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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, 1997
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 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, 1998, registrant had outstanding 7,252,365 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 $110,391,000.
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.
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PART I
ITEM 1. BUSINESS OF THE COMPANY AND SUBSIDIARY BANKS
ABC Bancorp ("ABC" or the "Company") was organized as a bank holding
company under the Federal Bank Holding Company Act of 1956, as amended, in 1981
(the"BHCA"), and the bank holding company laws of Georgia.
The Company provides, through its commercial bank subsidiaries
described below sometimes (hereinafter referred to as the "Subsidiary Banks" or
the "Banks", banking services to individuals and businesses in southwestern and
southcentral Georgia and southeastern Alabama. The Company's executive office is
located at 310 First Street, S.E., Moultrie, Georgia 31768, and its telephone
number is (912) 890-1111. As a registered bank holding company, the Company is
subject to the applicable provisions of the BHCA and the Georgia Bank Holding
Company Act, as well as to supervision by the Board of Governors of the Federal
Reserve System and the State of Georgia Department of Banking and Finance.
The Company's primary business as a bank holding company is to manage
the business and affairs of the Banks. The Banks provide a broad range of retail
and commercial banking services to its customers, including checking, savings,
NOW and money market accounts and time deposits of various types; loans for
business, agriculture, real estate, personal uses, home improvement and
automobiles, credit cards; letters of credit; trust services; discount brokerage
services; through a correspondent bank; IRA's; safe deposit box rentals; bank
money orders; and electronic funds transfer services, including wire transfers
and automated teller machines. The Company maintains a diversified loan
portfolio and makes no foreign or energy-related loans.
While the Company has decentralized certain of its management
responsibilities, it maintains efficient centralized operating systems. As a
result, corporate policy, strategy and certain administrative policies are
established by the Board of Directors of the Company, while lending and
community-specific marketing decisions are made primarily by each Bank to allow
it to respond to differing needs and demands of its own market. Data processing
functions are centralized in the Company's data processing division located in
Moultrie, Georgia. Within this framework, the Banks focus on providing
personalized services and quality products to their customers to meet the needs
of the communities they serve. The Company's objective is to establish itself as
a major financial institution in south Georgia and southeast Alabama. Management
has pursued this objective through an acquisition-oriented growth strategy and a
prudent operating strategy.
As a bank holding company, ABC performs central data processing
functions, purchasing functions and other common functions and provides certain
management services for its subsidiaries. Normal banking services are conducted
by its nine wholly-owned bank subsidiaries.
1
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AMERICAN BANKING COMPANY
American Banking Company ("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, 1997, American Bank ranked as the second of three banks in Colquitt
County on the basis of total deposits.
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, 1997, American Bank had correspondent relationships
with twelve 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.
Heritage Community Bank (Formerly The Bank of QUITMAN)
Heritage Community Bank ("Heritage Bank") was founded on December 26,
1888, and operates a full-service banking business in the city of Quitman and
Brooks County, Georgia. In 1997, The Bank of Quitman changed its name to
Heritage Community Bank. On December 31, 1997, Heritage Bank ranked as the
largest of four banks in Brooks County on the basis of total deposits.
Among the services provided by Heritage Bank are checking accounts
and savings accounts, certificates of deposit and money transfers. Heritage 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. Heritage Bank does not conduct trust activities.
As of December 31, 1997, Heritage Bank had correspondent
relationships with seven other commercial banks. Heritage Bank's principal
correspondent bank is SunTrust Bank, Atlanta, Georgia. These correspondent banks
provide certain services to Heritage 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, Heritage Bank maintains certain balances with
its correspondents in noninterest-bearing accounts.
2
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Bank of Thomas County
The Bank of Thomas County ("Thomas Bank") was incorporated in 1911
and operates a full service banking business in the cities of Coolidge and
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, 1997, Thomas Bank ranked as the sixth largest of eight banks
in Thomas County on the basis of total deposits.
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, 1997, 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.
CITIZENS SECURITY BANK (FORMERLY THE CITIZENS BANK OF TIFTON)
Citizens Security Bank ("Security Bank") was incorporated in 1945 and
operates a full service banking business in the city of Tifton and Tift County,
the city of Ocilla and Irwin County, and the city of Douglas and Coffee County
Georgia, providing such banking services as checking and savings accounts, other
types of time deposits and money transfers. As of December 31, 1997, Security
Bank ranked as the third largest of six banks in Tift County on the basis of
total deposits.
As a result acquisitions completed during 1997, Security Bank now has
a full service branches in the cities of Ocilla and Douglas, Georgia.
Security Bank finances commercial, agricultural and consumer
transactions and makes and services both secured and unsecured loans to
individuals, firms and corporations. Security Bank also offers several credit
card products to its customers. Security Bank makes a variety of residential,
industrial, commercial and agricultural loans secured by real estate, including
interim construction financing. Security Bank does not conduct trust activities.
At December 31, 1997, Security Bank had correspondent relationships
with seven other commercial banks. Security Bank's principal correspondent bank
is SunTrust Bank, Atlanta, Georgia. These correspondent banks provide certain
services to Security 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, Security Bank maintains certain balances with its correspondents
in noninterest-bearing accounts.
3
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CAIRO BANKING COMPANY
Cairo Banking Company ("Cairo Bank") was incorporated in 1900 and
operates a full-service banking business in the city of 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, 1997, Cairo Bank ranked as the second largest of five banks in
Grady County on the basis of total deposits.
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, 1997, Cairo Bank had correspondent relationships with
five other commercial banks. Cairo Bank's principal correspondent is The
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.
SOUTHLAND BANK
Southland Bank opened in 1887 through its predecessor, Clayton
Banking Company (now a branch of Southland Bank). The Abbeville branch was
opened in 1983, followed by the Headland branch in 1984. The main office is
located in Dothan, Alabama. Southland Bank's branches are located in the Alabama
cities of Abbeville, Clayton, Eufaula and Headland.
All Southland Bank locations offer full service banking including
checking and savings accounts, various types of time deposits and money
transfers. Southland Bank offers agricultural, commercial, consumer and real
estate lending on both secured and unsecured basis to individuals, businesses
and corporations. Southland Bank also provides mortgage loan production and full
brokerage capabilities through PFIC Securities. Southland Bank is also a
Certified SBA Lender.
As of December 31, 1997, Southland Bank had correspondent
relationships with Federal Home Loan Bank of Atlanta (FHLB), SunTrust Bank,
Atlanta, Georgia and Compass Bank, with the principal correspondent being the
FHLB. These corespondent banks provide certain services to Southland 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, Southland
Bank maintains certain balances with its correspondents in noninterest-bearing
accounts.
4
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CENTRAL BANK & TRUST
Central Bank & Trust ("Central Bank") was incorporated in 1986 and
operates a full-service banking business in the city of Cordele and Crisp
County, Georgia, providing such banking services as checking and savings
accounts, other types of time deposit and money transfers. As of December 31,
1997, Central Bank was ranked as the smallest of the three banks in Crisp County
on the basis of total deposits.
Central Bank also finances commercial, agricultural, consumer and
mortgage transactions and makes and services both secured and unsecured loans to
individuals, firms and corporations. Central Bank makes a variety of
residential, industrial, commercial and agricultural loans secured by real
estate, including interim construction financing. Central Bank does not conduct
trust activities.
At December 31, 1997, Central Bank had correspondent relationships
with four other commercial banks. Central Bank's principal correspondent is The
Bankers Bank, Atlanta, Georgia. These correspondent banks provide certain
services to Central 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, Central Bank maintains certain balances with
its correspondents in noninterest-bearing accounts.
FIRST NATIONAL BANK OF SOUTH GEORGIA
First National Bank of South Georgia ("First National Bank")
commenced operations on May 29, 1991 in an 8,750 square foot facility located on
a 1.73 acre tract of land located at the corner of Dawson Road and Westover
Boulevard in Albany, Georgia.
First National Bank is a full service commercial bank without trust
powers. First National Bank offers a full range of deposit accounts including
interest-bearing and noninterest-bearing checking for commercial and retail
customers, regular savings accounts, money market accounts, certificates of
deposit and individual retirement accounts. First National Bank originates a
variety of loans such as commercial, real estate, home equity and
consumer/instalment loans. In addition, First National Bank provides such
consumer services as travelers checks, official checks, U.S. Savings bonds, safe
deposit boxes, direct deposit services and automated teller services.
At December 31, 1997, First National Bank maintained correspondent
relationships with six commercial banks. First National Bank's principal
correspondent bank is The Bankers Bank, Atlanta, Georgia. These correspondent
banks provide certain services to First National Bank such as clearing 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. As compensation for these services, First
National Bank maintains certain balances with its correspondents in noninterest-
bearing accounts.
5
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MERCHANTS & FARMERS BANK
Merchants & Farmers Bank ("M & F Bank") was incorporated on September
24, 1925, and operates a full service banking business in the city of
Donalsonville and Seminole County, Georgia, providing such banking services as
checking and savings accounts, other types of time deposits and money transfers.
As of December 31, 1997, M & F Bank was the smallest of the three commercial
banks in Seminole County on the basis of total deposits.
M & F Bank finances commercial, agricultural and consumer
transactions and makes and services both secured and unsecured loans to
individuals, firms and corporations. M & F Bank also offers several credit card
products to its customers. M & F Bank makes a variety of residential,
industrial, commercial and agricultural loans secured by real estate, including
interim construction financing. M & F Bank does not conduct trust activities.
At December 31, 1997, M & F Bank had corresponding relationships with
five other banks. M & F Bank's primary correspondent bank is The Bankers Bank,
Atlanta, Georgia. These correspondent banks provide certain services to M & F
Bank, such as processing checks and other items, buying and selling Federal
funds, handling money transfers and exchanges, shipping coins and currency,
providing security and safekeeping of funds or other valuable items and
furnishing limited management information and advice. As compensation for these
services, M & F Bank pays analysis charges based on services rendered.
MARKET AREA AND COMPETITION
The Company's market area is located in South Georgia and
Southeastern Alabama. The Banks' main offices are located in the southern
Georgia cities of Moultrie, Quitman, Thomasville, Tifton, Cairo, Cordele, Albany
and Donalsonville, and the southern Alabama cities of Abbeville, Clayton,
Dothan, Eufaula and Headland. The Banks have a total of 27 offices located in
either the cities or counties in which the main offices are located, or in
smaller cities nearby.
ABC's 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.
The banking industry in Georgia and Alabama 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".
