transact business as a
foreign corporation in good standing in the States of the United States and
foreign jurisdictions where the character of its Assets or the nature or conduct
of its business requires it to be so qualified or licensed, except for such
jurisdictions in which the failure to be so qualified or licensed is not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on TARGET. Each TARGET Subsidiary that is a depository institution is an
insured institution as defined in the Federal Deposit Insurance Act and
applicable regulations thereunder.
4.5 FINANCIAL STATEMENTS. TARGET has Previously Disclosed, and
--------------------
delivered to PURCHASER prior to the execution of this Agreement, copies of all
TARGET Financial Statements
7
<PAGE>
for periods ended prior to the date hereof and will deliver to PURCHASER copies
of all TARGET Financial Statements prepared subsequent to the date hereof. The
TARGET Financial Statements (as of the dates thereof and for the periods covered
thereby) (a) are or, if dated after the date of this Agreement, will be in
accordance with the books and records of the TARGET Companies, which are or will
be, as the case may be, complete and correct and which have been or will have
been, as the case may be, maintained in accordance with good business practices,
and (b) present or will present, as the case may be, fairly the consolidated
financial position of the TARGET Companies as of the dates indicated and the
consolidated results of operations, changes in shareholders' equity, and cash
flows of the TARGET Companies for the periods indicated, in accordance with GAAP
(subject to any exceptions as to consistency specified therein or as may be
indicated in the notes thereto or, in the case of interim financial statements,
to normal recurring year-end adjustments that are not material).
4.6 ABSENCE OF UNDISCLOSED LIABILITIES. Except as Previously Disclosed,
----------------------------------
no TARGET Company has any Liabilities that are reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on TARGET, except
Liabilities which are accrued or reserved against in the consolidated balance
sheets of TARGET as of December 31, 1994 and September 30, 1995 included in the
TARGET Financial Statements or reflected in the notes thereto. Except as
Previously Disclosed, no TARGET Company has incurred or paid any Liability since
September 30, 1995, except for such Liabilities incurred or paid in the ordinary
course of business consistent with past business practice and which are not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on TARGET.
4.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since September 30, 1995, (a)
------------------------------------
there have been no events, changes or occurrences which have had, or are
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on TARGET, and (b) the TARGET Companies have not taken any action, or
failed to take any action, prior to the date of this Agreement, which action or
failure, if taken after the date of this Agreement, would represent or result in
a material breach or violation of any of the covenants and agreements of TARGET
provided in Article 7 of this Agreement.
4.8 TAX MATTERS.
-----------
(a) All Tax returns required to be filed by or on behalf of any of the
TARGET Companies have been duly filed or requests for extensions have been
timely filed, granted, and have not expired for periods ended on or before
December 31, 1994, and on or before the date of the most recent fiscal year end
immediately preceding the Effective Time, except to the extent that all such
failures to file, taken together, are not reasonably likely to have a Material
Adverse Effect on TARGET, and all returns filed are complete and accurate to the
Knowledge of TARGET. All Taxes shown on filed returns have been paid. As of
the date of this Agreement, there is no audit examination, deficiency, or refund
Litigation with respect to any Taxes that is reasonably likely to result in a
determination that would have, individually or in the aggregate, a Material
Adverse Effect on TARGET, except as reserved against in the TARGET Financial
Statements delivered prior to
8
<PAGE>
the date of this Agreement. All Taxes and other Liabilities due with respect to
completed and settled examinations or concluded Litigation have been paid.
(b) None of the TARGET Companies has executed an extension or
waiver of any statute of limitations on the assessment or collection of any Tax
due that is currently in effect, and no unpaid tax deficiency has been asserted
in writing against or with respect to any TARGET Company, which deficiency is
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on TARGET.
(c) Adequate provision for any Taxes due or to become due for any
of the TARGET Companies for the period or periods through and including the date
of the respective TARGET Financial Statements has been made and is reflected on
such TARGET Financial Statements.
(d) Deferred Taxes of the TARGET Companies have been provided for
in accordance with GAAP.
(e) Each of the TARGET Companies is in compliance with, and its
records contain all information and documents (including, without limitation,
properly completed IRS Forms W-9) necessary to comply with, all applicable
information reporting and Tax withholding requirements under federal, state and
local Tax Laws, and such records identify with specificity all accounts subject
to backup withholding under Section 3406 of the Internal Revenue Code, except
for such instances of noncompliance and such omissions as are not reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
TARGET.
(f) Effective January 1, 1993, TARGET adopted Financial Accounting
Standards Board Statement 109, "Accounting for Income Taxes."
4.9 TARGET ALLOWANCE FOR POSSIBLE LOAN LOSSES. The allowance for
-----------------------------------------
possible loan or credit losses (the "TARGET Allowance") shown on the
consolidated balance sheets of TARGET included in the most recent TARGET
Financial Statements dated prior to the date of this Agreement was, and the
TARGET Allowance shown on the consolidated balance sheets of TARGET included in
the TARGET Financial Statements as of dates subsequent to the execution of this
Agreement will be, maintained in accordance with, and are in the amounts
required by GAAP and applicable regulatory requirements or guidelines as of the
dates thereof except where the failure of such TARGET Allowance to be so
maintained is not reasonably likely to have a Material Adverse Effect on TARGET.
4.10 ASSETS. Except as Previously Disclosed or as disclosed or reserved
------
against in the TARGET Financial Statements, or where the failure to own good and
marketable title is not reasonably likely to have a Material Adverse Effect on
TARGET, the TARGET Companies have good and marketable title, free and clear of
all Liens, to all of their respective Assets. All material tangible properties
used in the businesses of the TARGET Companies are in good condition, reasonable
wear and tear excepted, and are usable in the ordinary course of business
consistent with
9
<PAGE>
TARGET's past practices. All Assets which are material to TARGET's business on
a consolidated basis, held under leases or subleases by any of the TARGET
Companies are held under valid Contracts enforceable in accordance with their
respective terms (except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, or other Laws affecting the
enforcement of creditors' rights generally and except that the availability of
the equitable remedy of specific performance or injunctive relief is subject to
the discretion of the court before which any proceedings may be brought), and
each such Contract is in full force and effect. The policies of fire, theft,
liability, and other insurance maintained with respect to the Assets or
businesses of the TARGET Companies provide adequate coverage under current
industry practices against loss or Liability, and the fidelity and blanket bonds
in effect as to which any of the TARGET Companies is a named insured are
reasonably sufficient. The Assets of the TARGET Companies include all assets
required to operate the business of the TARGET Companies as presently conducted.
4.11 ENVIRONMENTAL MATTERS.
---------------------
(a) Each TARGET Company, its Participation Facilities and its Loan
Properties are, and have been, in compliance with all Environmental Laws, except
for violations which are not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on TARGET.
(b) There is no Litigation pending or, to the Knowledge of TARGET,
threatened before any court, governmental agency or authority or other forum in
which any TARGET Company or any of its Participation Facilities has been or,
with respect to threatened Litigation, may be named as a defendant (i) for
alleged noncompliance (including by any predecessor) with any Environmental Law
or (ii) relating to the release into the environment of any Hazardous Material
or oil, whether or not occurring at, on, under or involving a site owned, leased
or operated by any TARGET Company or any of its Participation Facilities, except
for such Litigation pending or, to the Knowledge of TARGET, threatened that is
not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on TARGET.
(c) There is no Litigation pending or, to the Knowledge of TARGET,
threatened before any court, governmental agency or board or other forum in
which any of its Loan Properties (or any TARGET Company in respect of such Loan
Property) has been or, with respect to threatened litigation, may be named as a
defendant or potentially responsible party (i) for alleged noncompliance
(including by any predecessor) with any Environmental Law or (ii) relating to
the release into the environment of any Hazardous Material or oil, whether or
not occurring at, on, under or involving a Loan Property, except for such
Litigation pending or, to the Knowledge of TARGET, threatened that is not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on TARGET.
(d) To the Knowledge of TARGET, there is no reasonable basis for
any Litigation of a type described in subsections (b) or (c), except such as is
not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on TARGET.
10
<PAGE>
(e) During the period of (i) any TARGET Company's ownership or
operation of any of their respective current properties, (ii) any TARGET
Company's participation in the management of any Participation Facility, or
(iii) any TARGET Company's holding of a security interest in a Loan Property,
there have been no releases of Hazardous Material or oil in, on, under or
affecting any such property, Participation Facility, or to the Knowledge of
TARGET Loan Property, except such as are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on TARGET.
(f) Prior to the period of (i) any TARGET Company's ownership or
operation of any of their respective current properties, (ii) any TARGET
Company's participation in the management of any Participation Facility, or
(iii) any TARGET Company's holding of a security interest in a Loan Property, to
the Knowledge of TARGET, there were no releases of Hazardous Material or oil in,
on, under or affecting any such property, Participation Facility or Loan
Property, except such as are not reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on TARGET.
4.12 COMPLIANCE WITH LAWS.
--------------------
(a) TARGET is duly registered as a bank holding company under the
BHC Act. Each TARGET Company has in effect all Permits necessary for it to own,
lease or operate its Assets and to carry on its business as now conducted,
except for those Permits the absence of which are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on TARGET, and there
has occurred no Default under any such Permit, other than Defaults which are not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on TARGET.
(b) Except as Previously Disclosed no TARGET Company:
(i) is in violation of any Laws, Orders or Permits applicable
to its business or employees conducting its business, except for violations
which are not reasonably likely to have, individually or in the aggregate,
a Material Adverse Effect on TARGET; and
(ii) has received any notification or communication from any
agency or department of federal, state, or local government or any
Regulatory Authority or the staff thereof (A) asserting that any TARGET
Company is not in compliance with any of the Laws or Orders which such
governmental authority or Regulatory Authority enforces, where such
noncompliance is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on TARGET, (B) threatening to revoke
any Permits, the revocation of which is reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on TARGET, or
(C) requiring any TARGET Company to enter into or consent to the issuance
of a cease and desist order, formal agreement, directive, commitment or
memorandum of understanding, or to adopt any Board resolution or similar
undertaking, which restricts materially the conduct of its business, or in
any manner relates to its capital adequacy, its credit or reserve policies,
its management, or the payment of dividends.
11
<PAGE>
4.13 LABOR RELATIONS. No TARGET Company is the subject of any Litigation
---------------
asserting that it or any other TARGET Company has committed an unfair labor
practice (within the meaning of the National Labor Relations Act or comparable
state law) or seeking to compel it or any other TARGET Company to bargain with
any labor organization as to wages or conditions of employment, nor is there any
strike or other labor dispute involving any TARGET Company, pending or, to its
Knowledge, threatened, or to its Knowledge, is there any activity involving any
TARGET Company's employees seeking to certify a collective bargaining unit or
engaging in any other organization activity.
4.14 EMPLOYEE BENEFIT PLANS.
----------------------
(a) TARGET has Previously Disclosed, and delivered or made
available to PURCHASER prior to the execution of this Agreement, copies in each
case of all pension, retirement, profit-sharing, deferred compensation, stock
option, employee stock ownership, severance pay, vacation, bonus, or other
incentive plans all other written employee programs, arrangements, or
agreements, all medical, vision, dental, or other health plans, all life
insurance plans, and all other employee benefit plans or fringe benefit plans,
including, without limitation, "employee benefit plans," as that term is defined
in Section 3(3) of ERISA, currently adopted, maintained by, sponsored in whole
or in part by, or contributed to by any TARGET Company or Affiliate thereof for
the benefit of employees, retirees, dependents, spouses, directors, independent
contractors, or other beneficiaries and under which employees, retirees,
dependents, spouses, directors, independent contractors, or other beneficiaries
are eligible to participate (collectively, the "TARGET Benefit Plans"). Any of
the TARGET Benefit Plans which is an "employee pension benefit plan," as that
term is defined in Section 3(2) of ERISA, is referred to herein as a "TARGET
ERISA Plan." Each TARGET ERISA Plan which is also a "defined benefit plan" (as
defined in Section 414(j)) of the Internal Revenue Code) is referred to herein
as a "TARGET Pension Plan." No TARGET Pension Plan is or has been a multi-
employer plan within the meaning of Section 3(37) of ERISA.
(b) All TARGET Benefit Plans are in compliance with the applicable
terms of ERISA, the Internal Revenue Code, and any other applicable Laws the
breach or violation of which are reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on TARGET. Each TARGET ERISA Plan
which is intended to be qualified under Section 401(a) of the Internal Revenue
Code has received a favorable determination letter from the Internal Revenue
Service, and TARGET is not aware of any circumstances likely to result in
revocation of any such favorable determination letter. To the Knowledge of
TARGET, no TARGET Company has engaged in a transaction with respect to any
TARGET Benefit Plan that, assuming the taxable period of such transaction
expired as of the date hereof would subject any TARGET Company to a tax or
penalty imposed by either Section 4975 of the Internal Revenue Code or Section
502(i) of ERISA in amounts which are reasonably likely to have, individually or
in the aggregate, a Material Adverse Effect on TARGET.
(c) No TARGET ERISA Plan which is a defined benefit pension plan
has any "unfunded current liability," as that term is defined in Section
302(d)(8)(A) of ERISA, based on actuarial assumptions set forth for such plan's
most recent actuarial valuation. Since the date of the
12
<PAGE>
most recent actuarial valuation, there has been (i) no material change in the
financial position of any TARGET Pension Plan, (ii) no change in the actuarial
assumptions with respect to any TARGET Pension Plan, and (iii) no increase in
benefits under any TARGET Pension Plan as a result of plan amendments or changes
in applicable law, which is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on TARGET or materially adversely affect
the funding status of any such plan. Neither any TARGET Pension Plan nor any
"single-employer plan," within the meaning of Section 4001(a)(15) of ERISA,
currently or formerly maintained by any TARGET Company, or the single-employer
plan of any entity which is considered one employer with TARGET under Section
4001 of ERISA or Section 414 of the Internal Revenue Code or Section 302 of
ERISA (whether or not waived) (an "ERISA Affiliate") has an "accumulated funding
deficiency" within the meaning of Section 412 of the Internal Revenue Code or
Section 302 of ERISA, which is reasonably likely to have a Material Adverse
Effect on TARGET. No TARGET Company has provided, or is required to provide,
security to a TARGET Pension Plan or to any single-employer plan of an ERISA
Affiliate pursuant to Section 401(a)(29) of the Code.
(d) Within the six-year period preceding the Effective Time, no
Liability under Subtitle C or D of Title IV or ERISA has been or is expected to
be incurred by any TARGET Company with respect to any ongoing, frozen or
terminated single-employer plan or the single-employer plan of any ERISA
Affiliate, which Liability is reasonably likely to have a Material Adverse
Effect on TARGET. Except as Previously Disclosed, no TARGET Company has
incurred any withdrawal Liability with respect to a multi-employer plan under
Subtitle B of Title TV or ERISA (regardless of whether based on contributions of
an ERISA Affiliate), which Liability is reasonably likely to have a Material
Adverse Effect on TARGET. No notice of a "reportable event," within the meaning
of Section 4043 of ERISA for which the 30-day reporting requirement has not been
waived, has been required to be filed for any TARGET Pension Plan or by any
ERISA Affiliate within the 12-month period ending on the date hereof.
(e) No TARGET Company has any obligations for retiree health and
life benefits under any of the TARGET Benefit Plans and there are no
restrictions on the rights of such TARGET Company to amend or terminate any such
Plan without incurring any Liability thereunder, which Liability is reasonably
likely to have a Material Adverse Effect on TARGET.
(f) Except as Previously Disclosed, neither the execution and
delivery of this Agreement nor the consummation of the transactions contemplated
hereby will (i) result in any payment (including, without limitation, severance,
unemployment compensation, golden parachute or otherwise) becoming due to any
director or any employee of any TARGET Company from any TARGET Company under any
TARGET Benefit Plan or otherwise, (ii) increase any benefits otherwise payable
under any TARGET Benefit Plan, or (iii) result in any acceleration of the time
of payment or vesting of any such benefit.
(g) The actuarial present values of all accrued deferred
compensation entitlements (including, without limitation, entitlements under any
executive compensation, supplemental retirement, or employment agreement) of
employees and former employees of any TARGET Company and their respective
beneficiaries, other than entitlements accrued pursuant to
13
<PAGE>
funded retirement plans subject to the provisions of Section 412 of the Internal
Revenue Code or Section 302 of ERISA, have been fully reflected on the TARGET
Financial Statements to the extent required by and in accordance with GAAP.
4.15 MATERIAL CONTRACTS. Except as Previously Disclosed or otherwise
------------------
reflected in the TARGET Financial Statements, none of the TARGET Companies, nor
any of their respective Assets, businesses or operations, is a party to, or is
bound or affected by, or receives benefits under, (a) any employment, severance,
termination, consulting or retirement Contract providing for aggregate payments
to any Person in any calendar year in excess of $50,000, (b) any Contract
relating to the borrowing of money by any TARGET Company or the guarantee by any
TARGET Company of any such obligation (other than Contracts evidencing deposit
liabilities, purchases of federal funds, fully secured repurchase agreements,
trade payables, and Contracts relating to borrowings or guarantees made in the
ordinary course of business), and (c) any Contracts between or among TARGET
Companies (together with all Contracts referred to in Sections 4.10 and 4.14(a)
of this Agreement, the "TARGET Contracts"). None of the TARGET Companies is in
Default under any TARGET Contract, other than Defaults which are not reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
TARGET. All of the indebtedness of any TARGET Company for money borrowed is
prepayable at any time by such TARGET Company without penalty or premium.
4.16 LEGAL PROCEEDINGS. Except as Previously Disclosed, there is no
-----------------
Litigation instituted or pending or, to the Knowledge of TARGET, threatened (or
unasserted but considered probable of assertion and which, if asserted, would
have at least a reasonable probability of an unfavorable outcome) against any
TARGET Company, or against any Asset, interest, or right of any of them, that is
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on TARGET, nor are there any Orders of any Regulatory Authorities, other
governmental authorities, or arbitrators outstanding against any TARGET Company,
that are reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on TARGET.
4.17 REPORTS. Except as Previously Disclosed since January 1, 1993, each
-------
TARGET Company has timely filed all reports and statements, together with any
amendments required to be made with respect thereto, that it was required to
file with all Regulatory Authorities. As of their respective dates, each of
such reports and documents, including the financial statements, exhibits, and
schedules thereto, complied in all material respects with all applicable Laws.