6
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LENDING POLICY
The Company has sought to maintain a comprehensive lending policy
that meets the credit needs of each of the communities served by the Banks,
including low- and moderate-income customers, and to employ lending procedures
and policies consistent with this approach. All loans are subject to the
Company's written loan policy, which is updated annually and which provides that
lending officers have sole authority to approve loans of various maximum amounts
depending upon their seniority and experience. Each Bank's president has sole
discretion to approve loans in varying principal amounts up to specified limits
for each president. Each Bank's Board of Directors reviews and approves loans
that exceed management's lending authority and, in certain instances, other
types of loans. New credit extensions are reviewed daily by each Bank's senior
management and at least monthly by its Board of Directors.
The lending officers at each Bank have authority to make loans only
in the county in which the Bank is located and its contiguous counties. The
Company's lending policy requires analysis of the borrower's projected cash flow
and ability to service the debt. For agricultural loans, which constitute a
significant portion of the Company's loan portfolio, the lending officer visits
the borrower regularly during the growing season and re-evaluates the loan in
light of the borrower's updated cash flow projections. Under the Company's
ongoing loan review program, each loan is assigned to a lending officer other
than the originating lending officer for review and analysis.
The Company actively markets its services to qualified lending
customers in both the commercial and consumer sectors. The Company's commercial
lending officers actively solicit the business of new companies entering the
market as well as longstanding members of that market's business community.
Through personalized professional service and competitive pricing, the Company
has been successful in attracting new commercial lending customers. At the same
time, the Company actively advertises its consumer loan products and continually
seeks to make its lending officers more accessible.
Each Bank continually monitors its loan portfolio to identify areas
of concern and to enable management to take corrective action when necessary.
Each Bank's lending officers and Board of Directors meet periodically to review
all past due loans, the status of large loans and certain other matters.
Individual lending officers are responsible for reviewing collection of past due
amounts and monitoring any changes in the financial status of the borrowers.
LENDING ACTIVITIES
General. The Company provides a broad range of commercial and retail
lending services to corporations, partnerships and individuals, including
agricultural, commercial business loans, commercial and residential real estate
construction and mortgage loans, loan participations, consumer loans, revolving
lines of credit and letters of credit. The loan department of each Bank makes
direct and indirect loans to consumers and originates and services residential
mortgages. In addition, each of the Banks has loan officers who specialize in
originating and servicing agricultrual-related loans.
Agricultural-Related Loans. A significant portion of the Company's
consolidated loan portfolio is comprised of agricultural loans, described below,
and real estate mortgage loans secured by farmland. In addition, due to the
predominance of the agricultural industry in the Company's market area,
management believes that a significant portion of the Company's commercial and
industrial loans are agricultural-related. The Company has not attempted to
quantify the amount of its commercial and industrial loans which should be
considered agricultural-related loans because virtually all such loans are
agricultrual-related to some extent.
7
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LENDING ACTIVITIES (CONTINUED)
Agricultural Loans. The Company classifies loans as agricultural
loans if such loans are made for crop production expenses or to finance the
purchase of farm-related equipment. Agricultural loans typically involve
significant seasonal fluctuations in principal amounts. Although the Company
typically looks to an agricultural borrower's cash flow as the principal source
of repayment, agricultural loans are also generally secured by a security
interest in the crops or the farm-related equipment and, in some cases, an
assignment of crop insurance or a mortgage on real estate. In addition, a
portion of the Company's agricultural loans are guaranteed by the FmHA
Guaranteed Loan Program, described below. Agricultural loans are made with the
Company's loan documentation in accordance with the Company's lending policies
and are serviced by the Company's loan officers who visit the borrowers at least
three times during the growing season to re-evaluate the loan in light of the
borrowers' updated cash flows projections. See "Lending Policy." The Company
maintains average crop production yield statistics on its agricultural borrowers
which allows the Company to more accurately evaluate the borrowers' cash flow
projections. In order to minimize the risk of fluctuating commodity prices, the
Company encourages its agricultural borrowers to forward contract for the sale
of their crops.
All of the Banks participate in the FmHA Guaranteed Loan Program. The
FmHA guarantees 90% of the principal of and interest on loans made for the
purpose of buying or improving farms; purchasing items necessary for farm
operations; and developing or conserving land and water resources. The Company
has generally been able to obtain FmHA approval of loans within 10 days after
submitting an application.
Commercial and Industrial Loans. General commercial and industrial
loans consist of loans made primarily to manufacturers, wholesalers and
retailers of goods, service companies and other industries. Management believes
that a significant portion of these loans are, to varying degrees, agricultural-
related. See "--Agricultural-Related Loans." The Banks have also generated loans
which are guaranteed by the U. S. Small Business Administration. Management
believes that making such loans helps the local community and also provides the
Company with a source of income and solid future lending relationships as such
businesses grow and prosper. The primary repayment risk for commercial loans is
the failure of the business due to economic or financial factors. Although the
Company typically looks to a commercial borrower's cash flow as the principal
source of repayment for such loans, many commercial loans are secured by
inventory, equipment, accounts receivable and other assets.
Real Estate Loans. The Company's real estate loans are for a term of
years, although rarely more than ten, over which period the principal thereof is
amortized, and are generally secured by residential real estate, farmland or
commercial real estate.
Consumer Lending. The Company's consumer loans include motor vehicle,
home improvement, home equity, student and signature loans and small personal
credit lines. Many of the Banks also offer credit cards to their customers.
Trust Services. The Company provides personal trust services to its
customers through American Bank.
8
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LENDING ACTIVITIES (CONTINUED)
Compliance with Community Reinvestment Act. Each of the Banks has a
Community Reinvestment Act Officer who develops and oversees that Bank's
Community Reinvestment Act program and makes monthly reports to that Bank's
Board of Directors. The Banks regularly sponsor or participate in community
programs designed to ascertain and meet the credit needs of each of the
communities they serve, including low and moderate income neighborhoods. Some of
these activities include sponsoring minority festivals during Black History
Month, participating in community meetings to explain the availability of Small
Business Administration, Farmers' Home Loan Administration and Regional
Development Center loans, and sponsoring educational seminars for area farmers.
In addition, each of the Banks participate in the Georgia Residential Finance
Authority program which makes low interest rate loans to rehabilitate low income
rental housing.
DEPOSITS
Checking, savings and money market accounts and other time accounts
are the primary sources of the Banks' funds for loans and investments. The Banks
obtain most of their deposits from individuals and from businesses in their
respective market areas.
The Banks have not had to attract new or retain old deposits by
paying depositors rates of interest on certificates of deposit, money market and
other interest-bearing accounts significantly above rates paid by other banks in
the Banks' respective market areas. In the future, increasing competition among
banks in the Banks' market areas may cause the Banks' interest margins to
shrink. The Banks have never accepted deposits for which a broker's commission
was paid.
Investment Activities
The Company's investment policy is designed to maximize income from
funds not needed to meet loan demand in a manner consistent with appropriate
liquidity and risk objectives. Under this policy, the Banks may invest in
Federal, state and municipal obligations, public housing authority bonds,
industrial development revenue bonds and Government National Mortgage
Association ("GNMA") securities. The Banks' investments must satisfy certain
investment quality criteria. The Bank's investments must be rated at least "Baa"
by Moody's or "BAA" by Standard and Poor's. Securities rated below "A" are
periodically reviewed for creditworthiness. The Banks may purchase non-rated
municipal bonds only if the issuer of such bonds is located in a Bank's general
market area and such bonds are determined by the purchasing Bank to have a
credit risk no greater than the minimum ratings referred to above. Industrial
development authority bonds, which normally are not rated, are purchased only if
the issuer is located in the Company's market area and if the bonds are
considered to possess a high degree of credit soundness. The Banks typically
have not purchased a significant amount of GNMA securities, which normally have
higher yields than the Banks' other investments.
While the Company's investment policy permits the Banks to trade
securities to improve the quality of yields or marketability or to realign the
composition of the portfolio, the Banks historically have not done so to any
significant extent.
The Company's investment officers implement the investment policy,
monitor the portfolio and, reporting to each Bank's investment committee,
recommend portfolio strategies. Reports on all purchases, sales, net profits or
losses and market appreciation or depreciation of the bond portfolio are
reviewed by the Company's Board of Directors each month. Once a year, the
written investment policy is reviewed by the Company's Board of Directors.
Each Bank's securities are kept in safekeeping accounts at
correspondent banks.
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ASSET/LIABILITY MANAGEMENT
It is the objective of the Company to manage its assets and
liabilities to provide a satisfactory, consistent level of profitability within
the framework of established cash, loan, investment, borrowing and capital
policies. It is the overall philosophy of the Company's management to support
asset growth primarily through growth of core deposits, which include deposits
of all categories made by individuals, partnerships, corporations and other
entities. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
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 the Subsidiary Banks and are unencumbered.
<TABLE>
<CAPTION>
APPROXIMATE
SQUARE
Offices Used By Footage
- ---------------------------------------------------------- ------------------------ ------------------
<S> <C> <C>
310 First Street, S.E., Moultrie, GA ABC Bancorp 7,000
225 South Main Street, Moultrie, GA American Bank 9,000
1707 First Avenue, S.E., Moultrie, GA American Bank 5,500
137 Broad Street, Doerun, GA American Bank 3,860
1000 West Screven Street, Quitman, GA Heritage Bank 11,530
Eastern Brooks County, GA Heritage Bank 1,100
529 Pine Avenue, Coolidge, GA Thomas Bank 4,000
111 E. Eighth Street, Tifton, GA Security Bank 11,700
804 W. Second Street, Tifton, GA Security Bank 2,000
301 South Irwin Avenue, Ocilla, GA Security Bank 10,000
100 South Pearle Avenue, Douglas, GA Security Bank 3,100
201 South Broad Street, Cairo, GA Cairo Bank 10,000
Hwy. 84 Drive-in, Cairo, GA Cairo Bank 1,000
12 East Depot Street, Meigs, GA Cairo Bank 2,700
2484 East Pinetree Boulevard, Thomasville, GA Thomas Bank 4,800
3299 Ross Clark Circle, Dothan, AL Southland Bank 21,918
3090 Ross Clark Circle, Dothan, AL Southland Bank 419
1817 S. Oates St., Dothan, AL Southland Bank 2,500
204 Kirkland St., Abbeville, AL Southland Bank 5,300
33 Eufaula St., Clayton, AL Southland Bank 4,500
1094 S. Eufaula Ave., Eufaula, AL Southland Bank 2,240
208 Main St., Headland, AL Southland Bank 2,037
502 Second Street South, Cordele, GA Central Bank 5,800
1302 Sixteenth Avenue East, Cordele, GA Central Bank 300
2627 Dawson Road, Albany, GA First National Bank 8,750
1607 U.S. Highway 19 South, Leesburg, GA First National Bank 7,000
109 W. Third St., Donalsonville, GA M & F Bank 8,800
Hwy 374 and 253, Donalsonville, GA M & F Bank 840
</TABLE>
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EMPLOYEES
At December 31, 1997, ABC and its subsidiaries employed 376 full-time
employees and 33 part-time employees. ABC 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 1997. 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
and southeast Alabama. The Company's employees are not represented by any
collective bargaining group.
SUPERVISION AND REGULATION
GENERAL
As a bank holding company, the Company is subject to the regulation
and supervision of the Federal Reserve Board (the "FRB") 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 FRB, the Office of the Comptroller of the Currency (the "OCC"),
the Federal Deposit Insurance Corporation (the "FDIC"), the DBF and the State of
Alabama Department of Banking. 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
FRB 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 FRB 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. In 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 FRB, 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 FRB has determined by regulation or order to be closely related to
banking are: (i) operating a savings institution, mortgage company, finance
company, credit card company or factoring company; (ii) making or servicing
loans and certain types of leases; (iii) performing certain data processing
services; (iv) acting as fiduciary or investment or financial advisor; (v)
providing discount brokerage services; (vi) underwriting bank eligible
securities; (vii) underwriting debt and equity securities on a limited basis
through separately capitalized subsidiaries; and (viii) making investments in
corporations or projects designed primarily to promote community welfare.
11
<PAGE>
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.
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 and state laws on
the payment of dividends by such subsidiaries. The prior approval of the FRB 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 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 Georgia Subsidiary Banks to ABC), the prior approval of the DBF 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 Banks available for payment of cash dividends
under all applicable regulations without obtaining governmental approval were
approximately $5 million as of December 31, 1997.
In addition, the 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.
12
<PAGE>
The FRB has issued a policy statement on the payment of cash dividends
by bank holding companies, which expresses the FRB's view that a bank holding
company should pay cash dividends only to the extent that the holding company's
net income for the past year is sufficient to cover both the cash dividends and
a rate of earning retention that is consistent with the holding company's
capital needs, asset quality and overall financial condition. The FRB also
indicated that it would be inappropriate for a holding company experiencing
serious financial problems to borrow funds to pay dividends. Furthermore, under
the prompt corrective action regulatins adopted by the FRB, the FRB may prohibit
a bank holding company from paying any didivends if one or more of the holding
company's bank subsidiaries are classified as "undercapitalized".
Bank holding companies are required to give the FRB prior written
notice of any purchase or redemption of its outstanding equity securities if the
gross consideration for the purchase or redemption, when combined with the net
consideration paid for all such purchases or redemptions during the preceding 12
months, is equal to 10% or more of their consolidated net worth. The FRB may
disapprove such a purchase or redemption if it determines that the proposal
would continue an unsafe or unsound practice or would violate any law,
regulation, FRB order, or any condition imposed by, or written agreement with,
the FRB. This notification requirement does not apply to any company that meets
the well-capitalized standard for commercial banks, has a safety and soundness
examination rating of at least a "2" and is not subject to any unresolved
supervisory issues.
CAPITAL ADEQUACY
The FRB 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 FRB 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 FRB
has indicated that it will consider a "tangible Tier I capital leverage ratio"
(deducting all intangibles) and other indications of capital strength in
evaluating proposals for expansion or new activities.
13
<PAGE>
Section 38 to the Federal Deposit Insurance Act, as revised in
December 1992, implements the prompt corrective action provisions that Congress
enacted as a part of the Federal Deposit Insurance Corporation Improvement Act
of 1991 (the "FDIC 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.
Under the regulations of the FDIC implementing the prompt corrective
action provisions of the FDIC Act, financial institutions are placed in the
following five categories based upon capitalization ratios: (i) 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%; (ii)
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%; (iii) 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%; (iv) 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 (v) 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.
The downgrading of an institution's category is automatic in two
situations: (i) whenever an otherwise well-capitalized institution is subject to
any written capital order or directive; and (ii) where an undercapitalized
institution fails to submit or implement a capital restoration plan or has its
plan disapproved. The Federal banking agencies may treat institutions in the
well-capitalized, adequately capitalized and undercapitalized categories as if
they were in the next lower level based on safety and soundness considerations
relating to factors other than capital levels.
All insured institutions regardless of their level of capitalization
are prohibited by the FDIC Act from paying any dividend or making any other kind
of capital distribution or paying any management fee to any controlling person
if following the payment or distribution the institution would be
undercapitalized. While the prompt corrective action provisions of the FDIC Act
contain no requirements or restrictions aimed specifically at adequately
capitalized institutions, other provisions of the FDIC Act and the agencies'
regulations relating to deposit insurance assessments, brokered deposits and
interbank liabilities treat adequately capitalized institutions less favorably
than those that are well-capitalized.
Under the FDIC's regulations, all of the Subsidiary Banks are "well
capitalized" institutions.
The OCC's regulations establish two capital standards for national
banks: a leverage requirement and a risk-based capital requirement. In
addition, the OCC may, on a case-by-case basis, establish individual minimum
capital requirements for a national bank that vary from the requirements which
would otherwise apply under OCC regulations. A national bank that fails to
satisfy the capital requirements established under the OCC's regulations will be
subject to such administrative action or sanctions as the OCC deems appropriate.
14
<PAGE>
The leverage ratio adopted by the OCC requires a minimum Leverage
Ratio of 3% for national banks rated composite 1 under the CAMEL rating system
for banks. National banks not rated composite 1 under the CAMEL rating system
for banks are required to maintain a minimum Leverage Ratio of 4% to 5%,
depending upon the level and nature of risks of their operations. For purposes
of the OCC's leverage requirement, Tier I Capital generally consists of common
stockholders' equity and retained income and certain non-cumulative perpetual
preferred stock and related income, except that no intangibles and certain
purchased mortgage servicing rights and purchased credit card relationships may
be included in capital.
The risk-based capital requirements established by the OCC's
regulations require national banks to maintain Total Capital equal to at least
8% of total risk-weighted assets. For purposes of the risk-based capital
requirement, Total Capital means Tier 1 Capital plus "Tier 2 Capital", provided
that the amount of Tier 2 Capital may not exceed the amount of Tier 1 Capital,
less certain assets. The components of Tier 2 capital include certain permanent
and maturing capital instruments that do not qualify as core capital and general
valuation loan and lease loss allowances up to a maximum of 1.25% of risk-
weighted assets.
The OCC has revised its risk-based capital requirements to permit the
OCC to require higher levels of capital for an institution in light of its
interest rate risk. In addition, the OCC has proposed that a bank's interest
rate risk exposure would be qualified using either the measurement system set
forth in the proposal or the institution's internal model for measuring such
exposure, if such model is determined to be adequate by the institution's
examiner. Small institutions that are highly capitalized and have minimum
interest rate risk would be exempt from the rule unless otherwise determined by
the OCC. The Company has not determined what effect, if any, the OCC's proposed
interest rate risk component would have on the Company's national bank
subsidiary's capital if adopted as proposed.
SUPPORT OF SUBSIDIARY BANKS
Under the FRB 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 FRB 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.
Under the Financial Institutions Reform, Recovery and Enforcement Act,
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 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".
"Default" is defined generally as the appointment of a conservator or receiver,
and "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. The FDIC's claim for damages is superior to claims of
depositors, secured creditors and holders of subordinated debt (other than
affiliates) of the commonly controlled insured depository institution.
15
<PAGE>
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 of deposits, an increase of 177%. 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 over 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, the Subsidiary
Banks paid only the legally required annual minimum payment of $10,000 per year
for insurance as of January 1997.
On September 30, 1996, the President signed the Deposit Insurance Fund
Act of 1996 ("DIFA") which was part of the omnibus spending bill enacted by
Congress at the end of its 1996 session. DIFA provides that the FDIC may not
set semi-annual assessments with respect to the BIF in excess of the amount
needed to maintain the 1.25% designated reserve ratio or, if the reserve ratio
is less than the designated reserve ratio, to increase the reserve ratio to the
designated reserve ratio. In addition, DIFA mandates the merger of BIF and the
Savings Association Insurance Fund (the "SAIF"), effective January 1, 1999, only
if no insured depository institution is a savings association on that date. The
combined deposit insurance fund would be called the "deposit insurance fund" or
"DIF".
DIFA also imposes assessments against both SAFI and BIF deposits to
avoid predicted default on the bonds issued by the Financing Corporation
("FICO"), which is predicted to occur as early as 1998, as deposits in savings
institutions continue to decline. DIFA amends the Federal Home Loan Bank Act to
impose the FICO assessment against both SAIF and BIF deposits beginning after
December 31, 1996. The assessment imposed on insured depository institutions
with respect to any BIF-assessable deposit will be assessed at a range equal to
one-fifth of the rate (approximately 1.3 basis points) of the assessments
imposed on insured depository institutions with respect to any SAIF-asssessable
deposit (approximately 6.7 basis points). The FICO assessment for 1996 was paid
entirely by SAIF-insured institutions, but BIF-insured banks will pay the same
FICO assessment as SAIF-insured institutions beginning as of the earlier of
December 31, 1999, or the date as of which the last savings association ceases
to exist.
16
<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. Nearly 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 joint
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: (i) over
evidence of discrimination, when a lender blatantly discriminates on a
prohibited basis; (ii) 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 (iii) 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.
17
<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 Act.
The Federal Interstate Act authorizes the OCC and FDIC to approve
interstate branching de novo by national and state banks, respectively, only in
states which specifically allow for such branching. The Federal Interstate Act
also requires the appropriate Federal banking agencies to prescribe regulations
by June 1, 1997 which prohibit any out-of-state bank from using the interstate
branching authority primarily for the purpose of deposit production. These
regulations must include guidelines to ensure that interestate branches operated
by an out-of-state bank in a host state are reasonably helping to meet the
credit needs of the communities which they serve.
Other legislative proposals are pending before Congress, the effect of
which would reform the Glass-Steagall Act to allow banks and bank holding
companies to engage in additional types of non-banking activities as well as
effect regulatory relief for financial institutions. The regulatory relief
provisions contained in several bills would, if enacted, eliminate or reduce and
simplify disclosures and reporting requirements contained in current statues and
regulations. The likelihood of enactment of any of the pending or proposed
legislation is unknown.
In February 1996, Georgia adopted the "Georgia Interstate Branching
Act," which permits 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 between July 1, 1996 and June 30, 1998. Beginning July 1, 1998, the
number of de novo bank branches which may be established will no longer be
limited.
18
<PAGE>
MONETARY POLICY
The earnings of ABC are affected by domestic and foreign economic
conditions, particularly by the monetary and fiscal policies of the United
States government and its agencies.