As of their respective dates, none of such reports or documents contained any
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements made therein, in light
of the circumstances under which they were made, not misleading.
4.18 STATEMENTS TRUE AND CORRECT. No statement, certificate, instrument
---------------------------
or other writing furnished or to be furnished by any TARGET Company or any
Affiliate thereof to PURCHASER pursuant to this Agreement or any other document,
agreement or instrument referred to herein contains or will contain any untrue
statement of material fact or will omit to state a material fact necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading. None of the information supplied or to be supplied by any
TARGET
14
<PAGE>
Company or any Affiliate thereof for inclusion in the Registration Statement to
be filed by PURCHASER with the SEC, will, when the Registration Statement
becomes effective, be false or misleading with respect to any material fact, or
omit to state any material fact necessary to make the statements therein not
misleading. None of the information supplied or to be supplied by any TARGET
Company or any Affiliate thereof for inclusion in the Proxy Statement to be
mailed to TARGET's shareholders in connection with the Shareholders' Meeting,
and any other documents to be filed by any TARGET Company or any Affiliate
thereof with the SEC or any other Regulatory Authority in connection with the
transactions contemplated hereby, will, at the respective time such documents
are filed, and with respect to the Proxy Statement, when first mailed to the
shareholders of TARGET, be false or misleading with respect to any material
fact, or omit to state any material fact necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, or, in the case of the Proxy Statement or any amendment thereof or
supplement thereto, at the time of the Shareholders' Meeting, be false or
misleading with respect to any material fact, or omit to state any material fact
necessary to correct any statement in any earlier communication with respect to
the solicitation of any proxy for the Shareholders' Meeting. All documents that
any TARGET Company or any Affiliate thereof is responsible for filing with any
Regulatory Authority in connection with the transactions contemplated hereby
will comply as to form in all material respects with the provisions of
applicable Law.
4.19 ACCOUNTING, TAX AND REGULATORY MATTERS. Except as Previously
--------------------------------------
Disclosed, no TARGET Company or any Affiliate thereof has taken any action or
has any Knowledge of any fact or circumstance that is reasonably likely to (a)
prevent the transactions contemplated hereby, including the Merger, from
qualifying as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code, or (b) materially impede or delay receipt of any Consents
of Regulatory Authorities referred to in Section 8.1 (b) of this Agreement or
result in the imposition of a condition or restriction of the referred to in
the second sentence of such Section. To the Knowledge of TARGET, there exists
no fact, circumstance, or reason why the requisite Consents referred to in
Section 8.1(b) of this Agreement cannot be received in a timely manner without
the imposition of any condition or restriction of the type described in the
second sentence of such Section 8.1(b).
4.20 CHARTER PROVISIONS. Each TARGET Company has taken all action so
------------------
that the entering into of this Agreement and the consummation of the Merger and
the other transactions contemplated by this Agreement do not and will not result
in the grant of any rights to any Person under the Articles of Incorporation,
Bylaws or other governing instruments of any TARGET Company or restrict or
impair the ability of PURCHASER to vote, or otherwise to exercise the rights of
a shareholder with respect to, shares of any TARGET Company that may be acquired
or controlled by it.
15
<PAGE>
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF PURCHASER
-------------------------------------------
PURCHASER hereby represents and warrants to TARGET as follows:
5.1 ORGANIZATION, STANDING AND POWER. PURCHASER is a corporation duly
--------------------------------
organized, validly existing, and in good standing under the laws of the State of
Georgia, and is duly registered as a bank holding company under the BHC Act.
PURCHASER has the corporate power and authority to carry on its business as now
conducted and to own, lease and operate its Assets. PURCHASER is duly qualified
or licensed to transact business as a foreign corporation in good standing in
the States of the United States and foreign jurisdictions where the character of
its Assets or the nature or conduct of its business requires it to be so
qualified or licensed, except for such jurisdictions in which the failure to be
so qualified or licensed is not reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on PURCHASER.
5.2 AUTHORITY; NO BREACH.
--------------------
(a) PURCHASER has the corporate power and authority necessary to
execute, deliver and perform its obligations under this Agreement and to
consummate the transactions contemplated hereby. The execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated herein, including the Merger, have been duly and validly authorized
by all necessary corporate action in respect thereof on the part of PURCHASER.
This Agreement represents a legal, valid and binding obligation of PURCHASER,
enforceable against PURCHASER in accordance with its terms (except in all cases
as such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, or similar Laws affecting the enforcement of
creditors' rights generally and except that the availability of the equitable
remedy of specific performance or injunctive relief is subject to the discretion
of the court before which any proceeding may be brought).
(b) Neither the execution and delivery of this Agreement by
PURCHASER, nor the consummation by PURCHASER of the transactions contemplated
hereby, nor compliance by PURCHASER with any of the provisions hereof will (i)
conflict with or result in a breach of any provision of PURCHASER's Articles of
Incorporation or Bylaws, or (ii) constitute or result in a Default under, or
require any Consent pursuant to, or result in the creation of any Lien on any
Asset of any PURCHASER Company under, any Contract or Permit of any PURCHASER
Company, where such Default or Lien, or any failure to obtain such Consent, is
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on PURCHASER, or, (iii) subject to receipt of the requisite approvals
referred to in Section 8.1(b) of this Agreement, violate any Law or Order
applicable to any PURCHASER Company or any of their respective Assets.
(c) Other than in connection or compliance with the provisions of
the Securities Laws, applicable state corporate and securities Laws, and rules
of the NASD, and other than Consents required from Regulatory Authorities, and
other than notices to or filings with the Internal Revenue Service or the
Pension Benefit Guaranty Corporation with respect to any employee benefit
16
<PAGE>
plans, and other than Consents, filings or notifications which, if not obtained
or made, are not reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on PURCHASER, no notice to, filing with, or Consent of
any public body or authority is necessary for the consummation by PURCHASER of
the Merger and the other transactions contemplated in this Agreement.
5.3 CAPITAL STOCK.
-------------
(a) The authorized capital stock of PURCHASER consists of (i)
10,000,000 shares of PURCHASER Common Stock, of which 3,379,192 shares are
issued and outstanding as of the date of this Agreement, and (ii) 5,000,000
shares of Preferred Stock, none of which are issued or outstanding as of the
date of this Agreement. All of the issued and outstanding shares of PURCHASER
Common Stock are, and all of the shares of PURCHASER Common Stock to be issued
in exchange for shares of TARGET Common Stock upon consummation of the Merger,
when issued in accordance with the terms of this Agreement, will be, duly and
validly issued and outstanding and fully paid and nonassessable under the GBCC.
None of the outstanding shares of PURCHASER Common Stock has been, and none of
the shares of PURCHASER Common Stock to be issued in exchange for shares of
TARGET Common Stock upon consummation of the Merger will be, issued in violation
of any preemptive rights of the current or past shareholders of PURCHASER.
PURCHASER has reserved 6,667 shares of PURCHASER Common Stock for issuance under
the PURCHASER Stock Plans, pursuant to which options to purchase not more than
6,667 shares of PURCHASER Common Stock are outstanding as of the date of this
Agreement.
(b) Except as set forth in Section 5.3(a) of this Agreement, or as
Previously Disclosed, there are no shares of capital stock or other equity
securities of PURCHASER outstanding and no outstanding options, warrants, scrip,
rights to subscribe to, calls, or commitments of any character whatsoever
relating to, or securities or rights convertible into or exchangeable for,
shares of the capital stock of PURCHASER or contracts, commitments,
understandings, or arrangements by which PURCHASER is or may be bound to issue
additional shares of its capital stock or options, warrants, or rights to
purchase or acquire any additional shares of its capital stock.
5.4 PURCHASER SUBSIDIARIES. PURCHASER has Previously Disclosed all of
----------------------
the PURCHASER Subsidiaries as of the date of this Agreement. PURCHASER owns all
of the issued and outstanding shares of capital stock of each PURCHASER
Subsidiary. No equity securities of any PURCHASER Subsidiary are or may become
required to be issued (other than to a PURCHASER Company) by reason of any
options, warrants, scrip, rights to subscribe to, calls, or commitments of any
character whatsoever relating to, or securities or rights convertible into or
exchangeable for, shares of the capital stock of any such Subsidiary, and there
are no Contracts by which any PURCHASER Subsidiary is bound to issue (other than
to a PURCHASER Company) additional shares of its capital stock or options,
warrants, or rights to purchase or acquire any additional shares of its capital
stock or by which any PURCHASER Company is or may be bound to transfer any
shares of the capital stock of any PURCHASER Subsidiary (other than to a
PURCHASER Company). There are no Contracts relating to the rights of any
PURCHASER Company to vote or to dispose of any shares of the capital stock of
any PURCHASER Subsidiary.
17
<PAGE>
All of the shares of capital stock of each PURCHASER Subsidiary held by a
PURCHASER Company are fully paid and nonassessable under the applicable
corporation Law of the jurisdiction in which such Subsidiary is incorporated or
organized and are owned by the PURCHASER Company free and clear of any Lien.
Each PURCHASER Subsidiary is either a bank or a corporation, and is duly
organized, validly existing, and (as to corporations) in good standing under the
Laws of the jurisdiction in which it is incorporated or organized, and has the
corporate power and authority necessary for it to own, lease and operate its
Assets and to carry on its business as now conducted. Each PURCHASER Subsidiary
is duly qualified or licensed to transact business as a foreign corporation in
good standing in the States of the United States and foreign jurisdictions where
the character of its Assets or the nature or conduct of its business requires it
to be so qualified or licensed, except for such jurisdictions in which the
failure to be so qualified or licensed is not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on PURCHASER. Each
PURCHASER Subsidiary that is a depository institution is an insured institution
as defined in the Federal Deposit Insurance Act and applicable regulations
thereunder.
5.5 FINANCIAL STATEMENTS. PURCHASER has Previously Disclosed and
--------------------
delivered to TARGET prior to the execution of this Agreement copies of all
PURCHASER Financial Statements for periods ended prior to the date hereof and
will deliver to TARGET copies of all PURCHASER Financial Statements prepared
subsequent to the date hereof. The PURCHASER Financial Statements (as of the
dates thereof and for the periods covered thereby) (a) are or, if dated after
the date of this Agreement, will be in accordance with the books and records of
the PURCHASER Companies, which are or will be, as the case may be, complete and
correct and which have been or will have been, as the case may be, maintained in
accordance with good business practices, and (b) present or will present, as the
case may be, fairly the consolidated financial position of the PURCHASER
Companies as of the dates indicated and the consolidated results of operations,
changes in shareholders' equity, and cash flows of the PURCHASER Companies for
the periods indicated, in accordance with GAAP (subject to exceptions as to
consistency specified therein or as may be indicated in the notes thereto or, in
the case of interim financial statements, to normal recurring year-end
adjustments that are not material).
5.6 ABSENCE OF UNDISCLOSED LIABILITIES. No PURCHASER Company has any
----------------------------------
Liabilities that are reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on PURCHASER, except Liabilities which are
accrued or reserved against in the consolidated balance sheets of PURCHASER as
of December 31, 1994 and September 30, 1995 included in the PURCHASER Financial
Statements or reflected in the notes thereto. No PURCHASER Company has incurred
or paid any Liability since September 30, 1995, except for such Liabilities
incurred or paid in the ordinary course of business consistent with past
business practice and which are not reasonably likely to have, individually or
in the aggregate, a Material Adverse Effect on PURCHASER.
5.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since September 30, 1995,
------------------------------------
except as disclosed in SEC Documents filed by PURCHASER prior to the date of
this Agreement, (a) there have been no events, changes or occurrences which have
had, or are reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on PURCHASER, and (b) the
18
<PAGE>
PURCHASER Companies have not taken any action, or failed to take any action,
prior to the date of this Agreement, which action or failure, if taken after the
date of this Agreement, would represent or result in a material breach or
violation of any of the covenants and agreements of PURCHASER provided in
Article 7 of this Agreement.
5.8 TAX MATTERS.
-----------
(a) All Tax returns required to be filed by or on behalf of any of
the PURCHASER Companies have been timely filed or requests for extensions have
been timely filed, granted, and have not expired for periods ended on or before
December 31, 1994, and on or before the date of the most recent fiscal year end
immediately preceding the Effective Time, except to the extent that all such
failures to file, taken together, are not reasonably likely to have a Material
Adverse Effect on PURCHASER, and all returns filed are complete and accurate to
the Knowledge of PURCHASER. All Taxes shown on filed returns have been paid. As
of the date of this Agreement, there is no audit examination, deficiency, or
refund Litigation with respect to any Taxes that is reasonably likely to result
in a determination that would have, individually or in the aggregate, a Material
Adverse Effect on PURCHASER, except as reserved against in the PURCHASER
Financial Statements delivered prior to the date of this Agreement. All Taxes
and other Liabilities due with respect to completed and settled examinations or
concluded Litigation have been paid.
(b) None of the PURCHASER Companies has executed an extension or
waiver of any statute of limitations on the assessment or collection of any Tax
due that is currently in effect, and no unpaid tax deficiency has been asserted
in writing against or with respect to any PURCHASER Company, which deficiency is
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on PURCHASER.
(c) Adequate provision for any Taxes due or to become due for any
of the PURCHASER Companies for the period or periods through and including the
date of the respective PURCHASER Financial Statements has been made and is
reflected on such PURCHASER Financial Statements.
(d) Deferred Taxes of the PURCHASER Companies have been provided
for in accordance with GAAP.
(e) Effective January 1, 1993, PURCHASER adopted Financial
Accounting Standards Board Statement 109, "Accounting for Income Taxes."
5.9 PURCHASER ALLOWANCE FOR POSSIBLE LOAN LOSSES. The allowance for
--------------------------------------------
possible loan or credit losses (the "PURCHASER Allowance") shown on the
consolidated balance sheets of PURCHASER included in the most recent PURCHASER
Financial Statements dated prior to the date of this Agreement was, and the
PURCHASER Allowance shown on the consolidated balance sheets of PURCHASER
included in the PURCHASER Financial Statements as of dates subsequent to the
execution of this Agreement will be, as of the dates thereof, adequate (within
the meaning of GAAP and applicable regulatory requirements or guidelines) to
provide for losses relating to or
19
<PAGE>
inherent in the loan and lease portfolios (including accrued interest
receivables) of the PURCHASER Companies and other extensions of credit
(including letters of credit and commitments to make loans or extend credit) by
the PURCHASER Companies as of the dates thereof except where the failure of such
PURCHASER Allowance to be so adequate is not reasonably likely to have a
Material Adverse Effect on PURCHASER.
5.10 ASSETS. Except as Previously Disclosed or as disclosed or reserved
------
against in the PURCHASER Financial Statements, the PURCHASER Companies have good
and marketable title, free and clear of all Liens, to all of their respective
Assets. All material tangible properties used in the businesses of the
PURCHASER Companies are in good condition, reasonable wear and tear excepted,
and are usable in the ordinary course of business consistent with PURCHASER's
past practices. All Assets which are material to PURCHASER's business on a
consolidated basis, held under leases or subleases by any of the PURCHASER
Companies, are held under valid Contracts enforceable in accordance with their
respective terms (except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, or other Laws affecting the
enforcement of creditors' rights generally and except that the availability of
the equitable remedy of specific performance or injunctive relief is subject to
the discretion of the court before which any proceedings may be brought), and
each such Contract is in full force and effect. The policies of fire, theft,
liability, and other insurance maintained with respect to the Assets or
businesses of the PURCHASER Companies provide adequate coverage under current
industry practices against loss or Liability, and the fidelity and blanket bonds
in effect as to which any of the PURCHASER Companies is a named insured are
reasonably sufficient. The Assets of the PURCHASER Companies include all assets
required to operate the business of the PURCHASER Companies as presently
conducted.
5.11 ENVIRONMENTAL MATTERS.
---------------------
(a) Each PURCHASER Company, its Participation Facilities and its
Loan Properties are, and have been, in compliance with all Environmental Laws,
except for violations which are not reasonably likely to have, individually or
in the aggregate, a Material Adverse Effect on PURCHASER.
(b) There is no Litigation pending or, to the Knowledge of
PURCHASER, threatened before any court, governmental agency or authority or
other forum in which any PURCHASER Company or any of its Participation
Facilities has been or, with respect to threatened Litigation, may be named as a
defendant (i) for alleged noncompliance (including by any predecessor) with any
Environmental Law or (ii) relating to the release into the environment of any
Hazardous Material (as defined below) or oil, whether or not occurring at, on,
under or involving a site owned, leased or operated by any PURCHASER Company or
any of its Participation Facilities, except for such Litigation pending or, to
the Knowledge of Purchaser, threatened that is not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on PURCHASER.
20
<PAGE>
(c) There is no Litigation pending or, to the Knowledge of
Purchaser, threatened before any court, governmental agency or board or other
forum in which any of its Loan Properties (or any PURCHASER Company in respect
of such Loan Property) has been or, with respect to threatened Litigation, may
be named as a defendant or potentially responsible party (i) for alleged
noncompliance (including by any predecessor), with any Environmental Law or (ii)
relating to the release into the environment of any Hazardous Material or oil,
whether or not occurring at, on, under or involving a Loan Property, except for
such Litigation pending or, to the Knowledge of Purchaser, threatened that is
not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on PURCHASER.
(d) To the Knowledge of PURCHASER, there is no reasonable basis for
any Litigation of a type described in subsections (b) or (c), except such as is
not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on PURCHASER.
(e) During the period of (i) any PURCHASER Company's ownership or
operation of any of their respective current properties, (ii) any PURCHASER
Company's participation in the management of any Participation Facility, or
(iii) any PURCHASER Company's holding of a security interest in a Loan Property,
there have been no releases of Hazardous Material or oil in, on, under or
affecting such property, Participation Facility or Loan Property, except such as
are not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on PURCHASER.
(f) Prior to the period of (i) any PURCHASER Company's ownership or
operation of any of their respective current properties, (ii) any PURCHASER
Company's participation in the management of any Participation Facility, or
(iii) any PURCHASER Company's holding of a security interest in a Loan Property,
to the Knowledge of PURCHASER, there were no releases of Hazardous Material or
oil in, on, under or affecting any such property, Participation Facility or Loan
Property, except such as are not reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on PURCHASER.