The FRB has had, and will continue to have, an important impact on the
operating results of commercial banks through its power to implement national
monetary policy in order, among other things, to mitigate recessionary and
inflationary pressures by regulating the national money supply. The techniques
used by the Federal Reserve Bank include setting the reserve requirements of
member banks and establishing the discount rate on member bank borrowings. The
FRB also conducts open market transactions in United States government
securities.
FEDERAL HOME LOAN BANK SYSTEM
Certain of the Subsidiary Banks have correspondent relationships with
the Federal Home Loan Bank of Atlanta ("FHLB Atlanta"), which is one of 12
regional Federal Home Loan Banks ("FHLBs") that administer the home financing
credit function of savings companies. Each FHLB serves as a reserve or central
bank for its members within its assigned region. FHLBs are funded primarily
from proceeds derived from the sale of consolidated obligations of the FHLB
System and make loans to members (i.e., advances) in accordance with policies
and procedures, established by the Board of Directors of the FHLB which are
subject to the oversight of the Federal Housing Finance Board. All advances
from the FHLB are required to be fully secured by sufficient collateral as
determined by the FHLB. In addition, all long-term advances are required to
provide funds for residential home financing.
FHLB Atlanta provides certain services to certain Subsidiary Banks
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,
such Subsidiary Banks maintain certain balances with FHLB Atlanta in
noninterest-bearing accounts.
Under Federal law, the FHLBs are required to provide funds for the
resolution of troubled savings companies and to contribute to low- and
moderately-priced housing programs through direct loans or interest subsidies on
advances targeted for community investment and low- and moderate-income housing
projects.
FUTURE REQUIREMENTS
Statutes and regulations are regularly introduced which contain wide-
ranging proposals for altering the structure, regulations and competitive
relationships of the nation's financial institutions. It cannot be predicted
whether or in what form any proposed statute or regulation will be adopted or
the extent to which the business of ABC or any of the Subsidiary Banks may be
affected by such statute or regulation.
19
<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 the Company 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 1997.
ITEM 4.5 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 YEARS
Term AS OFFICER REGISTRANT and Other Directorships
- ------------------------------- --------------------------- ------------------------------------------------------------
<S> <C> <C>
Kenneth J. Hunnicutt; 62; President, Chief Chief Executive Officer of ABC Bancorp since 1994 and
Officer since 1981 Executive Officer and President since 1981. Mr. Hunnicutt served as Senior
Director 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.
W. Edwin Lane, Jr; 44: Executive Vice President Executive Vice President and Chief Financial Officer of
Officer since January 1, 1995 and Chief Financial ABC Bancorp since January 1, 1995. Mr. Lane served as
Officer 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.
20
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY
HOLDER MATTERS
(a) The following table sets forth: (a) the high and low bid prices for the
common stock as quoted on Nasdaq-NMS during 1996 and 1997; and (b) the
amount of quarterly dividends declared on the common stock during the
periods indicated.
<TABLE>
<CAPTION>
CASH
CALENDAR PERIOD BID PRICES DIVIDENDS
-------------------------------- ----------------------------------
1996 LOW HIGH DECLARED
-------------------------------- --------------- --------------- ---------------
<S> <C> <C> <C>
First quarter $ 11.250 $ 12.00 $ .08
Second quarter 11.250 15.00 .08
Third quarter 14.250 15.75 .08
Fourth quarter 13.375 15.75 .08
</TABLE>
<TABLE>
<CAPTION>
CASH
CALENDAR PERIOD BID PRICES DIVIDENDS
-------------------------------- ----------------------------------
1997 LOW HIGH DECLARED
-------------------------------- --------------- --------------- ---------------
<S> <C> <C>
First quarter $ 13.375 $ 16.375 $ .08
Second quarter 15.500 17.250 .10
Third quarter 16.000 17.375 .10
Fourth quarter 15.625 19.875 .10
</TABLE>
(b) As of March 1, 1998, there were approximately 7,750 holders of record of
the Common Stock.
(c) The Company paid an annual dividend on its Common Stock of $.38 and $.32
per share for fiscal years 1997 and 1996, respectively.
21
<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,
------------------------------------------------------------------------
1997 1996 1995 1994 1993
------------------------------------------------------------------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SELECTED BALANCE SHEET DATA:
Total assets $ 691,886 $ 673,162 $ 531,243 $ 464,084 $ 426,380
Total loans 490,244 452,844 319,471 285,575 246,480
Total deposits 600,711 577,905 466,317 409,645 378,303
Investment securities 123,219 135,266 101,695 96,200 94,181
Shareholders' equity 68,153 62,970 51,955 45,753 34,631
SELECTED INCOME STATEMENT DATA:
Interest income $ 58,668 $ 50,586 $ 40,951 $ 33,021 $ 30,315
Interest expense 25,969 22,324 17,367 12,717 12,199
------------ ---------- ---------- ---------- ----------
Net interest income 32,699 28,262 23,584 20,304 18,116
Provision for loan losses 2,731 1,919 1,241 988 1,621
Other income 7,736 6,532 4,904 4,466 4,212
Other expenses 27,139 22,878 18,127 17,072 15,868
------------ ---------- ---------- ---------- ----------
Income before tax 10,565 9,997 9,120 6,710 4,839
Income tax expense 3,119 2,839 2,752 1,945 1,190
------------ ---------- ---------- ---------- ----------
Net income before minority interest
and cumulative effect 7,446 7,158 6,368 4,765 3,649
Minority interest - - - - 76
------------ ---------- ---------- ---------- ----------
Net income before cumulative effect 7,446 7,158 6,368 4,765 3,573
Cumulative effect - - - - 551
------------ ---------- ---------- ---------- ----------
Net income $ 7,446 $ 7,158 $ 6,368 $ 4,765 $ 4,124
============ ========== ========== ========== ==========
PER SHARE DATA:
Net income before cumulative effect $ 1.03 $ 1.01 $ 0.95 $ 0.76 $ 0.61
Net income - basic 1.03 1.01 0.95 0.76 0.71
Net income - diluted 1.02 1.01 0.95 0.76 0.70
Book value 9.40 8.69 7.76 6.87 5.85
Tangible book value 8.12 7.69 7.40 6.46 5.34
Dividends 0.38 0.32 0.28 0.23 0.23
PROFITABILITY RATIOS:
Net income to average total assets 1.10% 1.21% 1.34% 1.11% 1.02%
Net income to average stockholders'
equity 11.35 12.19 13.01 12.83 12.32
Net interest margin 5.37 5.24 5.43 5.14 4.95
</TABLE>
22
<PAGE>
ITEM 6. SELECTED CONSOLIDATED FINANCIAL INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------------
1997 1996 1995 1994 1993
------------ ------------ ----------- ------------ ------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
LOAN QUALITY RATIOS:
Net charge-offs to total loans 0.48% 0.39% 0.16% 0.25% 0.73%
Reserve for loan losses to total loans
and OREO 1.55 1.60 1.84 1.81 1.98
Nonperforming assets to total loans
and OREO 2.41 1.39 1.08 1.50 1.91
Reserve for loan losses to
nonperforming loans 75.86 135.34 215.91 124.53 129.58
Reserve for loan losses to total
nonperforming assets 64.38 115.59 170.68 120.97 103.49
LIQUIDITY RATIOS:
Loans to total deposits 81.61% 78.36% 68.51% 69.71% 65.15%
Loans to average earnings assets 80.45 84.04 73.53 72.32 67.36
Noninterest-bearing deposits to
total deposits 15.00 15.06 17.56 17.14 14.70
CAPITAL ADEQUACY RATIOS:
Common stockholders' equity to
total assets 9.85% 9.35% 9.78% 9.86% 8.12%
Total stockholders' equity to total assets 9.85 9.35 9.78 9.86 8.12
Dividend payout ratio 36.89 31.68 29.47 30.26 32.39
</TABLE>
23
<PAGE>
ITEM 6. SELECTED CONSOLIDATED FINANCIAL INFORMATION (CONTINUED)
SELECTED QUARTERLY FINANCIAL DATA:
<TABLE>
<CAPTION>
QUARTERS ENDED DECEMBER 31, 1997
------------------------------------------------------------------------
4 3 2 1
--------------- --------------- --------------- ---------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SELECTED INCOME STATEMENT DATA:
Interest income $ 14,990 $ 14,858 $ 14,570 $ 14,231
Net interest income 8,397 8,107 8,125 8,070
Net income 2,037 1,528 2,022 1,859
PER SHARE DATA:
Net income - basic 0.28 0.21 0.28 0.26
Net income - diluted 0.28 0.20 0.28 0.25
Dividends 0.10 0.10 0.10 0.08
</TABLE>
<TABLE>
<CAPTION>
QUARTERS ENDED DECEMBER 31, 1996
------------------------------------------------------------------------
4 3 2 1
--------------- --------------- --------------- ---------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SELECTED INCOME STATEMENT DATA:
Interest income $ 14,204 $ 14,005 $ 11,555 $ 10,822
Net interest income 7,864 7,675 6,679 6,044
Net income 1,549 1,807 1,979 1,823
PER SHARE DATA:
Net income - basic 0.21 0.25 0.28 0.27
Net income - diluted 0.21 0.25 0.28 0.27
Dividends 0.08 0.08 0.08 0.08
</TABLE>
24
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Cautionary Statement Regarding Forward-Looking Information
The Company's 1997 Annual Report contains forward-looking statements
in addition to historical information. The Company cautions that there are
various important factors that could cause actual results to differ materially
from those indicated in the forward-looking statements; accordingly, there can
be no assurance that such indicated result will be realized. These factors
include legislative and regulatory initiatives regarding deregulation and
restructuring of the banking industry; the extent and timing of the entry of
additional competition in the Company's markets; potential business strategies,
including acquisitions or dispositions of assets or internal restructuring, that
may be pursued by the Company; state and Federal banking regulations; changes in
or application of environmental and other laws and regulations to which the
Company is subject; political, legal and economic conditions and developments;
financial market conditions and the results of financing efforts; changes in
commodity prices and interest rates; weather, natural disasters and other
catastrophic events; and other factors discussed in the Company's filings with
the Securities and Exchange Commission, including its Annual Report on Form
10-K. The words "believe", "expect", "anticipate", "project", and similar
expressions signify forward-looking statements. Readers are cautioned not to
place undue reliance on any forward-looking statements made by or on behalf of
the Company. Any such statement speaks only as of the date the statement was
made. The Company undertakes no obligation to update or revise any forward
looking statements. Additional information with respect to factors that may
cause results to differ materially from those contemplated by such forward-
looking statements is included in the Company's current and subsequent filings
with the Securities and Exchange Commission.