5.12 COMPLIANCE WITH LAWS. PURCHASER is duly registered as a bank
--------------------
holding company under the BHC Act. Each PURCHASER Company has in effect all
Permits necessary for it to own, lease or operate its Assets and to carry on its
business as now conducted, except for those Permits the absence of which are not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on PURCHASER, and there has occurred no Default under any such Permit,
other than Defaults which are not reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on PURCHASER.
(a) No PURCHASER Company:
(i) is in violation of any Laws, Orders or Permits applicable
to its business or employees conducting its business, except for violations
which are not reasonably likely to have, individually or in the aggregate,
a Material Adverse Effect on PURCHASER; or
21
<PAGE>
(ii) has received any notification or communication from any
agency or department of federal, state, or local government or any
Regulatory Authority or the staff thereof (A) asserting that any PURCHASER
Company is not in compliance with any of the Laws or Orders which such
governmental authority or Regulatory Authority enforces, where such
noncompliance is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on PURCHASER, (B) threatening to
revoke any Permits, the revocation of which is reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on PURCHASER,
or (C) requiring any PURCHASER Company to enter into or consent to the
issuance of a cease and desist order, formal agreement, directive,
commitment or memorandum of understanding, or to adopt any Board resolution
or similar undertaking, which restricts materially the conduct of its
business, or in any manner relates to its capital adequacy, its credit or
reserve policies, its management, or the payment of dividends.
5.13 LABOR RELATIONS. No PURCHASER Company is the subject of any
---------------
Litigation asserting that it or any other PURCHASER Company has committed an
unfair labor practice (within the meaning of the National Labor Relations Act or
comparable state law) or seeking to compel it or any other PURCHASER Company to
bargain with any labor organization as to wages or conditions of employment, nor
is there any strike or other labor dispute involving any PURCHASER Company,
pending or, to its Knowledge, threatened, or to its Knowledge, is there any
activity involving any PURCHASER Company's employees seeking to certify a
collective bargaining unit or engaging in any other organization activity.
5.14 EMPLOYEE BENEFIT PLANS.
----------------------
(a) PURCHASER has Previously Disclosed and delivered or made
available to TARGET prior to the execution of this Agreement copies in each case
of all pension, retirement, profit-sharing, deferred compensation, stock option,
employee stock ownership, severance pay, vacation, bonus, or other incentive
plans, all other written employee programs, arrangements, or agreements, all
medical, vision, dental, or other health plans, all life insurance plans, and
all other employee benefit plans or fringe benefit plans, including, without
limitation, "employee benefit plans," as that term is defined in Section 3(3) of
ERISA, currently adopted, maintained by, sponsored in whole or in part by, or
contributed to by any PURCHASER Company or Affiliate thereof for the benefit of
employees, retirees, dependents, spouses, directors, independent contractors, or
other beneficiaries and under which employees, retirees, dependents, spouses,
directors, independent contractors, or other beneficiaries are eligible to
participate (collectively, the "PURCHASER Benefit Plans). Any of the PURCHASER
Benefit Plans which is an "employee pension benefit plan," as that term is
defined in Section 3(2) of ERISA, is referred to herein as a "PURCHASER ERISA
Plan." Each PURCHASER ERISA Plan which is also a "defined benefit plan" (as
defined in Section 414(j)) of the Internal Revenue Code) is referred to herein
as a "PURCHASER Pension Plan." No PURCHASER Pension Plan is or has been a multi-
employer plan within the meaning of Section 3(37) of ERISA.
(b) All PURCHASER Benefit Plans are in compliance with the
applicable terms of ERISA, the Internal Revenue Code, and any other applicable
Laws the breach or violation
22
<PAGE>
of which are reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on PURCHASER. Each PURCHASER ERISA Plan which is
intended to be qualified under Section 401(a) of the Internal Revenue Code has
received a favorable determination letter from the Internal Revenue Service, and
PURCHASER is not aware of any circumstances likely to result in revocation of
any such favorable determination letter. To the Knowledge of PURCHASER, no
PURCHASER Company has engaged in a transaction with respect to any PURCHASER
Benefit Plan that, assuming the taxable period of such transaction expired as of
the date hereof would subject any PURCHASER Company to a tax or penalty imposed
by either Section 4975 of the Internal Revenue Code or Section 502(i) of ERISA
in amounts which are reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on PURCHASER.
(c) No PURCHASER ERISA Plan which is a defined benefit pension plan
has any "unfunded current liability," as that term is defined in Section
302(d)(8)(A) of ERISA, based on actuarial assumptions set forth for such plan's
most recent actuarial valuation. Since the date of the most recent actuarial
valuation, there has been (i) no material change in the financial position of
any PURCHASER Pension Plan, (ii) no change in the actuarial assumptions with
respect to any PURCHASER Pension Plan, and (iii) no increase in benefits under
any PURCHASER Pension Plan as a result of plan amendments or changes in
applicable Law which is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on PURCHASER or materially adversely affect
the funding status of any such plan. Neither any PURCHASER Pension Plan nor any
"single-employer plan," within the meaning of Section 4001(a)(15) of ERISA,
currently or formerly maintained by any PURCHASER Company, or the single-
employer plan of any ERISA Affiliate has an "accumulated funding deficiency"
within the meaning of Section 412 of the Internal Revenue Code or Section 302 of
ERISA, which is reasonably likely to have a Material Adverse Effect on
PURCHASER. No PURCHASER Company has provided, or is required to provide,
security to a PURCHASER Pension Plan or to any single-employer plan of an ERISA
Affiliate pursuant to Section 401(a)(29) of the Code.
(d) No Liability under Subtitle C or D of Title IV or ERISA has
been or is expected to be incurred by any PURCHASER Company with respect to any
ongoing, frozen or terminated single-employer plan or the single-employer plan
of any ERISA Affiliate, which Liability is reasonably likely to have a Material
Adverse Effect on PURCHASER. No PURCHASER Company has incurred any withdrawal
Liability with respect to a multi-employer plan under Subtitle B of Title IV or
ERISA (regardless of whether based on contributions of an ERISA Affiliate),
which Liability is reasonably likely to have a Material Adverse Effect on
PURCHASER. No notice of a "reportable event" within the meaning of Section 4043
of ERISA for which the 30-day reporting requirement has not been waived, has
been required to be filed for any PURCHASER Pension Plan or by any ERISA
Affiliate within the 12-month period ending on the date hereof
(e) Except as Previously Disclosed, (i) no PURCHASER Company has
any obligations for retiree health and life benefits under any of the PURCHASER
Benefit Plans and (ii) there are no restrictions on the rights of such PURCHASER
Company to amend or terminate any such Plan without incurring any Liability
thereunder, which Liability is reasonably likely to have a Material Adverse
Effect on PURCHASER.
23
<PAGE>
(f) Except as Previously Disclosed, neither the execution and
delivery of this Agreement nor the consummation of the transactions contemplated
hereby will (i) result in any payment (including, without limitation, severance,
unemployment compensation, golden parachute or otherwise) becoming due to any
director or any employee of any PURCHASER Company from any PURCHASER Company
under any PURCHASER Benefit Plan or otherwise, (ii) increase any benefits
otherwise payable under any PURCHASER Benefit Plan, or (iii) result in any
acceleration of the time of payment or vesting of any such benefit.
(g) The actuarial present values of all accrued deferred
compensation entitlements (including, without limitation, entitlements under any
executive compensation, supplemental retirement, or employment agreement) of
employees and former employees of any PURCHASER Company and their respective
beneficiaries, other than entitlements accrued pursuant to funded retirement
plans subject to the provisions of Section 412 of the Internal Revenue Code or
Section 302 of ERISA, have been fully reflected on the PURCHASER Financial
Statements to the extent required by and in accordance with GAAP.
5.15 LEGAL PROCEEDINGS. There is no Litigation instituted or pending,
-----------------
or, to the Knowledge of PURCHASER, threatened (or unasserted but considered
probable of assertion and which if asserted would have at least a reasonable
probability of an unfavorable outcome) against any PURCHASER Company, or against
any Asset, interest, or right of any of them, that is reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on PURCHASER, nor
are there any Orders of any Regulatory Authorities, other governmental
authorities, or arbitrators outstanding against any PURCHASER Company, that are
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on PURCHASER.
5.16 REPORTS. Since January 1, 1993, each PURCHASER Company has timely
-------
filed all reports and statements, together with any amendments required to be
made with respect thereto, that it was required to file with (a) the SEC,
including, but not limited to, Forms 10-K, Forms 10-Q, Forms 8-K, and proxy
statements, (b) other Regulatory Authorities, and (c) any applicable state
securities or banking authorities (except, in the case of state securities
authorities, failures to file which are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on PURCHASER). As
of their respective dates, each of such reports and documents, including the
financial statements, exhibits, and schedules thereto, complied in all material
respects with all applicable Laws. As of its respective date, none of such
reports and documents contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements made therein, in light of the circumstances under which they
were made, not misleading.
5.17 STATEMENTS TRUE AND CORRECT. No statement, certificate, instrument
---------------------------
or other writing furnished or to be furnished by any PURCHASER Company or any
Affiliate thereof to TARGET pursuant to this Agreement or any other document,
agreement or instrument referred to herein contains or will contain any untrue
statement of material fact or will omit to state a material fact necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading. None of the information supplied or to be supplied by any
PURCHASER
24
<PAGE>
Company or any Affiliate thereof for inclusion in the Registration Statement to
be filed by PURCHASER with the SEC, will, when the Registration Statement
becomes effective, be false or misleading with respect to any material fact, or
omit to state any material fact necessary to make the statements therein not
misleading. None of the information supplied or to be supplied by any PURCHASER
Company or any Affiliate thereof for inclusion in the Proxy Statement to be
mailed to TARGET's shareholders in connection with the Shareholders' Meeting,
and any other documents to be filed by any PURCHASER Company or any Affiliate
thereof with the SEC or any other Regulatory Authority in connection with the
transactions contemplated hereby, will, at the respective time such documents
are filed, and with respect to the Proxy Statement, when first mailed to the
shareholders of TARGET, be false or misleading with respect to any material
fact, or omit to state any material fact necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, or, in the case of the Proxy Statement or any amendment thereof or
supplement thereto, at the time of the Shareholders' Meeting, be false or
misleading with respect to any material fact, or omit to state any material fact
necessary to correct any statement in any earlier communication with respect to
the solicitation of any proxy for the Shareholders' Meeting. All documents that
any PURCHASER Company or any Affiliate thereof is responsible for filing with
any Regulatory Authority in connection with the transactions contemplated hereby
will comply as to form in all material respects with the provisions of
applicable Law.
5.18 ACCOUNTING, TAX AND REGULATORY MATTERS. No PURCHASER Company or any
--------------------------------------
Affiliate thereof has taken any action or has any Knowledge of any fact or
circumstance that is reasonably likely to (a) prevent the transactions
contemplated hereby, including the Merger, from qualifying as a reorganization
within the meaning of Section 368(a) of the Internal Revenue Code, or (b)
materially impede or delay receipt of any Consents of Regulatory Authorities
referred to in Section 9.1(b) of this Agreement or result in the imposition of a
condition or restriction of the type referred to in the second sentence of such
Section. To the Knowledge of PURCHASER, there exists no fact, circumstance, or
reason why the requisite Consents referred to in Section 9.1(b) of this
Agreement cannot be received in a timely manner without the imposition of any
condition or restriction of the type described in the second sentence of such
Section 9.1(b).
5.19 CHARTER PROVISIONS. Each PURCHASER Company has taken all action so
------------------
that the entering into of this Agreement and the consummation of the Merger and
the other transactions contemplated by this Agreement do not and will not result
in the grant of any rights to any Person under the Articles of Incorporation,
Bylaws or other governing instruments of any PURCHASER Company or restrict or
impair the ability of any TARGET shareholder to vote, or otherwise to exercise
the rights of a shareholder with respect to, shares of PURCHASER Common Stock
that may be acquired or controlled by it.
25
<PAGE>
ARTICLE 6
CONDUCT OF BUSINESS PENDING CONSUMMATION
----------------------------------------
6.1 AFFIRMATIVE COVENANTS OF TARGET. Unless the prior written consent
-------------------------------
of PURCHASER shall have been obtained, and except as otherwise contemplated
herein, TARGET shall, and shall cause each of its Subsidiaries: (a) to operate
its business in the usual, regular, and ordinary course; (b) to preserve intact
its business organization and Assets and maintain its rights and franchises; (c)
to use its reasonable efforts to cause its representations and warranties to be
correct at all times; and (d) to take no action which would (i) adversely affect
the ability of any Party to obtain any Consents required for the transactions
contemplated hereby without imposition of a condition or restriction of the type
referred to in the second sentence of Section 8.1(b) of this Agreement or (ii)
adversely affect in any material respect the ability of either Party to perform
its covenants and agreements under this Agreement.
6.2 NEGATIVE COVENANTS OF TARGET. From the date of this Agreement until
----------------------------
the earlier of the Effective Time or the termination of this Agreement, TARGET
covenants and agrees that it will not do or agree or commit to do, or permit any
of its Subsidiaries to do or agree or commit to do, any of the following without
the prior written consent of the chief executive officer or chief financial
officer of PURCHASER, which consent shall not be unreasonably withheld:
(a) amend the Articles of Incorporation, Bylaws or other governing
instruments of any TARGET Company; or
(b) incur any additional debt obligation or other obligation for
borrowed money (other than indebtedness of a TARGET Company to another TARGET
Company) in excess of an aggregate of $50,000 (for the TARGET Companies on a
consolidated basis) except in the ordinary course of the business of TARGET
Companies consistent with past practices (which shall include, for TARGET
Subsidiaries that are depository institutions, creation of deposit liabilities,
purchases of federal funds, receipt of Federal Home Loan Bank advances, and
entry into repurchase agreements fully secured by U.S. government or agency
securities), or impose, or suffer the imposition, on any share of stock held by
any TARGET Company of any Lien or permit any such Lien to exist; or
(c) repurchase, redeem, or otherwise acquire or exchange (other
than exchanges in the ordinary course under employee benefit plans), directly or
indirectly, any shares, or any securities convertible into any shares, of the
capital stock of any TARGET Company, or declare or pay any dividend or make any
other distribution in respect of TARGET's capital stock; or
(d) except for this Agreement, or pursuant to the exercise of stock
options outstanding as of the date hereof and pursuant to the terms thereof in
existence on the date hereto, or as Previously Disclosed, issue, sell, pledge,
encumber, authorize the issuance of, or enter into any Contract to issue, sell,
pledge, encumber, or authorize the issuance of or otherwise permit to become
outstanding, any additional shares of TARGET Common Stock or any other capital
stock
26
<PAGE>
of any TARGET Company, or any stock appreciation rights, or any option, warrant,
conversion, or other right to acquire any such stock, or any security
convertible into any such stock; or
(e) adjust, split, combine or reclassify any capital stock of any
TARGET Company or issue or authorize the issuance of any other securities in
respect of or in substitution for shares of TARGET Common Stock or sell, lease,
mortgage or otherwise dispose of or otherwise encumber (i) any shares of capital
stock of any TARGET Subsidiary (unless any such shares of stock are sold or
otherwise transferred to another TARGET Company) or (ii) any Asset having a book
value in excess of $50,000 other than in the ordinary course of business for
reasonable and adequate consideration; or
(f) acquire direct or indirect control over any Person, other than
in connection with (i) internal reorganizations or consolidations involving
existing Subsidiaries, (ii) foreclosures in the ordinary course of business, or
(iii) acquisitions of control by a depository institution Subsidiary in its
fiduciary capacity; or
(g) grant any increase in compensation or benefits to the employees
or officers of any TARGET Company (including such discretionary increases as may
be contemplated by existing employment agreements), except in accordance with
past practice Previously Disclosed or as required by Law; pay any bonus except
in accordance with past practice Previously Disclosed or the provisions of any
applicable program or plan adopted by its Board of Directors prior to the date
of this Agreement; enter into or amend any severance agreements with officers of
any TARGET Company; grant any increase in fees or other increases in
compensation or other benefits to directors of any TARGET Company except for the
payment of an amount not to exceed $10,000 to each director of TARGET Bank in
consideration of the termination of TARGET Bank's Director's Defined Benefit
Plan or in accordance with past practice Previously Disclosed; or
(h) enter into or amend any employment Contract between any TARGET
Company and any Person (unless such amendment is required by Law) that the
TARGET Company does not have the unconditional right to terminate without
Liability (other than Liability for services already rendered), at any time on
or after the Effective Time; or
(i) adopt any new employee benefit plan of any TARGET Company or
make any material change in or to any existing employee benefit plans of any
TARGET Company other than any such change that is required by Law or that, in
the opinion of counsel, is necessary or advisable to maintain the tax qualified
status of any such plan; or
(j) make any significant change in any accounting methods or
systems of internal accounting controls, except as may be appropriate to conform
to changes in regulatory accounting requirements or GAAP; or
(k) commence any Litigation other than in accordance with past
practice, settle any Litigation involving any Liability of any TARGET Company
for money damages in excess of $50,000 or which involves material restrictions
upon the operations of any TARGET Company; or
27
<PAGE>
(l) except in the ordinary course of business, modify, amend or
terminate any material Contract or waive, release, compromise or assign any
material rights or claims.
6.3 COVENANTS OF PURCHASER. From the date of this Agreement until the
----------------------
earlier of the Effective Time or the termination of this Agreement, PURCHASER
covenants and agrees that it shall continue to conduct its business and the
business of its Subsidiaries in a manner designed in its reasonable judgment, to
enhance the long-term value of the PURCHASER Common Stock and the business
prospects of the PURCHASER Companies and, to the extent consistent therewith, to
use all reasonable efforts to preserve intact the PURCHASER Companies' core
businesses and goodwill with their respective employees and the communities they
serve.
6.4 ADVERSE CHANGES IN CONDITION. Each Party agrees to give written
----------------------------
notice promptly to the other Party upon becoming aware of the occurrence or
impending occurrence of any event or circumstance relating to it or any of its
Subsidiaries which (a) is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on it or (b) is reasonably likely to cause
or constitute a material breach of any of its representations, warranties, or
covenants contained herein, and to use its reasonable efforts to prevent or
promptly to remedy the same.
6.5 REPORTS. Each Party and its Subsidiaries shall file all reports
-------
required to be filed by it with Regulatory Authorities between the date of this
Agreement and the Effective Time and shall deliver to the other Party copies of
all such reports promptly after the same are filed. If financial statements are
contained in any such reports filed with the SEC, such financial statements will
fairly present the consolidated financial position of the entity filing such
statements as of the dates indicated and the consolidated results of operations,
changes in shareholders' equity, and cash flows for the periods then ended in
accordance with GAAP (subject in the case of interim financial statements to
normal recurring year-end adjustments that are not material). As of their
respective dates, such reports filed with the SEC will comply in all material
respects with the Securities Laws and will not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading. Any financial statements contained
in any other reports to another Regulatory Authority shall be prepared in
accordance with Laws applicable to such reports.
ARTICLE 7
ADDITIONAL AGREEMENTS
---------------------
7.1 REGISTRATION STATEMENT; PROXY STATEMENT; SHAREHOLDER APPROVAL. As
-------------------------------------------------------------
soon as practicable after execution of this Agreement, PURCHASER shall file the
Registration Statement with the SEC, and shall use its best efforts to cause the
Registration Statement to become effective under the 1933 Act and take any
action required to be taken under the applicable state Blue Sky or securities
Laws in connection with the issuance of the shares of PURCHASER Common Stock
upon consummation of the Merger. TARGET shall furnish all information
concerning it and the holders of its capital stock as PURCHASER may reasonably
request in connection with such action. TARGET shall call a Shareholders'
Meeting, to be held as soon as reasonably practicable after the
28
<PAGE>
Registration Statement is declared effective by the SEC, for the purpose of
voting upon approval of the merger and this Agreement and such other related
matters as it deems appropriate. In connection with the Shareholders' Meeting,
(a) PURCHASER shall prepare and file on TARGET's behalf a Proxy Statement (which
shall be included in the Registration Statement) with the SEC and mail it to its
shareholders, (b) the Parties shall furnish to each other all information
concerning them that they may reasonably request in connection with such Proxy
Statement, (c) the Board of Directors of TARGET shall recommend (subject to
compliance with their fiduciary duties as advised by counsel) to its
shareholders that they approve this Agreement, and (d) the Board of Directors
and officers of TARGET shall use their reasonable efforts to obtain such
shareholders' approval (subject to compliance with their fiduciary duties as
advised by counsel).
7.2 LISTING. PURCHASER shall use its best efforts to list, prior to the
-------
Effective Time, on the NASDAQ/NMS, the shares of PURCHASER Common Stock to be
issued to the holders of TARGET Common Stock pursuant to the Merger.
7.3 APPLICATIONS. PURCHASER shall promptly prepare and file, and TARGET
------------
shall cooperate in the preparation and, where appropriate, filing of,
applications with all Regulatory Authorities having jurisdiction over the
transactions contemplated by this Agreement seeking the requisite Consents
necessary to consummate the transactions contemplated by this Agreement.
7.4 FILINGS WITH STATE OFFICES. Upon the terms and subject to the
--------------------------
conditions of this Agreement, PURCHASER shall execute and file the Georgia
Articles of Merger with the Secretary of State of the State of Georgia in
connection with the Closing.
7.5 AGREEMENT AS TO EFFORTS TO CONSUMMATE. Subject to the terms and
-------------------------------------
conditions of this Agreement, each Party agrees to use, and to cause its
Subsidiaries to use, its best efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, all things necessary, proper, or
advisable under applicable Laws, as promptly as practicable so as to permit
consummation of the Merger at the earliest possible date and to otherwise enable
consummation of the transactions contemplated hereby and shall cooperate fully
with the other Party hereto to that end (it being understood that any amendments
to the Registration Statement filed by PURCHASER in connection with the
PURCHASER Common Stock to be issued in the Merger or a resolicitation of proxies
as a consequence of an acquisition agreement by PURCHASER or any of its
Subsidiaries shall not violate this covenant), including, without limitation,
using its efforts to lift or rescind any Order adversely affecting its ability
to consummate the transactions contemplated herein and to cause to be satisfied
the conditions referred to in Article 9 of this Agreement. Each Party shall
use, and shall cause each of its Subsidiaries to use, its best efforts to obtain
all Consents necessary or desirable for the consummation of the transactions
contemplated by this Agreement.
7.6 INVESTIGATION AND CONFIDENTIALITY.
---------------------------------
(a) Prior to the Effective Time, each Party will keep the other
Party advised of all material developments relevant to its business and to
consummation of the Merger and shall permit the other Party to make or cause to
be made such investigation of the business and properties
29
<PAGE>
of it and its Subsidiaries and of their respective financial and legal
conditions as the other Party reasonably requests, provided that such
investigation shall be reasonably related to the transactions contemplated
hereby and shall not interfere unnecessarily with normal operations. No
investigation by a Party shall affect the representations and warranties of the
other Party.
(b) Except as may be required by applicable Law or legal process,
and except for such disclosure to those of its directors, officers, employees
and representatives as may be appropriate or required in connection with the
transactions contemplated hereby, each Party shall hold in confidence all
nonpublic information obtained from the other Party (including work papers and
other material derived therefrom) as a result of this Agreement or in connection
with the transactions contemplated hereby (whether so obtained before or after
the execution hereof) until such time as the Party providing such information
consents to its disclosure or such information becomes otherwise publicly
available. Promptly following any termination of this Agreement, each of the
Parties agrees to use its best efforts to cause its respective directors,
officers, employees and representatives to destroy or return to the providing
party all such nonpublic information (including work papers and other material
retrieved therefrom), including all copies thereof. Each Party shall, and shall
cause its advisers and agents to, maintain the confidentiality of all
confidential information furnished to it by the other Party concerning its and
its Subsidiaries' businesses, operations, and financial positions and shall not
use such information for any purpose except in furtherance of the transactions
contemplated by this Agreement. If this Agreement is terminated prior to the
Effective Time, each Party shall promptly return all documents and copies
thereof and all work papers containing confidential information received from
the other Party, except one copy of certain materials that can be retained for
legal files in accordance with the provisions of the Confidentiality Agreements.
(c) Each Party agrees to give the other Party notice as soon as
practicable after any determination by it of any fact or occurrence relating to
the other Party which it has discovered through the course of its investigation
and which represents, or is reasonably likely to represent, either a material
breach of any representation, warranty, covenant or agreement of the other Party
or which has had or is reasonably likely to have a Material Adverse Effect on
the other Party.
7.7 PRESS RELEASES. Prior to the Effective Time, TARGET and PURCHASER
--------------
shall consult with each other as to the form and substance of any press release
or other public disclosure materially related to this Agreement or any other
transaction contemplated hereby; provided, however, that nothing in this Section
7.7 shall be deemed to prohibit any Party from making any disclosure which its
counsel deems necessary or advisable in order to satisfy such Party's disclosure
obligations imposed by Law.
7.8 NO SOLICITATION. (a) TARGET shall not, nor shall it permit any of
---------------
its Subsidiaries to, nor shall it authorize or permit any officer, director of
employee of, or any investment banker, attorney or other advisor or
representative of, TARGET or any of its Subsidiaries to, (i) solicit or
initiate, or encourage the submission of, any takeover proposal or (ii)
participate in any discussions or negotiations regarding, or furnish to any
person any information with respect to, or take any other action to facilitate
any inquiries or the making of any proposal that
30
<PAGE>
constitutes, or may reasonably be expected to lead to, any takeover proposal;
provided, however, that, if in the opinion of its Board of Directors, after
consultation with counsel, such failure to act would be inconsistent with its
fiduciary duties to shareholders under applicable law, TARGET may, in response
to an unsolicited takeover proposal, and subject to compliance with subparagraph
(c) below, (A) furnish information with respect to TARGET to any Person pursuant
to a confidentiality agreement and (B) participate in negotiations regarding
such takeover proposal. Without limiting the foregoing, it is understood that
any violation of the restrictions set forth in the immediately preceding
sentence by any executive officer of TARGET or any of its Subsidiaries or any
investment banker, attorney or other advisor or representative of TARGET or any
of its Subsidiaries, whether or not such person is purporting to act on behalf
of TARGET or any of its Subsidiaries or otherwise, shall be deemed to be a
breach of this Section 7.8 by TARGET. For purposes of this Agreement, "takeover
proposal" means an inquiry, proposal or acquisition or purchase of a substantial
amount of assets of TARGET or any of its Subsidiaries (other than investors in
the ordinary course of business) or of over 20% of any class of equity
securities of TARGET or any of its Subsidiaries or any tender offer or exchange
offer that if consummated would result in any Person beneficially owning 20% or
more of any class of equity securities of TARGET or any of its Subsidiaries, or
any merger, consolidation, business combination, sale of substantially all
assets, recapitalization, liquidation, dissolution or similar transaction
involving TARGET or any of its Subsidiaries other than the transactions
contemplated by this Agreement, or any other transaction the consummation of
which would reasonably be expected to impede, interfere with, prevent or
materially delay the Merger or which would reasonably be expected to dilute
materially the benefits to PURCHASER of the transactions contemplated hereby.
(b) Except as set forth herein, neither the Board of Directors of TARGET
nor any committee thereof shall (i) withdraw or modify, or propose to withdraw
or modify, in a manner adverse to PURCHASER, the approval or recommendation of
such Board of Directors or any such committee of this Agreement or the Merger,
(ii) approve or recommend, or propose to approve or recommend, any takeover
proposal or (iii) enter into any agreement with respect to any takeover
proposal. Notwithstanding the foregoing, if in the opinion of the TARGET Board
of Directors, after consultation with counsel, failure to do so would be
inconsistent with its fiduciary duties to TARGET shareholders under applicable
law, then, prior to the Shareholders' Meeting, the TARGET Board of Directors may
(subject to the terms of this and the following sentences) withdraw or modify
its approval or recommendation of this Agreement or the Merger, approve or
recommend a superior proposal, or enter into an agreement with respect to a
superior proposal, in each case at any time after the second business day
following PURCHASER'S receipt of written notice (a "Notice of Superior
Proposal") advising PURCHASER that the TARGET Board of Directors has received a
superior proposal, specifying the material terms and conditions of such superior
proposal and identifying the Person making such superior proposal; provided that
TARGET shall not enter into an agreement with respect to a superior proposal
unless TARGET shall have furnished PURCHASER with written notice no later than
12:00 noon one (1) day in advance of any date that it intends to enter into such
agreement. In addition, if TARGET proposes to enter into an agreement with
respect to any takeover proposal, it shall concurrently with entering into such
agreement pay, or cause to be paid, to PURCHASER the Expenses and the
Termination Fee (as defined in Section 10.2(b). For purposes of this Agreement,
a "superior proposal" means any bona fide takeover
31
<PAGE>
proposal to acquire, directly or indirectly, for consideration consisting of
cash and/or securities, more than 50% of the shares of TARGET Common Stock or
TARGET Bank then outstanding or all or substantially all of the assets of TARGET
or TARGET Bank and otherwise on terms which the TARGET Board of Directors
determines in its good faith judgment (based on the advice of a financial
advisor of nationally recognized reputation) to be more favorable to its
shareholders than the Merger.
(c) In addition to the obligations of TARGET set forth in paragraph (b)
above, TARGET shall immediately advise PURCHASER orally and in writing of any
request for information or of any takeover proposal, or any inquiry with respect
to or which could lead to any takeover proposal, the material terms and
conditions of such request, takeover proposal or inquiry, and the identity of
the person making any takeover proposal or inquiry. TARGET shall keep PURCHASER
fully informed of the status and details (including amendments or proposed
amendments) of any such request, takeover proposal or inquiry.
(d) Nothing contained in this Section 7.8 shall prohibit TARGET from
making any disclosure to TARGET's shareholders if, in the opinion of the TARGET
Board of Directors, after consultation with counsel, failure to so disclose
would be inconsistent with its fiduciary duties to its shareholders under
applicable law; provided that TARGET does not, except as permitted by
subparagraph (b) above, withdraw or modify, or propose to withdraw or modify,
its position with respect to the Merger or approve or recommend, or propose to
approve or recommend, a takeover proposal.
7.9 TAX TREATMENT. Each of the Parties undertakes and agrees to use its
-------------
reasonable efforts to cause the Merger, and to take no action which would cause
the Merger not, to qualify for treatment as a "reorganization" within the
meaning of Section 368(a) of the Internal Revenue Code for federal income tax
purposes.
7.10 AGREEMENT OF AFFILIATES. TARGET has Previously Disclosed all
-----------------------
Persons whom it reasonably believes are "affiliates" of TARGET for purposes of
Rule 145 under the 1933 Act. TARGET shall use its reasonable efforts to cause
each such Person to deliver to PURCHASER not later than thirty (30) days after
the date of this Agreement, a written agreement, substantially in the form of
Exhibit 1 hereto, providing that such Person will not sell, pledge, transfer, or
otherwise dispose of the shares of TARGET Common Stock held by such Person
except as contemplated by such agreement or by this Agreement and will not sell,
pledge, transfer, or otherwise dispose of the shares of PURCHASER Common Stock
to be received by such Person upon consummation of the Merger except in
compliance with applicable provisions of the 1933 Act and the rules and
regulations thereunder. Regardless of whether each such affiliate has provided
the written agreement referred to in this Section, PURCHASER shall be entitled
to place restrictive legends upon certificates for shares of PURCHASER Common
Stock issued to affiliates of TARGET pursuant to this Agreement to enforce the
provisions of this Section.
32
<PAGE>
7.11 EMPLOYEE BENEFITS AND CONTRACTS. Following the Effective Time,
-------------------------------
PURCHASER shall provide generally to officers and employees of the TARGET
Companies employee benefits under employee benefit plans (other than stock
option or other plans involving the potential issuance of PURCHASER Common
Stock), on terms and conditions which when taken as a whole are substantially
similar to those currently provided by the PURCHASER Companies to their
similarly situated officers and employees, provided that for a period of twelve
(12) months after the Effective Time, PURCHASER shall provide generally to
officers and employees of TARGET Companies severance benefits in accordance with
the policies of either (i) TARGET as Previously Disclosed, or (ii) PURCHASER,
whichever of (i) or (ii) will provide the greater benefit to the officer or
employee. For purposes of participation and vesting under such employee benefit
plans, the service of the employees of the TARGET Companies prior to the
Effective Time shall be treated as service with a PURCHASER Company
participating in such employee benefit plans. PURCHASER also shall honor in
accordance with their terms all employment, severance, consulting and other
compensation Contracts Previously Disclosed to PURCHASER between any TARGET
Company and any current or former director, officer, or employee thereof and all
provisions for vested benefits or other vested amounts earned or accrued through
the Effective Time under the TARGET Benefit Plans.
7.12 LARGE DEPOSITS. Prior to the Closing, TARGET will provide PURCHASER
--------------
with a list of all certificates of deposit or checking, savings or other
deposits owned by persons who, to the Knowledge of the TARGET, had deposits
aggregating more than $100,000 and a list of all certificates of deposit or
checking, savings or other deposits owned by directors and officers of TARGET
and the Bank and their affiliates in an amount aggregating more than $100,000 as
of the last day of the calendar month immediately prior to the Closing.
7.13 INDEMNIFICATION. PURCHASER agrees that all rights to
---------------
indemnification and all limitations of liability existing in favor of the
officers and directors of TARGET and TARGET Bank ("Indemnified Parties") as
provided in their respective articles of incorporation and bylaws as of the date
hereof with respect to matters occurring prior to the Effective Time shall
survive the Merger and shall continue in full force and effect, without any
amendment thereto, for a period of not less than six (6) years from the
Effective Time; provided, however, that all rights to any indemnification in
respect of any claim asserted or made within such period shall continue until
the final disposition of such claim.
ARTICLE 8
CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE
-------------------------------------------------
8.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY. The respective obligations
---------------------------------------
of each Party to perform this Agreement and consummate the Merger and the other
transactions contemplated hereby are subject to the satisfaction of the
following conditions, unless waived by both Parties pursuant to Section 10.6 of
this Agreement:
33
<PAGE>
(a) SHAREHOLDER APPROVAL. The shareholders of TARGET shall have
--------------------
approved this Agreement, and the consummation of the transactions contemplated
hereby, including the Merger, as and to the extent required by Law or by the
provisions of any governing instruments.
(b) REGULATORY APPROVALS. All Consents of, filings and
--------------------
registrations with, and notifications to, all Regulatory Authorities required
for consummation of the Merger shall have been obtained or made and shall be in
full force and effect, and all waiting periods required by Law shall have
expired. No Consent obtained from any Regulatory Authority which is necessary to
consummate the transactions contemplated hereby shall be conditioned or
restricted in a manner (including, without limitation, requirements relating to
the raising of additional capital or the disposition of Assets) which, in the
reasonable judgment of the Board of Directors of either Party, would so
materially adversely impact the economic or business benefits of the
transactions contemplated by this Agreement so as to render inadvisable the
consummation of the Merger; provided, however, that no such condition or
restriction shall be deemed to be materially adverse unless it materially
differs from terms and conditions customarily imposed by any Regulatory
Authority in connection with similar transactions.
(c) CONSENTS AND APPROVALS. Each Party shall have obtained any and
----------------------
all Consents required for consummation of the Merger (other than those referred
to in Section 8.1(b) of this Agreement) or for the preventing of any Default
under any Contract or Permit of such Party which, if not obtained or made, is
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on such Party.
(d) LEGAL PROCEEDINGS. No court or governmental or regulatory
-----------------
authority of competent jurisdiction shall have enacted, issued, promulgated,
enforced or entered any Law or Order (whether temporary, preliminary or
permanent) or taken any other action which prohibits, materially restricts or
makes illegal consummation of the transactions contemplated by this Agreement.
(e) REGISTRATION STATEMENT. The Registration Statement shall be
----------------------
effective under the 1933 Act, no stop orders suspending the effectiveness of the
Registration Statement shall have been issued, no action, suit, proceeding or
investigation by the SEC to suspend the effectiveness thereof shall have been
initiated and be continuing, and all necessary approvals under state securities
Laws or the 1933 Act or 1934 Act relating to the issuance or trading of the
shares of PURCHASER Common Stock issuable pursuant to the Merger shall have been
received.