GENERAL
The Company's principal asset is its ownership of the Subsidiary
Banks. Accordingly, its results of operations are primarily dependent upon the
results of operations of the Subsidiary Banks. The Subsidiary Banks conduct a
commercial banking business which consists of attracting deposits from the
general public and applying those funds to the origination of commercial,
consumer and real estate loans (including commercial loans collateralized by
real estate). The Subsidiary Banks' profitablity depends primarily on net
interest income, which is the difference between interest income generated from
interest-earning assets (i.e., loans and investments) less the interest expense
incurred on interest-bearing liabilities (i.e., customer deposits and borrowed
funds). Net interest income is affected by the relative amounts of interest-
earning assets and interest-bearing liabilities, and the interest rate paid and
earned on these balances. Net interest income is dependent upon the Subsidiary
Banks' interest rate spread, which is the difference between the average yield
earned on its interest-earning assets and the average rate paid on its interest-
bearing liabilities. When interest-earning assets approximates or exceeds
interest-bearing liabilities, any positive interest rate spread will generate
interest income. The interest rate spread is impacted by interest rates, deposit
flows and loan demand. Additionally, and to a lesser extent, the profitability
of the Subsidiary Banks is affected by such factors as the level of noninterest
income and expenses, the provision for loan losses and the effective tax rate.
Noninterest income consists primarily of service charges on deposit accounts and
other fees and income from the sale of loans and investment securities.
Noninterest expenses consist of compensation and benefits, occupancy-related
expenses, deposit insurance premiums paid to the FDIC and other operating
expenses.
25
<PAGE>
The results of operations for the years ended December 31, 1997, 1996
and 1995 include the operations of Central Bank, First National Bank and M & F
Bank which were acquired in 1996 and accounted for as poolings of interest and
the operations of Irwin Bankcorp, Inc. which was acquired in 1997 and accounted
for as a pooling of interest. The results of operations for the year ended
December 31, 1996 also include the operations of Southland Bank since June 21,
1996, the date of its acquisition, which transaction was accounted for as a
purchase. Because the acquisition of Southland Bank was accounted for as a
purchase transaction, significant amounts of increases in average balances and
income and expense data are attributable to the inclusion of the operations of
Southland Bank from June 21, 1996, whereas no operations of Southland Bank have
been included in the consolidated financial data for 1995.
RESULTS OF OPERATIONS FOR YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
ABC'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 ABC, the ability to generate net interest income is dependent
upon the ability of the Subsidiary Banks 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, Federal Home Loan
Bank borrowings and other short-term borrowings. 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 13 basis points or 2.43% to 5.47% in
1997 as compared to 5.34% in 1996. This increase in net interest margin resulted
from an increase of 23 basis points in average yield earned on interest-earning
assets accompanied by an increase of 6 basis points in average rate paid on
interest-bearing liabilities. Interest earned on loans decreased 6 basis points;
interest earned on Federal funds sold increased 75 basis points; interest earned
on securities, including interest-bearing deposits in banks increased 18 basis
points; while interest paid on interest-bearing liabilities increased 6 basis
points. Net interest income on a taxable-equivalent basis was $33,320,000 in
1997 as compared to $28,790,000 in 1996, representing an increase of $4,530,000
or 15.73%. Net interest income on a taxable-equivalent basis was $28,790,000 in
1996 as compared to $24,063,000 in 1995, representing an increase of $4,727,000
or 19.64%. Taxable-equivalent net interest income of Southland Bank accounted
for $2,782,000 or approximately 59% of the total increase in net interest income
in 1996. Net interest margin decreased 3.61% to 5.34% in 1996 from 5.54% in 1995
on an increase of 24.03% in average interest-earning assets and an increase of
26.62% in average interest-bearing liabilities. Interest earned on average
interest-earning assets decreased 5 basis points to 9.49% in 1996 as compared to
9.54% in 1995, while interest paid on interest-bearing liabilities increased 7
basis points to 4.88% in 1996 compared to 4.81% in 1995.
26
<PAGE>
Average interest-earning assets increased $70,659,000 or 13.11% to
$609,500,000 in 1997 from $538,841,000 in 1996. Average loans increased
$79,225,000; average investments, including interest-bearing deposits in banks
increased $10,704,000; while average Federal funds sold decreased $19,270,000.
The increase in average interest-earning assets was funded by an increase in
average deposits of $73,336,000 or 14.59% to $575,979,000 in 1997 from
$502,643,000 in 1996. By comparison, average interest-earning assets increased
$104,389,000 or 24.03% to $538,841,000 in 1996 from $434,452,000 in 1995.
Average interest-earning assets of Southland Bank accounted for $58,454,000 or
56% of the total increase in average interest-earning assets in 1996. The
increase in average interest-earning assets in 1996 was funded by an increase if
average deposits of $89,008,000, or 21.52%. Average deposits of Southland Bank
accounted for $49,406,000 or approximately 56% of the total increase in average
deposits in 1996. In 1997 and 1996, approximately 14% of the average deposits
were noninterest-bearing deposits.
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 $2,731,000 in 1997, $1,919,000 in 1996 and $1,241,000 in 1995. The
increase in the provision for loan losses in 1997 of $812,000, or 42.31%, as
compared with 1996 was accompanied by an increase of 8.26% in total loans in
1997 and an increase in the allowance for loan losses of 4.87%. The allowance
for loan losses increased $354,000 to $7,627,000 at December 31, 1997 from
$7,273,000 at December 31, 1996. Net charge-offs represented 87.04% of the
provision for loan losses in 1997 as compared to 91.04% in 1996. The loan
charge-offs for 1997 represented .50% of average loans outstanding during the
year as compared to .44% for 1996 and .17% for 1995. At December 31, 1997, the
allowance for loan losses was 1.56% of total loans outstanding as compared to an
allowance for loan losses of 1.61% of total loans outstanding at December 31,
1996 and 1.84% of total loans outstanding at December 31, 1995. The allowance
for loan losses increased $1,383,000 to $7,273,000 in 1996 from $5,890,000 in
1995. The addition of $1,211,000 to the allowance for loan losses upon
acquisition of Southland Bank accounted for the major portion of the increase in
the allowance. 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 consolidated loan portfolio.
Although management believes that the consolidated allowance for loan
losses was adequate to cover losses in the consolidated loan portfolio at
December 31, 1997, economic conditions have developed in the first quarter of
1998 that will require additions of $850,000 to $1,300,000 to the allowance for
loan losses to cover possible losses associated with certain loans. Management
is carefully monitoring the economic conditions, the collateral associated with
selected loans and the ability of the customers to repay specific loans in
accordance with the negotiated loan agreements. The additions to the allowance
for loan losses required to cover potential losses will be recorded on the books
of the related subsidiary banks in the first quarter of 1998.
27
<PAGE>
Average total assets increased $86,204,000 or 14.61% to $676,581,000
in 1997 as compared to $590,377,000 in 1996. The increase in average total
assets was accompanied by an increase in average deposits of $73,336,000 or
14.59%. Average total assets increased $113,588,000 or 23.82% to $590,377,000 in
1996 as compared to $476,789,000 in 1995. Average total assets of Southland Bank
accounted for $66,295,000 or approximately 58% of the increase in average total
assets. The increase in average total assets was accompanied by an increase in
average total deposits of $89,008,000 or 21.52% to $502,643,000 in 1996 from
$413,635,000 in 1995. Average total deposits of Southland Bank accounted for
$49,406,000 or approximately 56% of the increase in average total deposits
ITEM 7a. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed only to U.S. Dollar interest rate changes and,
accordingly, the Company manages exposure by considering possible changes in
net interest margin. The Company does not have any trading instruments, nor
does it classify any portion of its investment portfolio as held for trading.
The Company does not engage in any hedging activities or invest in any
derivative instruments with a higher degree of risk than mortgage backed
securities, which are commonly pass through securities. Finally, the Company has
no exposure to foreign currency exchange rate risk, commodity price risk or
other market risks.
Interest rates play a major part in the net interest income of a
financial institution. The sensitivity to interest rate changes is known as
"interest rate risk." The repricing of interest-earning assets and interest-
bearing liabilities can influence the changes in net interest income. As part of
the Company's asset/liability management program, the timing of repriced assets
and liabilities is referred to as Gap management. It is the policy of the
Company to maintain a Gap ratio in the one-year time horizon of .80 to 1.20. As
indicated by the Gap analysis included in this annual report, the Company is
somewhat liability sensitive in relation to changes in market interest rates.
Being liability sensitive would result in net interest income decreasing in a
rising interest rate environment and increasing in a declining interest rate
environment. See "Asset/Liability Management" included in SELECTED STATISTICAL
INFORMATION OF ABC BANCORP.
The Company uses simulation analysis to monitor changes in net
interest income due to changes in market interest rates. The simulation of
rising, declining and flat interest rate scenarios allow management to monitor
and adjust interest rate sensitivity to minimize the impact of market interest
rate swings. The analysis of the impact on net interest income over a twelve-
month period is subjected to a gradual 200 basis point increase or decrease in
market rates on net interest income and is monitored on a quarterly basis. The
most recent simulation model projects that net interest income would increase
6.09% if interest rates rise gradually over the next year. On the other hand,
the model projects that net interest income would decline by 6.19% if interest
rates decline gradually over the next year.