(f) NASD LISTING. The shares of PURCHASER Common Stock issuable
------------
pursuant to the Merger shall have been approved for listing on the NASDAQ/NMS.
(g) TAX MATTERS. TARGET shall have received a written opinion of
-----------
counsel from Rogers & Hardin, in form reasonably satisfactory to it,
substantially to the effect that for federal income tax purposes (a) the Merger
will constitute a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code, and (b) the exchange in the Merger of TARGET
34
<PAGE>
Common Stock for PURCHASER Common Stock will not give rise to gain or loss to
the shareholders of TARGET with respect to such exchange (except to the extent
of any cash received).
8.2 CONDITIONS TO OBLIGATIONS OF PURCHASER. The obligations of
--------------------------------------
PURCHASER to perform this Agreement and consummate the Merger and the other
transactions contemplated hereby are subject to the satisfaction of the
following conditions, unless waived by PURCHASER pursuant to Section 10.6(a) of
this Agreement:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
------------------------------
warranties of TARGET set forth or referred to in this Agreement shall be true
and correct in all respects as of the date of this Agreement and as of the
Effective Time with the same effect as though all such representations and
warranties had been made on and as of the Effective Time (provided that
representations and warranties which are confined to a specified date shall
speak only as of such date), except (i) as expressly contemplated by this
Agreement, or (ii) for representations and warranties (other than the
representations and warranties set forth in Section 4.3 of this Agreement, which
shall be true in all respects) the inaccuracies of which relate to matters that
are not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on TARGET.
(b) PERFORMANCE OF AGREEMENTS AND COVENANTS. Each and all of the
---------------------------------------
agreements and covenants of TARGET to be performed and complied with pursuant to
this Agreement and the other agreements contemplated hereby prior to the
Effective Time shall have been duly performed and complied with in all material
respects.
(c) TARGET shall have delivered to PURCHASER (i) a certificate,
dated as of the Effective Time and signed on its behalf by its chief executive
officer, to the effect that the conditions of its obligations set forth in
Sections 8.2(a) and 8.2(b) of this Agreement have been satisfied, and (ii)
certified copies of resolutions duly adopted by TARGET's Board of Directors and
shareholders evidencing the taking of all corporate action necessary to
authorize the execution, delivery and performance of this Agreement, and the
consummation of the transactions contemplated hereby, all in such reasonable
detail as PURCHASER and its counsel shall reasonably request.
(d) OPINION OF COUNSEL. TARGET shall have delivered to PURCHASER
------------------
an opinion of Powell, Goldstein, Frazer & Murphy, counsel to TARGET, dated as of
the Closing, in substantially the form of Exhibit 2 hereto.
(e) ACCOUNTANT'S LETTERS. PURCHASER shall have received from
--------------------
Mauldin & Jenkins letters dated not more than five (5) days prior to (i) the
date of the Proxy Statement and (ii) the Effective Time, with respect to certain
financial information regarding TARGET, in form and substance reasonably
satisfactory to PURCHASER, which letters shall be based upon customary specified
procedures undertaken by such firm.
(f) EMPLOYMENT AGREEMENTS. Robert L. Evans shall have executed and
---------------------
delivered an Employment Agreement substantially in the form of Exhibit 4 hereto,
and Roxie W.
35
<PAGE>
Bagwell shall have executed and delivered an Employment Agreement substantially
in the form of Exhibit 5 hereto.
(g) TERMINATION OF DIRECTOR'S DEFINED BENEFIT PLAN. TARGET shall
----------------------------------------------
have caused TARGET Bank to terminate TARGET Bank's Director's Defined Benefit
Plan.
8.3 CONDITIONS TO OBLIGATIONS OF TARGET. The obligations of TARGET to
-----------------------------------
perform this Agreement and consummate the Merger and the other transactions
contemplated hereby are subject to the satisfaction of the following conditions,
unless waived by TARGET pursuant to Section 10.6(b) of this Agreement:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
------------------------------
warranties of PURCHASER set forth or referred to in this Agreement shall be true
and correct in all respects as of the date of this Agreement and as of the
Effective Time with the same effect as though all such representations and
warranties had been made on and as of the Effective Time (provided that
representations and warranties which are confined to a specified date shall
speak only as of such date), except (i) as expressly contemplated by this
Agreement, or (ii) for representations and warranties (other than the
representations and warranties set forth in Section 5.3 of this Agreement, which
shall be true in all respects) the inaccuracies of which relate to matters that
are not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on PURCHASER.
(b) PERFORMANCE OF AGREEMENTS AND COVENANTS. Each and all of the
---------------------------------------
agreements and covenants of PURCHASER to be performed and complied with pursuant
to this Agreement and the other agreements contemplated hereby prior to the
Effective Time shall have been duly performed and complied with in all material
respects.
(c) CERTIFICATES. PURCHASER shall have delivered to TARGET (i) a
------------
certificate, dated as of the Effective Time and signed on its behalf by its
chief executive officer and its chief financial officer, to the effect that the
conditions of its obligations set forth in Section 8.3(a) and 8.3(b) of this
Agreement have been satisfied, and (ii) certified copies of resolutions duly
adopted by PURCHASER's Board of Directors evidencing the taking of all corporate
action necessary to authorize the execution, delivery and performance of this
Agreement, and the consummation of the transactions contemplated hereby, all in
such reasonable detail as TARGET and its counsel shall reasonably request.
(d) OPINION OF COUNSEL. PURCHASER shall have delivered to TARGET
------------------
an opinion of Rogers & Hardin, counsel to PURCHASER, dated as of the Closing, in
substantially the form of Exhibit 3 hereto.
36
<PAGE>
ARTICLE 9
TERMINATION
-----------
9.1 TERMINATION. Notwithstanding any other provision of this Agreement,
-----------
and notwithstanding the approval of this Agreement by the shareholders of
TARGET, this Agreement may be terminated and the Merger abandoned at any time
prior to the Effective Time:
(a) By mutual consent of the Board of Directors of PURCHASER and
the Board of Directors of TARGET; or
(b) By the Board of Directors of either Party (provided that the
terminating Party is not then in material breach of any representation,
warranty, covenant, or other agreement contained in this Agreement) in the event
of a material breach by the other Party of any representation or warranty
contained in this Agreement which cannot be or has not been cured within thirty
(30) days after the giving of written notice to the breaching Party of such
breach and which breach would provide the non-breaching party the ability to
refuse to consummate the Merger under the standard set forth in Section 8.2(a)
of this Agreement in the case of PURCHASER and Section 8.3(a) of this Agreement
in the case of TARGET; or
(c) By the Board of Directors of either Party (provided that the
terminating Party is not then in material breach of any representation,
warranty, covenant, or other agreement contained in this Agreement) in the event
of a material breach by the other Party of any covenant or agreement contained
in this Agreement which cannot be or has not been cured within (30) days after
the giving of written notice to the breaching Party of such breach; or
(d) By the Board of Directors of either Party (provided that the
terminating Party is not then in material breach of any representation,
warranty, covenant, or other agreement contained in this Agreement) in the event
(i) any Consent of any Regulatory Authority required for consummation of the
Merger and the other transactions contemplated hereby has been denied by final
nonappealable action of such authority or if any action taken by such authority
is not appealed within the time limit for appeal, or (ii) if the shareholders of
TARGET fail to approve this Agreement and the transactions contemplated hereby
as required by the GBCC at the Shareholders' Meetings where the transactions
were presented to such shareholders for approval and voted upon; or
(e) By the Board of Directors of either Party in the event that the
Merger shall not have been consummated by October 31, 1996, but only if the
failure to consummate the transactions contemplated hereby on or before such
date is not caused by any breach of this Agreement by the Party electing to
terminate pursuant to this Section 9.1 (e); or
(f) By the Board of Directors of either Party (provided that the
terminating Party is not then in material breach of any representation,
warranty, covenant, or other agreement contained in this Agreement) in the event
that any of the conditions precedent to the obligations of such Party to
consummate the Merger cannot be satisfied or fulfilled by the date specified in
Section 9.1(e) of this Agreement.
37
<PAGE>
(g) By the Board of Directors of TARGET in connection with entering
into a definitive agreement in accordance with Section 7.8(b), provided that it
has complied with all provisions thereof, including the notice provisions
therein, and that it makes simultaneous payment of the Expenses and the
Termination Fee.
9.2 EFFECT OF TERMINATION. In the event of the termination and
---------------------
abandonment of this Agreement pursuant to Section 9.1 of this Agreement, this
Agreement shall become void and have no effect, except (i) as provided in
Section 10.14, and (ii) a termination pursuant to Section 9.1 of this Agreement
shall not relieve the breaching Party from Liability for an uncured willful
breach of a representation, warranty, covenant, or agreement giving rise to such
termination.
ARTICLE 10
MISCELLANEOUS
-------------
10.1 DEFINITIONS. Except as otherwise provided herein, the capitalized
-----------
terms set forth below (in their singular and plural forms as applicable) shall
have the following meanings:
"Acquisition Proposal" with respect to a Party shall mean any tender offer
or exchange offer or any proposal for a merger, acquisition of all of the stock
or Assets of, or other business combination involving such Party or any of its
Subsidiaries or the acquisition of a substantial equity interest in, or a
substantial portion of the Assets of, such Party or any of its Subsidiaries.
"Affiliate" of a Person shall mean: (a) any other Person directly, or
indirectly through one or more intermediaries, controlling, controlled by or
under common control with such Person or (b) any officer, director, partner,
employer, or direct or indirect beneficial owner of any 10% or greater equity or
voting interest of such Person.
"Agreement" shall mean this Agreement and Plan of Merger and the Exhibits
delivered pursuant hereto and incorporated herein by reference.
"Assets" of a Person shall mean all of the assets, properties, businesses
and rights of such Person of every kind, nature, character and description,
whether real, personal or mixed, tangible or intangible, accrued or contingent,
or otherwise relating to or utilized in such Person's business, directly or
indirectly, in whole or in part, whether or not carried on the books and records
of such Person, and whether or not owned in the name of such Person or any
Affiliate of such Person and wherever located.
"Base Period Trading Price" shall mean the average of the daily high and
low sales prices of a share of PURCHASER Common Stock as reported on NASDAQ/NMS
for the twenty (20) consecutive trading days immediately preceding five (5)
consecutive calendar days immediately preceding the Effective Time; provided
however, that for purposes of this calculation, the Base Period Trading Price
shall be deemed to equal (i) $16.80 in the event the Base Period Trading Price
is greater than $16.80 or (ii) $11.20 in the event the Base Period Trading Price
is less than $11.20.
38
<PAGE>
"BHC Act" shall mean the federal Bank Holding Company Act of 1956, as
amended.
"Closing" shall mean the closing of the transactions contemplated hereby,
as described in Section 1.2 of this Agreement.
"Closing Date" shall have the meaning provided in Section 1.2 of this
Agreement.
"Consent" shall mean any consent, approval, authorization, clearance,
exemption, waiver, or similar affirmation by any Person pursuant to any
Contract, Law, Order, or Permit.
"Contract" shall mean any written or oral agreement, arrangement,
authorization, commitment, contract, indenture, instrument, lease, obligation,
plan, practice, restriction, understanding or undertaking of any kind or
character, or other document to which any Person is a party or that is binding
on any Person or its capital stock, Assets or business.
"Default" shall mean (a) any breach or violation of or default under any
Contract, Order or Permit, (b) any occurrence of any event that with the passage
of time or the giving of notice or both would constitute a breach or violation
of or default under any Contract, Order or Permit, or (c) any occurrence of any
event that with or without the passage of or the giving of notice would give
rise to a right to terminate or revoke, change the current terms of, or
renegotiate, or to accelerate, increase, or impose any Liability under, any
Contract, Order or Permit.
"Dissenting Shares" shall have the meaning provided in Section 3.1(b) of
this Agreement.
"Dissenting TARGET Shareholders" shall have the meaning provided in Section
3.1(l) of this Agreement.
"Effective Time" shall mean the date and time at which the Merger becomes
effective as defined in Section 1.3 of this Agreement.
"Environmental Laws" shall mean all Laws which are administered,
interpreted or enforced by the United States Environmental Protection Agency and
state and local agencies with primary jurisdiction over pollution or protection
of the environment.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Plan" shall have the meaning provided in Section 4.14 of this
Agreement.
"Exchange Agent" shall have the meaning provided in Section 3.2 of this
Agreement.
"Exchange Ratio" shall have the meaning provided in Section 3.1(b) of this
Agreement.
"Exhibits" 1 through 3, inclusive, shall mean the Exhibits so marked,
copies of which are attached to this Agreement. Such Exhibits are hereby
incorporated by reference herein and made
39
<PAGE>
a part hereof and may be referred to in this Agreement and any other related
instrument or document without being attached hereto.
"Expenses" shall have the meaning provided in Section 10.2 of this
Agreement.
"GAAP" shall mean generally accepted accounting principles, consistently
applied during the periods involved.
"Georgia Articles of Merger" shall mean the Articles of Merger to be
executed by PURCHASER and filed with the Secretary of State of the State of
Georgia relating to the Merger as contemplated by Section 1.3 of this Agreement.
"GBCC" shall mean the Georgia Business Corporation Code.
"Hazardous Material" shall mean any pollutant, contaminant, or hazardous
substance within the meaning of the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, 42 U.S.C. (S) 9601 et seq.,
or any similar federal, state or local Law.
"Internal Revenue Code" shall mean the Internal Revenue Code of 1986, as
amended, and the rules and regulations promulgated thereunder.
"IRS" shall mean the Internal Revenue Service.
"Knowledge" as used with respect to a Person shall mean the Knowledge after
reasonable due inquiry of the Chairman, President, Chief Financial Officer,
Chief Accounting Officer, Chief Credit Officer, or any Senior or Executive Vice
President of such Person.
"Law" shall mean any code, law, ordinance, regulation, reporting or
licensing requirement, rule, or statute applicable to a Person or its Assets,
Liabilities or business, including, without limitation, those promulgated,
interpreted or enforced by any of the Regulatory Authorities.
"Letter of Transmittal" shall have the meaning provided in Section 3.2 of
this Agreement.
"Liability" shall mean any direct or indirect, primary or secondary,
liability, indebtedness, obligation, penalty, cost or expense (including,
without limitation, costs of investigation, collection and defense), claim,
deficiency, guaranty or endorsement of or by any Person (other than endorsements
of notes, bills, checks, and drafts presented for collection or deposit in the
ordinary course of business) of any type, whether accrued, absolute or
contingent, liquidated or unliquidated, matured or unmatured, or otherwise.
"Lien" shall mean any conditional sale agreement, default of title,
easement, encroachment, encumbrance, hypothecation, infringement, lien,
mortgage, pledge, reservation, restriction, security interest, title retention
or other security arrangement, or any adverse right or interest, charge, or
claim of any nature whatsoever of, on, or with respect to any property or
property interest, other
40
<PAGE>
than (i) Liens for current property Taxes not yet due and payable, (ii) for
depository institution Subsidiaries of a Party, pledges to secure deposits and
other Liens incurred in the ordinary course of the banking business, and (iii)
Liens which are not reasonably likely to have, individually or in the aggregate,
a Material Adverse Effect on a Party.
"Litigation" shall mean any action, arbitration, cause of action, claim,
complaint, criminal prosecution, demand letter, governmental or other
examination or investigation, hearing, inquiry, administrative or other
proceeding, or notice (written or oral) by any Person alleging potential
Liability or requesting information relating to or affecting a Party, its
business, its Assets (including, without limitation, Contracts related to it),
or the transactions contemplated by this Agreement, but shall not include
regular, periodic examinations of depository institutions and their Affiliates
by Regulatory Authorities.
"Loan Property" shall mean any property owned by the Party in question or
by any of its Subsidiaries or in which such Party or Subsidiary holds a security
interest, and, where required by the context, includes the owner or operator of
such property, but only with respect to such property.
"Material" for purposes of this Agreement shall be determined in light of
the facts and circumstances of the matter in question, provided that any
specific monetary amount stated in this Agreement shall determine materiality in
that instance.
"Material Adverse Effect" on a Party shall mean an event, change or
occurrence which has a material adverse impact on (a) the financial position,
business, or results of operations of such Party and its Subsidiaries, taken as
a whole, or (b) the ability of such Party to perform its obligations under this
Agreement or to consummate the Merger or the other transactions contemplated by
this Agreement, provided that "material adverse impact" shall not be deemed to
include the impact of (x) changes in banking and similar Laws of general
applicability or interpretations thereof by courts or governmental authorities,
(y) changes in generally accepted accounting principles or regulatory accounting
principles generally applicable to banks and their holding companies, and (z)
the Merger and compliance with the provisions of this Agreement on the operating
performance of the Parties.
"Merger" shall mean the merger of TARGET with and into PURCHASER referred
to in Section 1.1 of this Agreement.
"Merger Consideration" shall have the meaning provided in Section 3.1(b) of
this Agreement.
"NASD" shall mean the National Association of Securities Dealers, Inc.
"NASDAQ/NMS" shall mean the National Market System of the National
Association of Securities Dealers Automated Quotations System.
"1933 Act" shall mean the Securities Act of 1933, as amended.
"1934 Act" shall mean the Securities Exchange Act of 1934, as amended.
41
<PAGE>
"Old Certificates" shall have the meaning provided in Section 3.2 of this
Agreement.
"Order" shall mean any administrative decision or award, decree,
injunction, judgment, order, quasi-judicial decision or award, ruling, or writ
of any federal, state, local or foreign or other court, arbitrator, mediator,
tribunal, administrative agency or Regulatory Authority.
"Outstanding TARGET Shares" shall have the meaning provided in Section
3.1(b) of this Agreement.
"Participation Facility" shall mean any facility or property in which the
Party in question or any of its Subsidiaries participates in the management
(including any property or facility held in a joint venture) and, where required
by the context, said term means the owner or operator of such facility or
property, but only with respect to such facility or property.
"Party" shall mean either TARGET or PURCHASER, and "Parties" shall mean
both TARGET and PURCHASER.
"Permit" shall mean any federal, state, local, and foreign governmental
approval, authorization, certificate, easement, filing, franchise, license,
notice, permit, or right to which any, Person is a party or that is or may be
binding upon or inure to the benefit of any Person or its capital stock, Assets,
Liabilities, or business.
"Person" shall mean a natural person or any legal, commercial or
governmental entity, such as, but not limited to, a corporation, general
partnership, joint venture, limited partnership, limited liability company,
trust, business association, group acting in concert, or any person acting in a
representative capacity.
"Previously Disclosed" shall mean information (a) delivered in writing
prior to the date of this Agreement in the manner and to the Party and counsel
described in Section 10.8 of this Agreement and describing in reasonable detail
the matters contained therein, provided that in the case of Subsidiaries
acquired after the date of this Agreement, such information may be so delivered
by the acquiring Party to the other Party prior to the date of such acquisition,
or (b) disclosed prior to the date of this Agreement by one Party to the other
in an SEC Document delivered to such other Party in which the specific
information has been identified by the Party making the disclosure.
"Proxy Statement" shall mean the proxy statement used by TARGET to solicit
the approval of its shareholders of the transactions contemplated by this
Agreement and shall include the prospectus of PURCHASER relating to shares of
PURCHASER Common Stock to be issued to the shareholders of TARGET.
"PURCHASER Allowance" shall have the meaning provided in Section 5.9 of
this Agreement.
42
<PAGE>
"PURCHASER Benefit Plans" shall have the meaning set forth in Section 5.14
of this Agreement.
"PURCHASER Common Stock" shall mean the $1.00 par value common stock of
PURCHASER.
"PURCHASER Companies" shall mean, collectively, PURCHASER and all PURCHASER
Subsidiaries.
"PURCHASER Financial Statements" shall mean (i) the consolidated statements
of condition (including related notes and schedules, if any) of PURCHASER as of
September 30, 1995, and as of December 31, 1994 and 1993, and the related
statements of income, changes in shareholders' equity, and cash flows (including
related notes and schedules, if any) for the nine months ended September 30,
1995, and for each of the three years ended December 31, 1994, 1993, and 1992,
as filed by PURCHASER in SEC Documents and (ii) the consolidated statements of
condition of PURCHASER (including related notes and schedules, if any) and
related statements of income, changes in shareholders' equity, and cash flows
(including related notes and schedules, if any) included in SEC Documents filed
with respect to periods ended subsequent to September 30, 1995.
"PURCHASER Stock Plans" shall mean the existing stock option and other
stock-based compensation plans.
"PURCHASER Subsidiaries" shall mean the Subsidiaries of PURCHASER.
"Record Date" shall have the meaning provided in Section 3.1(e) of this
Agreement.
"Registration Statement" shall mean the Registration Statement on Form S-4,
or other appropriate form, filed with the SEC by PURCHASER under the 1933 Act in
connection with the transactions contemplated by this Agreement.
"Regulatory Authorities" shall mean, collectively, the Federal Trade
Commission, the United States Department of Justice, the Board of the Governors
of the Federal Reserve System, the Office of the Comptroller of the Currency,
the Federal Deposit Insurance Corporation, all state banking and other
regulatory agencies having jurisdiction over the Parties and their respective
Subsidiaries, the NASD, and the SEC.
"SEC Documents" shall mean all reports and registration statements filed,
or required to be filed, by a Party or any of its Subsidiaries with any
Regulatory Authority pursuant to the Securities Laws.
"Securities Laws" shall mean the 1933 Act, the 1934 Act, the Investment
Company Act of 1940, as amended, the Investment Advisors Act of 1940, as
amended, the Trust Indenture Act of 1939, as amended, state blue sky laws, and
the rules and regulations of any Regulatory Authority promulgated thereunder.
43
<PAGE>
"Shareholders' Meeting" shall mean the meeting of the shareholders of
TARGET to be held pursuant to Section 7.1 of this Agreement, including any
adjournment or adjournments thereof.
"Subsidiaries" shall mean all those corporations, banks, associations, or
other entities of which the entity in question owns or controls 5% or more of
the outstanding equity securities either directly or through an unbroken chain
of entities as to each of which 5 % or more of the outstanding equity securities
is owned directly or indirectly by its parent; provided, however, there shall
not be included any such entity acquired through foreclosure or any such entity
the equity securities of which are owned or controlled in a fiduciary capacity.
"Surviving Corporation" shall mean PURCHASER as the surviving corporation
resulting from the Merger.
"TARGET Allowance" shall have the meaning provided in Section 4.9 of this
Agreement.
"TARGET Bank" shall mean Central Bank & Trust, a Georgia state-chartered
bank and a TARGET Subsidiary.
"TARGET Benefit Plans" shall have the meaning set forth in Section 5.14 of
this Agreement.
"TARGET Common Stock" shall mean the $1.00 par value Common Stock of
TARGET.
"TARGET Companies" shall mean, collectively, TARGET and all TARGET
Subsidiaries.
"TARGET Financial Statements" shall mean (a) the consolidated balance
sheets (including related notes and schedules, if any) of TARGET as of September
30, 1995, and as of December 31, 1994 and 1993, and the related statements of
income, changes in shareholders' equity, and cash flows (including related notes
and schedules, if any) for the nine months ended September 30, 1995, and for
each of the three fiscal years ended December 31, 1994, 1993, 1992, as
previously furnished by TARGET to Purchaser, and (b) the consolidated balance
sheets of TARGET (including related notes and schedules, if any) and related
statements of income, changes in shareholders' equity, and cash flows (including
related notes and schedules, if any) with respect to periods ended subsequent to
September 30, 1993.
"TARGET Stock Plans" shall mean the existing stock option and other stock-
based compensation plans of TARGET.
"TARGET Subsidiaries" shall mean the Subsidiaries of TARGET, which shall
include the TARGET Subsidiaries described in Section 4.4 of this Agreement and
any Person acquired as a Subsidiary of TARGET in the future and owned by TARGET
at the Effective Time.
"Taxes" shall mean any federal, state, county, local, foreign and other
taxes, assessments, charges, fares, and impositions, including interest and
penalties thereon or with respect thereto.
44
<PAGE>
"Termination Fee" shall have the meaning provided in Section 10.2 of this
Agreement.
"Total Equity of TARGET" shall mean TARGET's total stockholders' equity
contemplated under GAAP as of the close of business on the day immediately
preceding the Closing Date.
10.2 EXPENSES.
--------
(a) Except as otherwise provided in this Section 10.2, each of the
Parties shall bear and pay all direct costs and expenses incurred by it or on
its behalf in connection with the transactions contemplated hereunder, including
filing, registration and application fees, printing fees, and fees and expenses
of its own financial or other consultants, investment bankers, accountants, and
counsel (the "Expenses"), except that each of the Parties shall bear and pay
one-half of the filing fees payable in connection with the Registration
Statement and the Proxy Statement and printing costs incurred in connection with
the printing of the Registration Statement and the Proxy Statement.
(b) TARGET shall pay, or cause to be paid, in same day funds to
PURCHASER the sum of (i) all of PURCHASER'S Expenses plus (ii) $400,000 (the
"Termination Fee") upon demand if (A) TARGET terminates this Agreement pursuant
to Section 9.1(g) or (B) prior to the termination of this Agreement (other than
by TARGET pursuant to Section 9.1(b)), a takeover proposal shall have been made
and within one (1) year of such termination, TARGET enters into an agreement
with respect to, or approves or recommends or takes any action to facilitate,
such takeover proposal. The amount of Expenses so payable shall be the amount
set forth in an estimate delivered by PURCHASER, subject to an upward or
downward adjustment.
10.3 BROKERS AND FINDERS. Except as Previously Disclosed, each of the
-------------------
Parties represents and warrants that neither it nor any of its officers,
directors, employees, or Affiliates has employed any broker or finder or
incurred any Liability for any financial advisory fees, investment bankers'
fees, brokerage fees, commissions, or finders' fees in connection with this
Agreement or the transactions contemplated hereby. In the event of a claim by
any broker or finder based upon its representing or being retained by or
allegedly representing or being retained by TARGET or PURCHASER, each of TARGET
and PURCHASER, as the case may be, agrees to indemnify and hold the other Party
harmless of and from any Liability in respect of any such claim.
10.4 ENTIRE AGREEMENT. Except as otherwise expressly provided herein,
----------------
this Agreement (including the documents and instruments referred to herein)
constitutes the entire agreement between the Parties with respect to the
transactions contemplated hereunder and supersedes all prior arrangements or
understandings with respect thereto, written or oral (except, as to Section
8.6(b) of this Agreement, with respect to the Confidentiality Agreements).
Nothing in this Agreement expressed or implied, is intended to confer upon any
Person, other than the Parties or their respective successors, any rights,
remedies, obligations, or liabilities under or by reason of this Agreement,
other than as provided in Section 7.13 of this Agreement.
10.5 AMENDMENTS. To the extent permitted by Law, this Agreement may be
----------
amended by a subsequent writing signed by each of the Parties upon the approval
of the Boards of Directors
45
<PAGE>
of each of the Parties; provided, however, that after any such approval by the
holders of TARGET Common Stock, there shall be made no amendment decreasing the
consideration to be received by TARGET shareholders without the further approval
of such shareholders.
10.6 WAIVERS.
-------
(a) Prior to or at the Effective Time, PURCHASER, acting through
its Board of Directors, chief executive officer or other authorized officer,
shall have the right to waive any Default in the performance of any term of this
Agreement by TARGET, to waive or extend the time for the compliance or
fulfillment by TARGET of any and all of its obligations under this Agreement,
and to waive any or all of the conditions precedent to the obligations of
PURCHASER under this Agreement, except any condition which, if not satisfied,
would result in the violation of any Law. No such waiver shall be effective
unless in writing signed by a duly authorized officer of PURCHASER.
(b) Prior to or at the Effective Time, TARGET, acting through its
Board of Directors, chief executive officer or other authorized officer, shall
have the right to waive any Default in the performance of any term of this
Agreement by PURCHASER, to waive or extend the time for the compliance or
fulfillment by PURCHASER of any and all of its obligations under this Agreement,
and to waive any or all of the conditions precedent to the obligations of TARGET
under this Agreement, except any condition which, if not satisfied, would result
in the violation of any Law. No such waiver shall be effective unless in
writing signed by a duly authorized officer of TARGET.
(c) The failure of any Party at any time or times to require
performance of any provision hereof shall in no manner affect the right of such
Party at a later time to enforce the same or any other provision of this
Agreement. No waiver of any condition or of the breach of any term contained in
this Agreement in one or more instances shall be deemed to be or construed as a
further or continuing waiver of such condition or breach or a waiver of any
other condition or of the breach of any other term of this Agreement.
10.7 ASSIGNMENT. Except as expressly contemplated hereby, neither this
----------
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by any Party hereto (whether by operation of Law or otherwise) without
the prior written consent of the other Party. Subject to the immediately
preceding sentence, this Agreement will be binding upon, inure to the benefit
of, and be enforceable by the Parties and their respective successors and
assigns.
10.8 NOTICES. All notices or other communications which are required or
-------
permitted hereunder shall be in writing and sufficient if delivered by hand, by
facsimile transmission, by registered or certified mail, postage pre-paid, or by
courier or overnight carrier, to the persons at the addresses set forth below
(or at such other address as may be provided hereunder), and shall be deemed to
have been delivered as of the date so delivered:
46
<PAGE>
PURCHASER: ABC Bancorp
310 First Street, S.E.
Moultrie, Georgia 31768
Telecopy Number: (912) 890-2235
Attention: President
Copy to Counsel: Rogers & Hardin
2700 Cain Tower, Peachtree Center
229 Peachtree Street, N.E.
Atlanta, Georgia 30303
Telecopy Number: (404) 525-2224
Attention: Steven E. Fox
TARGET: Central Bankshares, Inc.
P.O. Box 40
Cordele, Georgia 31015
Telecopy Number: (912) 273-7750
Attention: President
Copy to Counsel: Powell, Goldstein, Frazer & Murphy
191 Peachtree Street, N.E.
Sixteenth Floor
Atlanta, Georgia 30303
Telecopy Number: (404) 572-5958
Attention: Walter G. Moeling, IV
10.9 GOVERNING LAW. This Agreement shall be governed by and construed in
-------------
accordance with the Laws of the State of Georgia, without regard to any
applicable conflicts of Laws, except to the extent that the federal laws of the
United States may apply to the Merger.
10.10 COUNTERPARTS. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
10.11 CAPTIONS. The captions contained in this Agreement are for
--------
reference purposes only and are not part of this Agreement.
10.12 ENFORCEMENT OF AGREEMENT. The Parties hereto agree that irreparable
------------------------
damage would occur in the event that any of the provisions of this Agreement was
not performed in accordance with its specific terms or was otherwise breached.
It is accordingly agreed that the Parties shall be
47
<PAGE>
entitled to an injunction or injunctions to prevent breaches of this Agreement
and to enforce specifically the terms and provisions hereof in any court of the
United States or any state having jurisdiction, this being in addition to any
other remedy to which they are entitled at law or in equity.
10.13 SEVERABILITY. Any term or provision of this Agreement which is
------------
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of
this Agreement is so broad as to be unenforceable, the provision shall be
interpreted to be only so broad as is enforceable.
10.14 SURVIVAL. The respective representations, warranties, obligations,
--------
covenants and agreements of the Parties shall not survive the Effective Time or
the termination and abandonment of this Agreement, except that (i) Articles Two,
Three and Ten and Sections 7.6(b), 7.9, 7.11 and 7.13 of this Agreement shall
survive the Effective Time; and (ii) Sections 7.6(b), 7.8(b), 9.2, 10.2 and
10.14 shall survive the termination and abandonment of this Agreement.
IN WITNESS WHEREOF, each of the Parties has caused this Agreement to be
executed on its behalf and its corporate seal to be hereunto affixed and
attested by its officers as of the day and year first above written.
ATTEST: ABC BANCORP
/S/ SARA R. HALL By: /S/ KENNETH J. HUNNICUTT
- ---------------- ------------------------
Secretary President
[CORPORATE SEAL]
ATTEST: CENTRAL BANKSHARES, INC.
/S/ ROXIE W. BAGWELL By: /S/ ROBERT L. EVANS
- -------------------- ------------------------
Secretary President
[CORPORATE SEAL]
48
<PAGE>
EXHIBIT 1
---------
AFFILIATE AGREEMENT
-------------------
ABC Bancorp
310 First Street, S.E.
Moultrie, Georgia 31768
Attention: President
Ladies and Gentlemen:
The undersigned is a shareholder of Central Bankshares, Inc. ("Target"), a
corporation organized under the laws of the State of Georgia and located in
Cordele, Georgia, and will become a shareholder of ABC Bancorp ("Purchaser")
pursuant to the transactions described in the Agreement and Plan of Merger,
dated as of December 29, 1995 (the "Agreement"), by and between Target and
Purchaser. Under the terms of the Agreement, Target will be merged into and
with Purchaser (the "Merger"), and the shares of the $1.00 par value common
stock of Target ("Target Common Stock") will be converted into and exchanged for
a combination of shares of the $1.00 par value common stock of Purchaser
("Purchaser Common Stock"). This Affiliate Agreement represents an agreement
between the undersigned and Purchaser regarding certain rights and obligations
of the undersigned in connection with the shares of Purchaser to be received by
the undersigned as a result of the Merger.
In consideration of the Merger and the mutual covenants contained herein,
the undersigned and Purchaser hereby agree as follows:
1. AFFILIATE STATUS. The undersigned understands and agrees that as to
----------------
Target the undersigned is an "affiliate" under Rule 145(c) as defined in Rule
405 of the Rules and Regulations of the Securities and Exchange Commission
("SEC") under the Securities Act of 1933, as amended ("1933 Act"), and the
undersigned anticipates that the undersigned will be such an "affiliate" at the
time of the Merger.
2. COVENANTS AND WARRANTIES OF UNDERSIGNED. The undersigned
---------------------------------------
represents, warrants and agrees that:
(a) The Purchaser Common Stock received by the undersigned as a
result of the Merger will be taken for his or her own account and not for
others, directly or indirectly, in whole or in part.
(b) Purchaser has informed the undersigned that any distribution by
the undersigned of Purchaser Common Stock has not been registered under the 1933
Act and that shares
<PAGE>
of Purchaser Common Stock received pursuant to the Merger can only be sold by
the undersigned (i) following registration under the 1933 Act, or (ii) in
conformity with the volume and other requirements of Rule 145(d) promulgated by
the SEC as the same now exist or may hereafter be amended, or (iii) to the
extent some other exemption from registration under the 1933 Act might be
available. The undersigned understands that Purchaser is under no obligation to
file a registration statement with the SEC covering the disposition of the
undersigned's shares of Purchaser Common Stock.
3. RESTRICTIONS ON TRANSFER.
------------------------
(a) The undersigned understands and agrees that stop transfer
instructions with respect to the shares of Purchaser Common Stock received by
the undersigned pursuant to the Merger will be given to Purchaser's Transfer
Agent and that there will be placed on the certificates for such shares, or
shares issued in substitution thereof, a legend stating in substance:
"The shares represented by this certificate may not be sold, transferred or
otherwise disposed of except or unless (i) covered by an effective
registration statement under the Securities Act of 1933, as amended, (ii)
in accordance with (x) Rule 145(d) (in the case of shares issued to an
individual who is not an affiliate of Purchaser) or (y) Rule 144 (in the
---
case of shares issued to an individual who is an affiliate of Purchaser) of
the Rules and Regulations of such Act, or (iii) in accordance with a legal
opinion satisfactory to counsel for Purchaser that such sale or transfer is
otherwise exempt from the registration requirements of such Act."
(b) Such legend will also be placed on any certificate representing
Purchaser securities issued subsequent to the original issuance of the Purchaser
Common Stock pursuant to the Merger as a result of any stock dividend, stock
split, or other recapitalization as long as the Purchaser Common Stock issued to
the undersigned pursuant to the Merger has not been transferred in such manner
to justify the removal of the legend therefrom. In addition, if the provisions
of Rules 144 and 145 are amended to eliminate restrictions applicable to the
Purchaser Common Stock received by the undersigned pursuant to the Merger, or at
the expiration of the restrictive period set forth in Rule 145(d), Purchaser,
upon the request of the undersigned, will cause the certificates representing
the shares of Purchaser Common Stock issued to the undersigned in connection
with the Merger to be reissued free of any legend relating to the restrictions
set forth in Rules 144 and 145(d) upon receipt by Purchaser of an opinion of its
counsel to the effect that such legend may be removed.