28
<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,
-----------------------------------------------------------------------------------------------------
1997 1996 1995
------------------------------- ------------------------------- -----------------------------------
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)
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Interest-earning assets:
Loans, net of unearned
interest $ 475,047 $ 50,502 10.63% $ 395,822 $ 42,322 10.69% $ 308,405 $ 33,547 10.88 %
Investment securities:
Taxable 104,161 6,511 6.25 99,734 6,100 6.12 82,742 4,839 5.85
Nontaxable 22,872 1,826 7.98 20,559 1,553 7.55 15,377 1,410 9.17
Interest-bearing deposits
in banks 3,964 232 5.85 - - - - - -
Federal funds sold 3,456 199 5.76 22,726 1,139 5.01 27,928 1,634 5.85
---------- --------- ---------- --------- ---------- ---------
Total interest-earning
assets 609,500 59,270 9.72 538,841 51,114 9.49 434,452 41,430 9.54
---------- --------- ---------- --------- ---------- ---------
Noninterest-earning assets:
Cash 28,620 25,336 21,355
Allowance for loan losses (7,458) (6,776) (5,650)
Unrealized gain (loss) on
available for sale
securities (121) (338) (194)
Other assets 46,040 33,314 26,826
---------- ---------- ----------
Total noninterest-earning
assets 67,081 51,536 42,337
---------- ---------- ----------
Total assets $ 676,581 $ 590,377 $ 476,789
========== ========== ==========
</TABLE>
29
<PAGE>
AVERAGE BALANCES AND NET INCOME ANALYSIS (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------------------
1997 1996
-------------------------------------- -------------------------------------
INTEREST AVERAGE INTEREST AVERAGE
AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD/
BALANCE EXPENSE RATE PAID BALANCE EXPENSE RATE PAID
--------- -------- --------- --------- -------- ----------
(DOLLARS IN THOUSANDS)
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
LIABILITIES AND
STOCKHOLDERS' EQUITY
Interest-bearing liabilities:
Savings and interest-bearing
demand deposits $ 166,877 $ 5,089 3.05 % $ 149,503 $ 4,558 3.05%
Time deposits 330,621 19,139 5.79 283,054 16,377 5.79
Other short-term borrowings 2,804 154 5.49 5,713 221 3.87
Other borrowings 25,080 1,568 6.25 19,113 1,168 6.11
------------ ----------- ---------- -----------
Total interest-bearing
liabilities 525,382 25,950 4.94 457,383 22,324 4.88
------------ ----------- ---------- -----------
Noninterest-bearing liabilities
and stockholders' equity:
Demand deposits 78,481 70,086
Other liabilities 7,118 4,168
Stockholders' equity 65,600 58,740
------------ ----------
Total noninterest-bearing
liabilities and
stockholders' equity 151,199 132,994
------------ ----------
Total liabilities and
stockholders' equity $ 676,581 $ 590,377
============ ==========
Interest rate spread 4.78 % 4.61%
========== ==========
Net interest income $ 33,320 $ 28,790
=========== ==========
Net interest margin 5.47 % 5.34%
========== ==========
</TABLE>
30
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1995
----------------------------------
INTEREST AVERAGE
AVERAGE INCOME/ YIELD/
BALANCE EXPENSE RATE
PAID
-------- -------- -------
(DOLLARS IN THOUSANDS)
----------------------------------
<S> <C> <C> <C>
LIABILITIES AND
STOCKHOLDERS' EQUITY
Interest-bearing liabilities:
Savings and interest-bearing
demand deposits $ 124,638 $ 3,843 3.08%
Time deposits 226,688 12,912 5.70
Other short-term borrowings 5,560 301 5.41
Other borrowings 4,332 311 7.18
---------- -----------
Total interest-bearing
liabilities 361,218 17,367 4.81
---------- -----------
Noninterest-bearing liabilities
and stockholders' equity:
Demand deposits 62,309
Other liabilities 4,321
Stockholders' equity 48,941
----------
Total noninterest-bearing
liabilities and
stockholders' equity 115,571
----------
Total liabilities and
stockholders' equity $ 476,789
==========
Interest rate spread 4.73%
========
Net interest income $ 24,063
===========
Net interest margin 5.54%
========
</TABLE>
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,
---------------------------------------------------------------------------
1997 VS. 1996 1996 VS. 1995
---------------------------------------------------------------------------
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 $ 8,180 $ (291) $ 8,471 $ 8,775 $ (734) $ 9,509
Interest on securities:
Taxable 411 140 271 1,261 267 994
Nontaxable 273 98 175 143 (332) 475
Interest-bearing deposits in banks 232 - 232 - - -
Interest on Federal funds (940) 26 (966) (495) (191) (304)
-------- ------- --------- -------- ------- ---------
Total interest income 8,156 (27) 8,183 9,684 (990) 10,674
-------- ------- --------- -------- ------- ---------
Expense from interest-bearing liabilities:
Interest on savings and interest-
bearing demand deposits 531 1 530 715 (52) 767
Interest on time deposits 2,762 10 2,752 3,465 254 3,211
Interest on short-term borrowings (67) 46 (113) (80) (88) 8
Interest on other borrowings 400 35 365 857 (204) 1,061
-------- ------- --------- -------- ------- ---------
Total interest expense 3,626 92 3,534 4,957 (90) 5,047
-------- ------- --------- -------- ------- ---------
Net interest income $ 4,530 $ (119) $ 4,649 $ 4,727 $ (900) $ 5,627
======== ======= ========= ======== ======= =========
</TABLE>
NONINTEREST INCOME
The most significant increase in noninterest income were increases in
service charges on deposit accounts and other income. The increase in service
charges on deposit accounts resulted from on increase in average deposits of
$73,336,000, of which $47,862,000 was attributable to the average deposits of
Southland Bank and $12,562,000 was attributable to the average deposits of the
Douglas branch of Security Bank. The increase in service charges on deposit
accounts of $903,000 (23.64%), in 1996 over 1995 resulted from an increase in
average deposits of $89,008,000, of which $49,406,000 was attributable to the
average deposits of Southland Bank. Total other income increased $443,000 in
1997 over 1996, of which $270,000 was attributable to the Company starting a
mortgage origination function and $127,000 was attributable to the sale of
servicing rights in one of the subsidiary banks. Total other income increased
$647,000 in 1996 over 1995, of which $505,000 was attributable to other income
of Southland Bank.
31
<PAGE>
NONINTEREST INCOME (CONTINUED)
Following is a comparison of noninterest income for 1997, 1996 and 1995.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------
1997 1996 1995
----------------- ----------------- -----------------
(DOLLARS IN THOUSANDS)
------------------------------------------------------------
<S> <C> <C> <C>
Service charges on deposit accounts $ 5,509 $ 4,722 $ 3,819
Other service charges, commissions and fees 474 500 422
Other income 1,753 1,310 663
----------------- ----------------- -----------------
$ 7,736 $ 6,532 $ 4,904
================= ================= =================
</TABLE>
NONINTEREST EXPENSE
Salaries and employee benefits increased $2,388,000 or 21.03% in 1997 over
1996, of which $875,000 was attributable to Southland Bank and $226,000 was
attributable to the acquisition of the Douglas branch of Security Bank. The
remaining increase in salaries and employee benefits resulted from normal
increases in salaries and bonuses and the addition of several employees by the
parent company, including three senior executives. Equipment and occupancy
expense increased $795,000 or 25.13% in 1997 over 1996, of which $311,000 was
attributable to Southland Bank and $50,000 was attributable to the Douglas
branch of Security Bank. The remaining increase was due to normal expansion
within its banking subsidiaries. Amortization of intangible assets increased
$257,000 in 1997 over 1996. The entire amount of the increase resulted from the
amortization of the excess of purchase price over net book value of assets
acquired upon the acquisitions of Southland Bank and the Douglas branch which
were accounted for as purchase transactions. Merger and acquisition expense of
$406,000 in 1997 resulted from the acquisition of one financial institutions and
one branch acquisition during 1997. All other noninterest expense increased
$1,123,000 in 1997 over 1996, of which $770,000 was attributable to Southland
Bank and $74,000 was attributable to Douglas. Salaries and employee benefits
increased $2,154,000 or 23.41% in 1996 over 1995, of which $1,202,000 was
attributable to Southland Bank. The remaining increase in salaries and employee
benefits resulted from normal increases in salaries and bonuses and the addition
of several employees by the parent company, including three senior executives.
Equipment and occupancy expense increased $500,000 or 18.78% in 1996 over 1995,
of which $366,000 was attributable to Southland Bank. Amortization of
intangible assets increased $177,000 in 1996 over 1995. The entire amount of
the increase resulted from the amortization of the excess of purchase price over
net book value of assets acquired upon the acquisition of Southland Bank which
was accounted for as a purchase transaction. Merger and acquisition expense of
$708,000 in 1996 resulted from the acquisition of four financial institutions
during 1996. Stationery and supplies expense increased $225,000 in 1996 over
1995, of which $81,000 was attributable to Southland Bank. Also contributing to
the increase in stationery and supplies expense was the implementation of an
innovative system for rendering customer account statements known as an "image
item processing system". All other noninterest expense increased $987,000 in
1996 over 1995, of which $526,000 was attributable to Southland Bank. Following
is an analysis of noninterest expense for 1997, 1996 and 1995.
32
<PAGE>
NONINTEREST EXPENSE (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------
1997 1996 1995
----------------- ----------------- -----------------
(DOLLARS IN THOUSANDS)
------------------------------------------------------------
<S> <C> <C> <C>
Salaries and employee benefits $ 13,742 $ 11,354 $ 9,200
Equipment and occupancy 3,958 3,163 2,663
Merger and acquisition expense 406 708 -
Amortization of intangible assets 744 487 310
Data processing fees 528 586 551
Directors fees 555 562 530
FDIC premiums 111 378 528
Stationery and supplies expense 560 616 391
Other expense 6,535 5,024 3,954
----------------- ----------------- -----------------
$ 27,139 $ 22,878 $ 18,127
================= ================= =================
</TABLE>
ASSET/LIABILITY MANAGEMENT
A principal objective of 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 ABC's Asset and
Liability Committee (the "ALCO Committee") which establishes policies and
monitors results to control interest rate sensitivity.
As part of ABC's interest rate risk management policy, the ALCO Committee
examines the extent to which its assets and liabilities are "interest rate-
sensitive" and monitors its interest rate-sensitivity "gap". An asset or
liability is considered to be interest rate sensitive if it will reprice or
mature within the time period analyzed, usually one year or less. The interest
rate-sensitivity gap is the difference between the interest-earning assets and
interest-bearing liabilities scheduled to mature or reprice within such time
period. A gap is considered positive when the amount of interest rate-sensitive
assets exceeds the amount of interest rate-sensitive liabilities. A gap is
considered negative when the amount of interest rate-sensitive liabilities
exceeds the interest rate-sensitive assets. During a period of rising interest
rates, a negative gap would tend to adversely affect net interest income, while
a positive gap would tend to result in an increase in net interest income.
During a period of falling interest rates, a negative gap would tend to result
in an increase in net interest income, while a positive gap would tend to
adversely affect net interest income. If ABC's assets and liabilities were
equally flexible and moved concurrently, the impact of any increase or decrease
in interest rates on net interest income would be minimal.
33
<PAGE>
ASSET/LIABILITY MANAGEMENT (CONTINUED)
A simple interest rate "gap" analysis by itself may not be an accurate
indicator of how net interest income will be affected by changes in interest
rates. Accordingly, the ALCO Committee also evaluates how the repayment of
particular assets and liabilities is impacted by changes in interest rates.