4. UNDERSTANDING OF RESTRICTIONS ON DISPOSITIONS. The undersigned has
---------------------------------------------
carefully read the Agreement and this Affiliate Agreement and discussed their
requirements and impact upon his or her ability to sell, transfer, or otherwise
dispose of the shares of Purchaser Common Stock received by the undersigned in
connection with the Merger, to the extent he or she believes necessary, with his
or her counsel or counsel for Target.
2
<PAGE>
5. FILING OF REPORTS BY PURCHASER. Purchaser agrees for a period of
------------------------------
three years after the effective date of the Merger, to file on a timely basis
all reports required to be filed by it pursuant to Section 13 of the Securities
Exchange Act of 1934, as amended, so that the public information provisions of
Rule 145(d) promulgated by the SEC as the same are presently in effect will be
available to the undersigned in the event the undersigned desires to transfer
any shares of Purchaser Common Stock issued to the undersigned pursuant to the
Merger.
6. TRANSFER UNDER RULE 145(D). If the undersigned desires to sell or
--------------------------
otherwise transfer the shares of Purchaser Common Stock received by him or her
in connection with the Merger at any time during the restrictive period set
forth in Rule 145(d), the undersigned will provide the necessary representation
letter to the Transfer Agent for Purchaser Common Stock, together with such
additional information as the Transfer Agent may reasonably request. If
Purchaser's counsel concludes that such proposed sale or transfer complies with
the requirements of Rule 145(d), Purchaser shall cause such counsel to provide
such opinions as may be necessary to Purchaser's Transfer Agent so that the
undersigned may complete the proposed sale or transfer.
7. ACKNOWLEDGMENTS. The undersigned recognizes and agrees that the
---------------
foregoing provisions also apply with respect to Target Common Stock held by, and
Purchaser Common Stock issued in connection with the Merger to, (a) the
undersigned's spouse, (b) any relative of the undersigned or of the
undersigned's spouse who has the same home as the undersigned, (c) any trust or
estate in which the undersigned, the undersigned's spouse, and any such relative
collectively own at least a 10% beneficial interest or of which any of the
foregoing serves as trustee, executor or in any similar capacity, and (d) any
corporation or other organization in which the undersigned, the undersigned's
spouse and any such relative collectively own at least 10% of any class of
equity securities or of the equity interest. The undersigned further recognizes
that, in the event that the undersigned is a director or executive officer of
Purchaser or becomes a director or executive officer of Purchaser upon
consummation of the Merger, among other things, any sale of Purchaser Common
Stock by the undersigned within a period of less than six months following the
effective time of the Merger may subject the undersigned to liability pursuant
to Section 16(b) of the Securities Exchange Act of 1934, as amended.
8. MISCELLANEOUS. This Affiliate Agreement is the complete agreement
-------------
between Purchaser and the undersigned concerning the subject matter hereof. Any
notice required to be sent to any parry hereunder shall be sent by registered or
certified mail, return receipt requested, using the addresses set forth herein
or such other address as shall be furnished in writing by the parties. This
Affiliate Agreement shall be governed by the laws of the State of Georgia.
3
<PAGE>
This Affiliate Agreement is executed as of the _____ day of______________
199__.
Very truly yours,
____________________________
Signature
____________________________
Print Name
____________________________
____________________________
____________________________
____________________________
Address
____________________________
Telephone No.
AGREED TO AND ACCEPTED as of
____________________, 199__
ABC BANCORP
By:_________________________
Its:_____________________
4
<PAGE>
EXHIBIT 2
---------
MATTERS AS TO WHICH
POWELL, GOLDSTEIN, FRAZER & MURPHY WILL OPINE
1. Target is a corporation duly organized, existing and in good
standing under the laws of the State of Georgia with corporate power and
authority (a) to conduct its business as described in the proxy statement used
to solicit the approval by the shareholders of Target of the transactions
contemplated by the Agreement ("Proxy Statement"), and (b) to own and use its
Assets.
2. Target Bank is a Georgia chartered state bank duly organized and
validly existing under the laws of the State of Georgia with all requisite power
and authority to conduct its business as described in the Proxy Statement, and
to own and use its Assets. The deposits of Target Bank are insured by the
Federal Deposit Insurance Corporation to the extent provided by law.
3. Target's authorized shares consist of 10,000,000 shares of Common
Stock, $1.00 par value, of which ________ shares were outstanding as of
_________________. The outstanding shares of Target Common Stock have been duly
authorized and validly issued, were not issued in violation of any statutory
preemptive rights of shareholders, and are fully paid and nonassessable. To our
Knowledge, except as Previously Disclosed, there are no options, subscriptions,
warrants, calls, rights or commitments obligating Target to issue equity
securities or acquire its equity securities.
4. Target owns directly or indirectly all the issued and outstanding
shares of the capital stock of Target Bank. To our knowledge, there are no
options, subscriptions, warrants, calls, rights or commitments obligating Target
Bank to issue equity securities or acquire its equity securities.
5. The execution and delivery by Target of the Agreement do not, and if
Target were now to perform its obligations under the Agreement such performance
would not, result in any violation of the Articles of Incorporation or Bylaws of
Target or the Articles of Incorporation or Bylaws of Target Bank or, to our
Knowledge, result in any breach of, or default or acceleration under, any
material Contract or Order to which Target or Target Bank is a party or by which
Target or Target Bank is bound.
6. Target has duly authorized the execution and delivery of the
Agreement and all performance by Target thereunder and has duly executed and
delivered the Agreement.
7. The Agreement is enforceable against Target.
<PAGE>
EXHIBIT 3
---------
MATTERS AS TO WHICH
ROGERS & HARDIN WILL OPINE
1. Purchaser is a corporation duly organized, existing and in good
standing under the laws of the State of Georgia with corporate power and
authority (a) to conduct its business as described in the proxy statement used
to solicit the approval by the shareholders of Target of the transactions
contemplated by the Agreement ("Proxy Statement"), and (b) to own and use its
Assets.
2. Purchaser's authorized shares consist of 10,000,000 shares of Common
Stock, no par value, of which __________ shares were outstanding as of
_____________, and 5,000,000 shares of Preferred Stock, none of which were
outstanding as of ____________. The outstanding shares of Purchaser Common
Stock have been duly authorized and validly issued, were not issued in violation
of any statutory preemptive rights of shareholders, and are fully paid and
nonassessable. To our Knowledge, except as Previously Disclosed, there are no
options, subscriptions, warrants, calls, rights or commitments obligating
Purchaser to issue equity securities or acquire its equity securities. The
shares of Purchaser Common Stock to be issued to the shareholders of Target upon
consummation of the Merger have been registered under the Securities Act of
1933, as amended, and when issued in accordance with the Agreement, will be
validly issued, fully paid and nonassessable.
3. The execution and delivery by Purchaser of the Agreement do not, and
if Purchaser were now to perform its obligations under the Agreement such
performance would not, result in any violation of the Articles of Incorporation
or Bylaws of Purchaser or, to our knowledge, result in any breach of, or default
or acceleration under, any material Contract or Order to which Purchaser is a
party or by which Purchaser is bound.
4. Purchaser has duly authorized the execution and delivery of the
Agreement and all performance by Purchaser thereunder and has duly executed and
delivered the Agreement.
5. The Agreement is enforceable against Purchaser.
<PAGE>
EXHIBIT 4
---------
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT (the "Agreement") is effective as of ___________,
1996, by and between CENTRAL BANK & TRUST, a Georgia bank (the "Bank"), and
ROBERT L. EVANS, a resident of the State of Georgia (the "Executive").
WHEREAS, ABC Bancorp, a Georgia corporation ("ABC"), has acquired all of
the equity interest of the Bank by means of a merger pursuant to a Merger
Agreement dated as of December 29, 1995 the ("Merger Agreement");
WHEREAS, the Bank is now a wholly-owned subsidiary of ABC;
WHEREAS, the Executive is the President and Chief Executive Officer of the
Bank and desires to continue his employment with the Bank in such capacity;
WHEREAS, ABC desires that the Executive continue to serve in the capacity
of President and Chief Executive Officer of the Bank; and
WHEREAS, the Bank and the Executive, in conjunction with and pursuant to
the terms of the Merger Agreement, desire to set forth in writing the terms and
conditions of the Executive's continued employment with the Bank.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements contained herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereby
agree as follows:
1. EMPLOYMENT AND DUTIES.
---------------------
(a) The Bank hereby agrees to continue to employ the Executive and
the Executive agrees to continue employment in his capacity as President and
Chief Executive Officer of the Bank to act in accordance with the terms and
conditions set forth herein. The Executive also consents to serve, if elected,
as a director of the Bank without additional compensation therefor for the first
twelve (12) months of such service and thereafter at the rate then in effect for
directors of the Bank. During the term of this Agreement, the Executive agrees
that this position will be his principal employment, that he will serve the Bank
faithfully and to the best of his ability and that he will devote his full
business time, attention and skills to the operation of the business of the
Bank, subject to reasonable absences for vacation and illness, and that he will
perform such duties, functions and responsibilities in connection with such
position and consistent with the foregoing as are from time to time delegated to
the Executive by the Board of Directors of the Bank (the "Board"); provided,
--------
<PAGE>
however, that the foregoing shall not be deemed to restrict the Executive from
- -------
devoting a reasonable amount of time and attention to the management of his
personal affairs and investments, so long as such activities do not interfere
with the responsible performance of the Executive's duties hereunder. The
Executive shall provide the Board with periodic reports on, and keep it informed
on a current basis concerning, the business and affairs of the Bank.
(b) The Bank shall provide the Executive with a private office,
secretarial and administrative assistance, office equipment, supplies and other
facilities and services suitable to the Executive's position to be located at
502 Second Street South, Cordele, Georgia 31015, or at a comparable location
within Crisp County, Georgia.
2. TERM. The term ("Term") of this Agreement shall commence on the
----
date hereof and shall continue until the first anniversary of the date hereof
unless earlier terminated pursuant to Section 4 hereof.
3. COMPENSATION. In consideration of the services to be rendered by
------------
the Executive to the Bank hereunder, the Bank hereby agrees to pay or otherwise
provide the Executive the following compensation and benefits, it being
understood that the Bank shall have the right to deduct therefrom all taxes
which may be required to be deducted or withheld under any provision of
applicable law (including, without limitation, Social Security payments, income
tax withholding and other required deductions now in effect or which may become
effective by law any time during the Term):
(a) SALARY. The Executive shall receive an annual salary of
------
("Salary") of $94,000.00 to be paid in equal installments in accordance with the
Bank's salary payment practices in effect from time to time for executives of
the Bank.
(b) BONUS PAYMENT. In addition to Salary, the Executive shall be
-------------
entitled to receive an annual bonus pursuant to any annual incentive
compensation plan adopted by the Board; provided, however, that if (i) no such
-------- -------
plan is adopted or (ii) the bonus payable pursuant to such plan would be less
than an amount equal to (a) the lesser of (1) any bonus paid to the Executive by
the Bank in respect of services rendered by the Executive to the Bank for the
year ended December 31, 1995 or (2) $17,860.00 minus (b) the present value of
-----
any compensation received by or accrued for the benefit of the Executive
pursuant to the Executive's participation in any employee benefit, retirement
and compensation plans as specified in Section 3(c) hereof (the "Minimum Bonus
Amount"), then the bonus payable to the Executive (if any) shall be equal to the
Minimum Bonus Amount.
(c) COMPENSATION PURSUANT TO PLANS. During the Term, the Executive
------------------------------
shall be included as a participant in all present and future employee benefit,
retirement and compensation plans generally available to employees of the Bank,
consistent with his Salary and his position with the Bank, including, without
limitation, the Bank's (or ABC's) pension plan and hospitalization, major
medical, disability and group life insurance plans.
-2-
<PAGE>
(d) EXPENSES. The Executive shall be entitled to receive
--------
reimbursement for all reasonable expenses incurred by him in connection with the
fulfillment of his duties hereunder, upon receipt of appropriate vouchers
therefor, provided that the Executive has complied with all reasonable policies
and procedures relating to the reimbursement of such expenses as shall, from
time to time, be established by the Bank.
(e) VACATION AND PERQUISITES. For so long as the Executive is
------------------------
employed by the Bank hereunder, the Bank shall continue in effect the vacation
policies applicable to the Executive no less favorable from his point of view
than those written policies in effect as of the date of the Merger Agreement,
and the Executive shall continue to be entitled to receive perquisites,
including, without limitation, the use of an automobile and country club
memberships, no less favorable from his point of view than those to which he is
entitled as of the date of the Merger Agreement.
4. TERMINATION.
-----------
(a) This Agreement shall terminate on the earliest to occur of the
following events: (i) on the mutual agreement of the Bank and the Executive;
(ii) the death of the Executive or Executive's voluntary retirement; (iii) the
Executive becoming unable to perform a substantial portion of his duties as
described herein due to injury, illness or disability (mental or physical) as
determined by an independent physician selected by the Bank and reasonably
satisfactory to the Executive for a period of two (2) consecutive months or any
aggregate period of four (4) months in any twelve (12) month period
("Disability"); or (iv) immediately upon the Bank giving written notice to the
Executive of termination for Cause (as defined herein).
(b) The Bank may terminate the Executive's employment under this
Agreement at any time for Cause. The termination shall be evidenced by written
notice to the Executive, which shall specify the cause for termination. "Cause"
shall exist if: (i) the Executive is convicted of (from which no appeal may be
taken), or pleads guilty to, any act of fraud, misappropriation or embezzlement,
or any felony; (ii) in the reasonable determination of the Board, the Executive
has engaged in conduct or activity materially damaging to the business of the
Bank (it being understood, however, that unintentional physical damage to any
property of the Bank by the Executive shall not be a ground for such a
determination by the Board); or (iii) the Executive has failed, without
reasonable cause, to devote his full business time and best efforts to the
business of the Bank as provided in Section 1(a) hereof and, after written
notice from the Bank of such failure, the Executive at any time thereafter again
so fails.
5. REPRESENTATIONS AND WARRANTIES.
------------------------------
(a) The Executive represents and warrants to the Bank that: (i) he
has the full power and authority to execute, deliver and perform this Agreement,
and that he has taken all actions necessary to secure all approvals required in
connection herewith and therewith; (ii) this Agreement has been duly authorized,
executed and delivered by him and constitutes his valid and binding agreement,
enforceable against him in accordance with its terms; and (iii) the execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby will
-3-
<PAGE>
not, with the passage of time or the giving of notice or both, violate or
conflict with, constitute a breach of or default under, result in the loss of
any material benefit under, or permit the acceleration of or entitle any party
to accelerate any obligation under or pursuant to, any material mortgage, lien,
leases, agreement, instrument, order, arbitration award, judgment or decree to
which he is a party or by which he or any of his assets are bound.
(b) The Bank hereby represents and warrants to the Executive that:
(i) this Agreement has been duly authorized, executed and delivered by it, and
constitutes the valid and binding agreement of it, enforceable against it in
accordance with its terms; (ii) it has the full power authority to execute,
deliver and perform this Agreement and has taken all necessary action to secure
all approvals required in connection herewith; and (iii) the execution, delivery
and performance of this Agreement and the consummation of the transactions
contemplated hereby will not, with the passage of time or the giving of notice
or both, violate or conflict with, constitute a breach of or default under,
result in the loss of any material benefit under, or permit the acceleration of
or entitle any party to accelerate any obligation under or pursuant to, its
charter or bylaws or any material mortgage, lien, lease, agreement, instrument,
order, arbitration award, judgment or decree to which it is a party or by which
it or any of its assets are bound.
6. RESTRICTIVE COVENANTS. Acknowledging that (i) he has intimate
---------------------
knowledge of the business of the Bank which, if exploited by him, in
contravention of this Agreement, would seriously adversely and irreparably
affect the value of the Bank and the ability of ABC to continue to operate the
Bank following the consummation of the merger contemplated by the Merger
Agreement; (ii) the provisions of this Section 6 are reasonable and necessary to
protect the legitimate interests of ABC; (iii) the provisions of this Section 6
are reasonable and necessary to protect the goodwill of the Bank acquired by ABC
pursuant to the Merger Agreement; (iv) any violation of this Section 6 will
result in irreparable injury to ABC and the Bank and that damages at law would
not be reasonable or adequate compensation to ABC and the Bank for a violation
of this Section 6; and (v) that in the course of his employment with the Bank,
as contemplated by this Agreement, and as a result of the position of trust that
he will hold under this Agreement, he will obtain private and confidential
information and proprietary data relating to ABC, the Bank and other affiliates
of ABC, including, without limitation, financial information, product
information and other data that are valuable assets and property rights of the
Bank and ABC and its affiliates (collectively referred to as "Confidential
Information"), the Executive hereby agrees as follows:
(a) The Executive shall not, during the Term of this Agreement or
any time after the termination of this Agreement, either directly or indirectly,
disclose or use any Confidential Information acquired during his employment with
the Bank, unless (i) the Confidential Information has been made public through
no action or fault of the Executive, or (ii) its disclosure is requested or
compelled by applicable law or regulatory agency. The Executive further agrees
that after the termination of this Agreement, or at such other time as the Bank
requests, the Executive will return to the Bank all documents, papers and
records constituting Confidential Information, and all copies of same in the
Executive's possession and control.
-4-
<PAGE>
(b) For a period of one (1) year after termination of the
Executive's employment hereunder for any reason, the Executive shall not
directly or indirectly provide banking or bank-related services to, or solicit
the banking or bank-related business of, any customer of the Bank at the time of
such provision of services or solicitation which the Executive served either
alone or with others while employed by the Bank in any city, town, borough,
township, village or other place in which the Executive performed services for
the Bank while employed by it, or assist any actual or potential competitor of
the Bank to provide banking or bank-related services to or solicit any such
customer's banking or bank-related business in any such place.
(c) While the Executive is employed by the Bank and for a period of
one (1) year after termination of the Executive's employment hereunder for any
reason, the Executive shall not, directly or indirectly, as principal, agent, or
trustee, or through the agency of any corporation, partnership, trade
association, agent or agency, engage in any banking or bank-related business or
venture which competes with the business of the Bank as conducted during the
Executive's employment by the Bank within a radius of fifty (50) miles of the
Bank's main office.