Income associated with interest-earning assets and costs associated with
interest-bearing liabilities may not be affected uniformly by changes in
interest rates. In addition, the magnitude and duration of changes in interest
rates may have a significant impact on net interest income. For example,
although certain assets and liabilities may have similar maturities or periods
of repricing, they may not react identically to changes in market interest
rates. Interest rates on certain types of assets and liabilities fluctuate in
advance of changes in general market interest rates, while interest rates on
other types may lag behind changes in general market rates. In addition, certain
assets, such as adjustable rate mortgage loans, have features (generally
referred to as "interest rate caps") which limit changes in interest rates on a
short-term basis and over the life of the asset. In the event of a change in
interest rates, prepayment and early withdrawal levels also could deviate
significantly from those assumed in calculating the interest-rate gap. The
ability of many borrowers to service their debts also may decrease in the event
of an interest-rate increase.
The following table sets forth the distribution of the repricing of ABC's
earning assets and interest-bearing liabilities as of December 31, 1997, the
interest rate sensitivity gap (i.e., interest rate sensitive assets divided by
interest rate sensitivity liabilities), the cumulative interest rate sensitivity
gap ratio (i.e., interest rate sensitive assets divided by interest rate
sensitive 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 ABC's
customers. In addition, various assets and liabilities indicated as repricing
within the same period may in fact reprice at different times within such period
and at different rates.
34
<PAGE>
<TABLE>
<CAPTION>
AT DECEMBER 31, 1997
-----------------------------------------------------------------------
MATURING OR REPRICING WITHIN
-----------------------------------------------------------------------
ZERO TO THREE
THREE MONTHS TO ONE TO OVER
MONTHS ONE YEAR THREE YEARS THREE YEARS TOTAL
------------- ------------ ------------- ------------- ----------
(DOLLARS IN THOUSANDS)
-----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
EARNING ASSETS:
Interest-bearing deposits in banks $ 2,288 $ - $ - $ - $ 2,288
Federal funds sold 890 - - - 890
Investment securities 8,730 19,729 31,280 63,480 123,219
Loans 218,770 55,496 96,530 119,448 490,244
------------- ------------ ------------- ------------- ----------
230,678 75,225 127,810 182,928 616,641
------------- ------------ ------------- ------------- ----------
INTEREST-BEARING LIABILITIES:
Interest-bearing demand deposits/(1)/ - 40,830 87,464 - 128,294
Savings/(1)/ - - 46,715 - 46,715
Certificates less than $100,000 75,826 130,006 36,825 6,999 249,656
Certificates, $100,000 and over 28,958 42,852 11,965 2,162 85,937
Other short-term borrowings 660 - - - 660
Other borrowings 15,000 - - 400 15,400
------------- ------------ ------------- ------------- ----------
120,444 213,688 182,969 9,561 526,662
------------- ------------ ------------- ------------- ----------
INTEREST RATE SENSITIVITY GAP $ 110,234 $ (138,463) $ (55,159) $ 173,367 $ 89,979
============= ============ ============= ============= ==========
CUMULATIVE INTEREST RATE SENSITIVITY GAP $ 110,234 $ (28,229) $ (83,388) $ 89,979
============= ============ ============= ===========
INTEREST RATE SENSITIVITY GAP RATIO 1.92 0.35 0.70 19.13
============= ============ ============= ===========
CUMULATIVE INTEREST RATE SENSITIVITY GAP RATIO 1.92 0.92 0.84 1.17
============= ============ ============= ===========
</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 Three Years" category. It has
also found that the money-market checking deposits reprice between three
months to one year, on the average.
35
<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 56% 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, 23% of the investment portfolio matures within one year.
TYPES OF INVESTMENTS
The amortized cost and fair value of investments in securities at December
31, 1997 and 1996 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, 1997:
U. S. GOVERNMENT AND AGENCY SECURITIES $ 79,636 $ 287 $ (101) $ 79,822
MORTGAGE-BACKED SECURITIES 6,984 120 (19) 7,085
STATE AND MUNICIPAL SECURITIES 5,660 174 - 5,834
OTHER SECURITIES 525 - (67) 458
------------- ------------- ------------- -------------
$ 92,805 $ 581 $ (187) $ 93,199
============= ============= ============= =============
December 31, 1996:
U. S. Government and agency securities $ 84,744 $ 251 $ (468) $ 84,527
Mortgage-backed securities 12,555 135 (52) 12,638
State and municipal securities 5,529 127 - 5,656
Other securities 525 - (70) 455
------------- ------------- ------------- -------------
$ 103,353 $ 513 $ (590) $ 103,276
============= ============= ============= =============
SECURITIES HELD TO MATURITY
DECEMBER 31, 1997:
U. S. GOVERNMENT AND AGENCY SECURITIES $ 8,995 $ 1 $ (10) $ 8,986
MORTGAGE-BACKED SECURITIES 2,951 27 (10) 2,968
STATE AND MUNICIPAL SECURITIES 18,074 557 (8) 18,623
------------- ------------- ------------- -------------
$ 30,020 $ 585 $ (28) $ 30,577
============= ============= ============= =============
December 31, 1996:
U. S. Government and agency securities $ 11,238 $ - $ (200) $ 11,038
Mortgage-backed securities 4,326 27 (44) 4,309
State and municipal securities 16,426 493 (28) 16,891
------------- ------------- ------------- -------------
$ 31,990 $ 520 $ (272) $ 32,238
============= ============= ============= =============
</TABLE>
36
<PAGE>
MATURITIES
The amounts of investments in securities in each category as of
December 31, 1997 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 $ 24,867 5.83% $ 2,715 8.77%
After one year through five years 64,946 6.29 9,192 7.25
After five years through ten years 9,392 6.46 9,462 7.58
After ten years 106 6.04 2,539 7.37
--------------- -------------- --------------- ---------
$ 99,311 6.19% $ 23,908 7.57%
=============== ============== =============== =========
</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%.
37
<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
residential and commercial real estate mortgages, which constituted
approximately 48% of the Company's loan portfolio as of December 31, 1997. The
amount of loans outstanding at the indicated dates is shown in the following
table according to type of loans.
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------------------------------------
1997 1996 1995 1994 1993
----------- ------------ ------------- ------------ ----------
(DOLLARS IN THOUSANDS)
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Commercial and financial $ 72,171 $ 69,772 $ 48,031 $ 40,185 $ 32,784
Agricultural 41,882 35,525 22,716 24,304 15,667
Real estate - construction 13,117 13,612 3,756 3,886 6,143
Real estate - mortgage, farmland 55,245 52,978 48,411 42,458 36,687
Real estate - mortgage, commercial 108,339 89,708 61,806 50,461 39,772
Real estate - mortgage, residential 127,767 121,448 74,671 69,129 65,918
Consumer instalment loans 68,959 67,572 58,615 53,419 47,048
Other 2,764 2,229 1,465 1,733 2,461
------------ ------------ ---------- ---------- ----------
490,244 452,844 319,471 285,575 246,480
Less reserve for possible loan losses 7,627 7,273 5,890 5,168 4,889
----------- ------------ ---------- ---------- ----------
Loans, net $ 482,617 $ 445,571 $ 313,581 $ 280,407 $ 241,591
============ ============ ========== ========== ==========
</TABLE>
MATURITIES AND SENSITIVITY TO CHANGES IN INTEREST RATES
Total loans as of December 31, 1997 are shown in the following table
according to maturity or repricing opportunities (1) one year or less, (2) after
one year through three years, and (3) after three years.
<TABLE>
<CAPTION>
(DOLLARS IN
THOUSANDS)
-----------------
<S> <C>
MATURITY OR REPRICING WITHIN:
One year or less $ 274,266
After one year through three years 96,530
After three years 119,448
-----------------
$ 490,244
=================
</TABLE>
38
<PAGE>
The following table summarizes loans at December 31, 1997 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 $ 213,385
Floating or adjustable interest rates 1,593
-----------------
$ 214,978
=================
</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
A loan is placed on nonaccrual status when, in management's judgment,
the collection of the interest income appears doubtful. Interest receivable that
has been accrued in prior years and is subsequently determined to have doubtful
collectibility is charged to the allowance for possible loan losses. Interest on
loans that are classified as nonaccrual is recognized when received. Past due
loans are loans whose principal or interest is past due 90 days or more. In some
cases, where borrowers are experiencing financial difficulties, loans may be
restructured to provide terms significantly different from the original
contractual terms.
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------------------------------
1997 1996 1995 1994 1993
----------- --------- --------- ---------- --------
(DOLLARS IN THOUSANDS)
-----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Loans accounted for on a nonaccrual basis $ 10,101 $ 4,977 $ 2,271 $ 3,518 $ 3,260
Instalment loans and term loans contractually 59 397 457 274 513
past due ninety days or more as to interest
or principal payments and still accruing
Loans, the terms of which have been renegotiated - - - 358 -
to provide a reduction or deferral of interest
or principal because of deterioration in the
financial position of the borrower
Loans now current about which there are serious - - - - -
doubts as to the ability of the borrower
to comply with present loan repayment terms
</TABLE>
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.
39
<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 $7,627,000 at December 31,
1997, representing 1.56% of year end total loans outstanding, compared with
$7,273,000 at December 31, 1996, which represented 1.61% 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.
ALLOCATION OF THE ALLOWANCE FOR LOAN LOSSES
The following table sets forth the breakdown of the allowance for loan
losses by loan category for the periods indicated. Management believes the
allowance can be allocated only on an approximate basis. The allocation of the
allowance to each category is not necessarily indicative of future losses and
does not restrict the use of the allowance to absorb losses in any other
category.