(d) In addition to all other remedies provided at law or at equity,
the Bank may petition and obtain from a court of law or equity both temporary
and permanent injunctive relief without the necessity of proving actual damages
and without posting bond or other security to prevent a breach by the Executive
of any covenant contained in this Section 6, as well as to an equitable
accounting of all earnings and profits and other benefits arising out of any
such violations.
7. NOTICES. Any notice or other communication required or permitted to
-------
be given hereunder shall be in writing and deemed to have been given when
delivered in person or when dispatched by telegram or electronic facsimile
transfer (confirmed in writing by mail, registered or certified, return receipt
requested, postage prepaid, simultaneously dispatched) to the addresses
specified below.
If to the Executive: Robert L. Evans
502 Second Street South
Cordele, Georgia 31015
Facsimile: (912) 273-7750
If to the Bank: Central Bank & Trust
c/o ABC Bancorp
310 First Street, S.E.
Moultrie, Georgia 31768
Facsimile: (912) 890-2235
Attn: President
or to such other address or fax number as either party may from time to time
designate in writing to the other.
-5-
<PAGE>
8. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
----------------
between the parties hereto relating to the subject matter hereof, and supersedes
all prior agreements and understandings, whether oral or written, with respect
to the same. No modification, alteration, amendment or recision of or
supplement to this Agreement shall be valid or effective unless the same is in
writing and signed by both parties hereto.
9. GOVERNING LAW. This Agreement and the rights and duties of the
-------------
parties hereunder shall be governed by, construed under and enforced in
accordance with the laws of the State of Georgia.
10. ASSIGNMENT. This Agreement shall inure to the benefit of and be
----------
binding upon the parties hereto and their respective heirs, personal
representatives, successors and permitted assigns. The rights, duties and
obligations under this Agreement are assignable by the Bank to a successor of
all or substantially all of the business or assets of the Bank. The rights,
duties and obligations of the Executive under this Agreement shall not be
assignable.
11. SURVIVAL. The respective obligations of the parties under Section 6
--------
hereof shall survive the termination of this Agreement.
IN WITNESS WHEREOF, the Bank has caused this Agreement to be executed and
delivered, and the Executive has executed and delivered this Agreement, all as
of the day and year first above written.
CENTRAL BANK & TRUST
By:_________________________________________
Its:_______________________________
_______________________________(SEAL)
ROBERT L. EVANS
-6-
<PAGE>
EXHIBIT 5
---------
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT (the "Agreement") is effective as of ___________,
1996, by and between CENTRAL BANK & TRUST, a Georgia bank (the "Bank"), and
ROXIE W. BAGWELL, a resident of the State of Georgia (the "Executive").
WHEREAS, ABC Bancorp, a Georgia corporation ("ABC"), has acquired all of
the equity interest of the Bank by means of a merger pursuant to a Merger
Agreement dated as of December 29, 1995 the ("Merger Agreement");
WHEREAS, the Bank is now a wholly-owned subsidiary of ABC;
WHEREAS, the Executive is the Vice President of the Bank and desires to
continue her employment with the Bank in such capacity;
WHEREAS, ABC desires that the Executive continue to serve in the capacity
of Vice President of the Bank; and
WHEREAS, the Bank and the Executive, in conjunction with and pursuant to
the terms of the Merger Agreement, desire to set forth in writing the terms and
conditions of the Executive's continued employment with the Bank.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements contained herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereby
agree as follows:
1. EMPLOYMENT AND DUTIES.
---------------------
(a) The Bank hereby agrees to continue to employ the Executive and
the Executive agrees to continue employment in her capacity as Vice President of
the Bank to act in accordance with the terms and conditions set forth herein.
The Executive also consents to serve, if elected, as a director of the Bank
without additional compensation therefor for the first twelve (12) months of
such service and thereafter at the rate then in effect for directors of the
Bank. During the term of this Agreement, the Executive agrees that this
position will be her principal employment, that she will serve the Bank
faithfully and to the best of her ability and that she will devote her full
business time, attention and skills to the operation of the business of the
Bank, subject to reasonable absences for vacation and illness, and that she will
perform such duties, functions and responsibilities in connection with such
position and consistent with the foregoing as are from time to time delegated to
the Executive by the Board of Directors of the Bank (the "Board") or the Bank's
Chief Executive
<PAGE>
Officer; provided, however, that the foregoing shall not be deemed to restrict
-------- -------
the Executive from devoting a reasonable amount of time and attention to the
management of her personal affairs and investments, so long as such activities
do not interfere with the responsible performance of the Executive's duties
hereunder. The Executive shall provide the Board or the Bank's Chief Executive
Officer with periodic reports on, and keep the Board or such officer informed on
a current basis concerning, the business and affairs of the Bank.
(b) The Bank shall provide the Executive with a private office,
secretarial and administrative assistance, office equipment, supplies and other
facilities and services suitable to the Executive's position to be located at
502 Second Street South, Cordele, Georgia 31015, or at a comparable location
within Crisp County, Georgia.
2. TERM. The term ("Term") of this Agreement shall commence on the
----
date hereof and shall continue until the first anniversary of the date hereof
unless earlier terminated pursuant to Section 4 hereof.
3. COMPENSATION. In consideration of the services to be rendered by
------------
the Executive to the Bank hereunder, the Bank hereby agrees to pay or otherwise
provide the Executive the following compensation and benefits, it being
understood that the Bank shall have the right to deduct therefrom all taxes
which may be required to be deducted or withheld under any provision of
applicable law (including, without limitation, Social Security payments, income
tax withholding and other required deductions now in effect or which may become
effective by law any time during the Term):
(a) SALARY. The Executive shall receive an annual salary of
------
("Salary") of $70,000.00 to be paid in equal installments in accordance with the
Bank's salary payment practices in effect from time to time for executives of
the Bank.
(b) BONUS PAYMENT. In addition to Salary, the Executive shall be
-------------
entitled to receive an annual bonus pursuant to any annual incentive
compensation plan adopted by the Board; provided, however, that if (i) no such
-------- -------
plan is adopted or (ii) the bonus payable pursuant to such plan would be less
than an amount equal to (a) the lesser of (1) any bonus paid to the Executive by
the Bank in respect of services rendered by the Executive to the Bank for the
year ended December 31, 1995 or (2) $6,300.00 minus (b) the present value of any
-----
compensation received by or accrued for the benefit of the Executive pursuant to
the Executive's participation in any employee benefit, retirement and
compensation plans as specified in Section 3(c) hereof (the "Minimum Bonus
Amount"), then the bonus payable to the Executive (if any) shall be equal to the
Minimum Bonus Amount.
(c) COMPENSATION PURSUANT TO PLANS. During the Term, the Executive
------------------------------
shall be included as a participant in all present and future employee benefit,
retirement and compensation plans generally available to employees of the Bank,
consistent with her Salary and her position with the Bank, including, without
limitation, the Bank's (or ABC's) pension plan and hospitalization, major
medical, disability and group life insurance plans.
-2-
<PAGE>
(d) EXPENSES. The Executive shall be entitled to receive
--------
reimbursement for all reasonable expenses incurred by him in connection with the
fulfillment of her duties hereunder, upon receipt of appropriate vouchers
therefor, provided that the Executive has complied with all reasonable policies
and procedures relating to the reimbursement of such expenses as shall, from
time to time, be established by the Bank.
(e) VACATION AND PERQUISITES. For so long as the Executive is
------------------------
employed by the Bank hereunder, the Bank shall continue in effect the vacation
policies applicable to the Executive no less favorable from her point of view
than those written policies in effect as of the date of the Merger Agreement,
and the Executive shall continue to be entitled to receive perquisites,
including, without limitation, the use of an automobile and country club
memberships, no less favorable from her point of view than those to which she is
entitled as of the date of the Merger Agreement.
4. TERMINATION.
-----------
(a) This Agreement shall terminate on the earliest to occur of the
following events: (i) on the mutual agreement of the Bank and the Executive;
(ii) the death of the Executive or Executive's voluntary retirement; (iii) the
Executive becoming unable to perform a substantial portion of her duties as
described herein due to injury, illness or disability (mental or physical) as
determined by an independent physician selected by the Bank and reasonably
satisfactory to the Executive for a period of two (2) consecutive months or any
aggregate period of four (4) months in any twelve (12) month period
("Disability"); or (iv) immediately upon the Bank giving written notice to the
Executive of termination for Cause (as defined herein).
(b) The Bank may terminate the Executive's employment under this
Agreement at any time for Cause. The termination shall be evidenced by written
notice to the Executive, which shall specify the cause for termination. "Cause"
shall exist if: (i) the Executive is convicted of (from which no appeal may be
taken), or pleads guilty to, any act of fraud, misappropriation or embezzlement,
or any felony; (ii) in the reasonable determination of the Board, the Executive
has engaged in conduct or activity materially damaging to the business of the
Bank (it being understood, however, that unintentional physical damage to any
property of the Bank by the Executive shall not be a ground for such a
determination by the Board); or (iii) the Executive has failed, without
reasonable cause, to devote her full business time and best efforts to the
business of the Bank as provided in Section 1(a) hereof and, after written
notice from the Bank of such failure, the Executive at any time thereafter again
so fails.
5. REPRESENTATIONS AND WARRANTIES.
------------------------------
(a) The Executive represents and warrants to the Bank that: (i) she
has the full power and authority to execute, deliver and perform this Agreement,
and that she has taken all actions necessary to secure all approvals required in
connection herewith and therewith; (ii) this Agreement has been duly authorized,
executed and delivered by him and constitutes her valid and binding agreement,
enforceable against him in accordance with its terms; and (iii) the execution,
-3-
<PAGE>
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby will not, with the passage of time or the
giving of notice or both, violate or conflict with, constitute a breach of or
default under, result in the loss of any material benefit under, or permit the
acceleration of or entitle any party to accelerate any obligation under or
pursuant to, any material mortgage, lien, leases, agreement, instrument, order,
arbitration award, judgment or decree to which she is a party or by which she or
any of her assets are bound.
(b) The Bank hereby represents and warrants to the Executive that:
(i) this Agreement has been duly authorized, executed and delivered by it, and
constitutes the valid and binding agreement of it, enforceable against it in
accordance with its terms; (ii) it has the full power authority to execute,
deliver and perform this Agreement and has taken all necessary action to secure
all approvals required in connection herewith; and (iii) the execution, delivery
and performance of this Agreement and the consummation of the transactions
contemplated hereby will not, with the passage of time or the giving of notice
or both, violate or conflict with, constitute a breach of or default under,
result in the loss of any material benefit under, or permit the acceleration of
or entitle any party to accelerate any obligation under or pursuant to, its
charter or bylaws or any material mortgage, lien, lease, agreement, instrument,
order, arbitration award, judgment or decree to which it is a party or by which
it or any of its assets are bound.
6. RESTRICTIVE COVENANTS. Acknowledging that (i) she has intimate
---------------------
knowledge of the business of the Bank which, if exploited by him, in
contravention of this Agreement, would seriously adversely and irreparably
affect the value of the Bank and the ability of ABC to continue to operate the
Bank following the consummation of the merger contemplated by the Merger
Agreement; (ii) the provisions of this Section 6 are reasonable and necessary to
protect the legitimate interests of ABC; (iii) the provisions of this Section 6
are reasonable and necessary to protect the goodwill of the Bank acquired by ABC
pursuant to the Merger Agreement; (iv) any violation of this Section 6 will
result in irreparable injury to ABC and the Bank and that damages at law would
not be reasonable or adequate compensation to ABC and the Bank for a violation
of this Section 6; and (v) that in the course of her employment with the Bank,
as contemplated by this Agreement, and as a result of the position of trust that
she will hold under this Agreement, she will obtain private and confidential
information and proprietary data relating to ABC, the Bank and other affiliates
of ABC, including, without limitation, financial information, product
information and other data that are valuable assets and property rights of the
Bank and ABC and its affiliates (collectively referred to as "Confidential
Information"), the Executive hereby agrees as follows:
(a) The Executive shall not, during the Term of this Agreement or
any time after the termination of this Agreement, either directly or indirectly,
disclose or use any Confidential Information acquired during her employment with
the Bank, unless (i) the Confidential Information has been made public through
no action or fault of the Executive, or (ii) its disclosure is requested or
compelled by applicable law or regulatory agency. The Executive further agrees
that after the termination of this Agreement, or at such other time as the Bank
requests, the Executive will return to the Bank all documents, papers and
records constituting Confidential Information, and all copies of same in the
Executive's possession and control.
-4-
<PAGE>
(b) For a period of one (1) year after termination of the
Executive's employment hereunder for any reason, the Executive shall not
directly or indirectly provide banking or bank-related services to, or solicit
the banking or bank-related business of, any customer of the Bank at the time of
such provision of services or solicitation which the Executive served either
alone or with others while employed by the Bank in any city, town, borough,
township, village or other place in which the Executive performed services for
the Bank while employed by it, or assist any actual or potential competitor of
the Bank to provide banking or bank-related services to or solicit any such
customer's banking or bank-related business in any such place.
(c) While the Executive is employed by the Bank and for a period of
one (1) year after termination of the Executive's employment hereunder for any
reason, the Executive shall not, directly or indirectly, as principal, agent, or
trustee, or through the agency of any corporation, partnership, trade
association, agent or agency, engage in any banking or bank-related business or
venture which competes with the business of the Bank as conducted during the
Executive's employment by the Bank within a radius of fifty (50) miles of the
Bank's main office.
(d) In addition to all other remedies provided at law or at equity,
the Bank may petition and obtain from a court of law or equity both temporary
and permanent injunctive relief without the necessity of proving actual damages
and without posting bond or other security to prevent a breach by the Executive
of any covenant contained in this Section 6, as well as to an equitable
accounting of all earnings and profits and other benefits arising out of any
such violations.
7. NOTICES. Any notice or other communication required or permitted to
-------
be given hereunder shall be in writing and deemed to have been given when
delivered in person or when dispatched by telegram or electronic facsimile
transfer (confirmed in writing by mail, registered or certified, return receipt
requested, postage prepaid, simultaneously dispatched) to the addresses
specified below.
If to the Executive: Roxie W. Bagwell
502 Second Street South
Cordele, Georgia 31015
Facsimile: (912) 273-7750
If to the Bank: Central Bank & Trust
c/o ABC Bancorp
310 First Street, S.E.
Moultrie, Georgia 31768
Facsimile: (912) 890-2235
Attn: President
or to such other address or fax number as either party may from time to time
designate in writing to the other.
-5-
<PAGE>
8. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
----------------
between the parties hereto relating to the subject matter hereof, and supersedes
all prior agreements and understandings, whether oral or written, with respect
to the same. No modification, alteration, amendment or recision of or
supplement to this Agreement shall be valid or effective unless the same is in
writing and signed by both parties hereto.
9. GOVERNING LAW. This Agreement and the rights and duties of the
-------------
parties hereunder shall be governed by, construed under and enforced in
accordance with the laws of the State of Georgia.
10. ASSIGNMENT. This Agreement shall inure to the benefit of and be
----------
binding upon the parties hereto and their respective heirs, personal
representatives, successors and permitted assigns. The rights, duties and
obligations under this Agreement are assignable by the Bank to a successor of
all or substantially all of the business or assets of the Bank. The rights,
duties and obligations of the Executive under this Agreement shall not be
assignable.
11. SURVIVAL. The respective obligations of the parties under Section 6
--------
hereof shall survive the termination of this Agreement.
IN WITNESS WHEREOF, the Bank has caused this Agreement to be executed and
delivered, and the Executive has executed and delivered this Agreement, all as
of the day and year first above written.
CENTRAL BANK & TRUST
By:______________________________________
Its:____________________________
___________________________________(SEAL)
ROXIE W. BAGWELL
-6-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1994
<PERIOD-START> JAN-01-1995 JAN-01-1994
<PERIOD-END> DEC-31-1995 DEC-31-1994
<CASH> 23,612 20,089
<INT-BEARING-DEPOSITS> 0 0
<FED-FUNDS-SOLD> 41,025 21,902
<TRADING-ASSETS> 0 0
<INVESTMENTS-HELD-FOR-SALE> 39,991 1,910
<INVESTMENTS-CARRYING> 10,269 44,595
<INVESTMENTS-MARKET> 10,462 43,024
<LOANS> 214,251 192,124
<ALLOWANCE> (4,272) (3,757)
<TOTAL-ASSETS> 341,505 292,799
<DEPOSITS> 300,988 256,869
<SHORT-TERM> 3,487 2,338
<LIABILITIES-OTHER> 3,095 3,142
<LONG-TERM> 0 0
3,597 2,698
0 0
<COMMON> 0 0
<OTHER-SE> 30,338 27,752
<TOTAL-LIABILITIES-AND-EQUITY> 341,505 292,799
<INTEREST-LOAN> 22,647 18,017
<INTEREST-INVEST> 4,056 3,311
<INTEREST-OTHER> 0 0
<INTEREST-TOTAL> 26,703 21,328
<INTEREST-DEPOSIT> 10,371 7,603
<INTEREST-EXPENSE> 302 225
<INTEREST-INCOME-NET> 16,030 13,500
<LOAN-LOSSES> 848 638
<SECURITIES-GAINS> 0 0
<EXPENSE-OTHER> 12,228 11,547
<INCOME-PRETAX> 6,230 4,340
<INCOME-PRE-EXTRAORDINARY> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 4,341 3,100
<EPS-PRIMARY> 1.29 1.05
<EPS-DILUTED> 1.29 1.05
<YIELD-ACTUAL> 9.83 8.80
<LOANS-NON> 2,259 3,460
<LOANS-PAST> 27 103
<LOANS-TROUBLED> 0 358
<LOANS-PROBLEM> 0 0
<ALLOWANCE-OPEN> 3,757 3,571
<CHARGE-OFFS> 730 971
<RECOVERIES> 397 519
<ALLOWANCE-CLOSE> 4,272 3,757
<ALLOWANCE-DOMESTIC> 0 0
<ALLOWANCE-FOREIGN> 0 0
<ALLOWANCE-UNALLOCATED> 4,272 3,757
</TABLE>