<TABLE>
<CAPTION>
AT DECEMBER 31,
------------------------------------------------------------------------------------------
1997 1996 1995
---------------------------- ----------------------------- --------------------------
PERCENT OF PERCENT OF PERCENT OF
LOANS IN LOANS IN LOANS IN
CATEGORY CATEGORY CATEGORY
TO TOTAL TO TOTAL TO TOTAL
AMOUNT LOANS AMOUNT LOANS AMOUNT LOANS
----------- ------------ ------------- -------------- ------------ -----------
(DOLLARS IN THOUSANDS)
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Commercial, financial,
industrial and agricultural $ 1,792 23 % $ 1,661 23% $ 1,364 22%
Real estate 3,274 62 2,928 62 2,032 59
Consumer 1,112 15 1,446 15 1,206 19
Unallocated 1,449 - 1,238 - 1,288 -
------------ ------------- ----------- -------------- ------------ -----------
$ 7,627 100 % $ 7,273 100% $ 5,890 100%
============ ============= =========== ============== ============ ===========
</TABLE>
40
<PAGE>
The following table presents an analysis of the Company's loan loss
experience for the periods indicated:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------------------------------------------
1997 1996 1995 1994 1993
-------------- ----------- ----------- ------------ ----------
(DOLLARS IN THOUSANDS)
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Average amount of loans outstanding $ 475,047 $ 395,822 $ 308,405 $ 271,970 $ 243,607
============== =========== =========== =========== ==========
Balance of reserve for possible loan losses at
beginning of period $ 7,273 $ 5,890 $ 5,169 $ 4,889 $ 5,075
-------------- ----------- ----------- ----------- ----------
Charge-offs:
Commercial, financial and agricultural (759) (768) (309) (479) (573)
Real estate (1,981) (1,242) (108) (338) (1,883)
Consumer (383) (279) (573) (481) (518)
Recoveries:
Commercial, financial and agricultural 168 89 116 100 336
Real estate 512 275 128 265 556
Consumer 66 178 226 225 275
-------------- ------------ ----------- ----------- ----------
Net charge-offs (2,377) (1,747) (520) (708) (1,807)
-------------- ------------ ----------- ----------- ----------
Additions to reserve charged to operating expenses 2,731 1,919 1,241 988 1,621
-------------- ------------ ----------- ----------- ----------
Allowance for loan losses of acquired subsidiary - 1,211 - - -
-------------- ------------ ----------- ----------- ----------
Balance of reserve for possible loan losses $ 7,627 $ 7,273 $ 5,890 $ 5,169 $ 4,889
============== ============ =========== =========== ==========
Ratio of net loan charge-offs to average loans .50% .44% .17% .26% .74%
============== ============ =========== =========== ==========
</TABLE>
41
<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,
--------------------------------------------------------------------------
1997 1996
----------------------------------- -----------------------------------
AMOUNT RATE AMOUNT RATE
----------------- --------------- ----------------- ---------------
(DOLLARS IN THOUSANDS)
--------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Noninterest-bearing demand deposits $ 78,481 -% $ 70,086 -%
Interest-bearing demand and savings deposits 166,877 3.05 149,503 3.05
Time deposits 330,621 5.79 283,054 5.79
----------------- -----------------
Total deposits $ 575,979 $ 502,643
================= =================
</TABLE>
ABC has a large, stable base of time deposits with little or no
dependence on volatile deposits of $100,000 or more. The time deposits are
principally certificates of deposit and individual retirement accounts obtained
for individual customers.
The amounts of time certificates of deposit issued in amounts of
$100,000 or more as of December 31, 1997, 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 $ 28,958
Over three through twelve months 42,852
Over twelve months 14,127
---------------
Total $ 85,937
===============
</TABLE>
42
<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,
---------------------------------------------------------------
1997 1996 1995
------------------ ------------------- --------------
<S> <C> <C> <C>
Return on assets (1) 1.10% 1.21% 1.34%
Return on equity (2) 11.35 12.19 13.01
Dividends payout ratio (3) 36.89 31.68 29.47
Equity to assets ratio (4) 9.70 9.95 10.27
</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.
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 ABC and the Subsidiary Banks to meet
those needs. ABC and the Subsidiary 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. In addition, the Subsidiary Banks
maintain relationships with correspondent banks which could provide funds to
them on short notice, if needed.
The liquidity and capital resources of ABC and the Subsidiary Banks
are monitored on a periodic basis by state and Federal regulatory authorities.
At December 31, 1997, the Subsidiary Banks' short-term investments were adequate
to cover any reasonable anticipated immediate need for funds. During 1997, ABC
increased its capital $110,000 by the exercise of options by shareholders of
pooled subsidiaries prior to merger. It also increased its capital by retaining
net earnings of $4,781,000 after payment of dividends. After recording an
increase in capital of $299,000 for unrealized gains on securities available for
sale, net of taxes, total capital increased $5,183,000 during 1997. At December
31, 1997, total capital of ABC amounted to $68,153,000. ABC and the Subsidiary
Banks are aware of no events or trends likely to result in a material change in
their liquidity.
43
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
At December 31, 1997, ABC had no binding commitments for capital
expenditures. However, management estimates that approximately $600,000 will be
required for completion of banking facilities in 1998.
In accordance with risk capital guidelines issued by the Federal
Reserve Board, ABC is required to maintain a minimum standard of total capital
to weighted risk assets of 8%. Additionally, all member banks must maintain
"core" or "Tier 1" capital of at least 4% of total assets ("leverage ratio").
Member banks operating at or near the 4% capital level are expected to have
well-diversified risks, including no undue interest rate risk exposure,
excellent control systems, good earnings, high asset quality, and well managed
on- and off-balance sheet activities; and, in general, be considered strong
banking organizations with a composite 1 rating under the CAMEL rating system of
banks. For all but the most highly rated banks meeting the above conditions, the
minimum leverage ratio is to be 4% plus an additional 100 to 200 basis points.
The following table summarizes the regulatory capital levels of the
Company at December 31, 1997.
<TABLE>
<CAPTION>
ACTUAL REQUIRED EXCESS
------------------------------- --------------------------------- -----------------------------
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
------------- --------------- -------------- ---------------- -----------------------------
(DOLLARS IN THOUSANDS)
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Leverage capital $ 58,137 8.60% $ 27,039 4.00% $ 31,098 4.60%
Risk-based capital:
Core capital 58,137 12.07 19,267 4.00 38,870 8.07
Total capital 64,178 13.32 38,534 8.00 25,644 5.32
</TABLE>
Each Bank also met its individual regulatory capital requirements at
December 31, 1997.
YEAR 2000 ISSUE COSTS
Based on a preliminary study by management of ABC, ABC expects to
incur approximately $500,000, of which $300,000 has been budgeted for 1998 and
$200,000 for 1999, to modify its information systems appropriately to accurately
process information in the year 2000 and beyond. ABC continues to evaluate
appropriate courses of corrective action, including replacement of certain
systems whose associated costs would be recorded as assets and amortized.
Management expects that the costs to convert ABC's information systems to year
2000 compliance will not have a material impact on ABC's consolidated financial
statements.
44
<PAGE>
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,
1997 and 1996.
<TABLE>
<CAPTION>
1997 1996
--------------- ---------------
(DOLLARS IN THOUSANDS)
----------------------------------
<S> <C> <C>
Commitments to extend credit $ 81,682 $ 64,904
Credit card commitments 7,153 3,077
Standby letters of credit 1,584 1,436
--------------- ---------------
$ 90,419 $ 69,417
=============== ===============
</TABLE>
IMPACT OF INFLATION
The consolidated financial statements and related consolidated
financial data presented herein have been prepared in accordance with generally
accepted accounting principles and practices within the banking industry which
require the measurement of financial position and operating results in terms of
historical dollars without considering the changes in the relative purchasing
power of money over time due to inflation. Unlike most industrial companies,
virtually all the assets and liabilities of a financial institution are monetary
in nature. As a result, interest rates have a more significant impact on a
financial institution's performance than the effects of general levels of
inflation.
45
<PAGE>
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-42 of this Annual Report on
Form 10-K:
Consolidated Balance Sheets - December 31, 1997 and 1996
Consolidated Statements of Income - Years ended December 31, 1997, 1996 and
1995
Consolidated Statements of Stockholders' Equity - Years ended December 31,
1997, 1996 and 1995
Consolidated Statements of Cash Flows - Years ended December 31, 1997, 1996
and 1995
Notes to Consolidated Financial Statements.
ITEM 9. DISAGREEMENT ON ACCOUNTING AND FINANCIAL DISCLOSURE
During 1997 and 1996, 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.
46
<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 4.5 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.
47
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(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, 1997 and
1996
(ii) Consolidated Statements of Income - Years ended
December 31, 1997, 1996 and 1995
(iii) Consolidated Statements of Stockholders' Equity -
Years ended December 31, 1997, 1996 and 1995
(iv) Consolidated Statements of Cash Flows - Years ended
December 31, 1997, 1996 and 1995
(v) Notes to Consolidated Financial Statements
(b) ABC Bancorp (Parent Company Only):
Parent Company only financial information has been included
in Note 16 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.
48
<PAGE>
3. Exhibits required by Item 601 of Regulation S-K:
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
------------- ------------------------------------------------------
3.1 Articles of Incorporation of ABC, as amended
(incorporated by reference to Exhibit 2.1 to ABC's
Regulation A Offering Statement on Form 1-A (File No.
24A-2630) filed August 14, 1987).
3.2 Amendment to Amended Articles of Incorporation dated
May 26, 1995 (incorporated by reference to Exhibit
3.1.1 to ABC's Form 10-K filed March 28, 1996).
3.3 Amendment to Amended Articles of Incorporation (filed
as Exhibit 4.3 to ABC's Registration on Form S-4
(Registration No. 333-08301), filed with the
Commission on July 17, 1996 and incorporated herein by
reference).
3.4 Bylaws of ABC, as amended (incorporated by reference
to Exhibit 2.2 to ABC's Regulation A Offering
Statement on Form 1-A (File No. 24A-2630) filed August
14, 1987.
3.5 Form of Articles of Amendment to the Articles of
Incorporation, filed herewith electronically.
3.6 Form of Amendment to Bylaws, filed herewith
electronically.
10.1 1985 Incentive Stock Option Plan (filed as Exhibit 5.1
to ABC'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 ABC'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 ABC'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 ABC'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 ABC'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 ABC's Annual Report
on Form 10-KSB (File Number 2-71257), filed herewith
with the Commission on March 27, 1989 and incorporated
herein by reference.
49
<PAGE>
EXHIBIT NO DESCRIPTION
------------- ------------------------------------------------------
10.7 1992 Incentive Stock Option Plan and Option
Agreement for K. J. Hunnicutt (filed as Exhibit 10.7
to ABC's Annual Report on Form 10-KSB (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 ABC's Annual Report on Form 10-KSB (File
Number 0-016181), 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
ABC's Annual Report on Form 10-KSB (File Number 0-
016181), filed with the Commission on March 30, 1995
and incorporated herein by reference).
10.10 Agreement and Plan of Merger by and between ABC and
Southland Bancorporation dated as of December 18, 1995
(filed as Exhibit 10.10 to ABC's Annual Report on Form
10-K (File No. 0-16181), filed with the Commission on
March 28, 1996 and incorporated herein by reference),
and Amendment No. 1 thereto dated as of April 16,1996
(filed as part of Appendix A to Amendment No. 1 to
ABC's Registration on Form S-4 (Registration No. 333-
2387), filed with the Commission on May 21, 1996 and
incorporated herein by reference).
10.11 Agreement and Plan of Merger by and between ABC and
Central Bankshares, Inc., dated as of December 29,
1995 (filed as Exhibit 10.11 to ABC's Annual Report on
Form 10-K (File No. 0-16181), filed with the
Commission on March 28, 1996 and incorporated herein
by reference), and Amendment No. 1 thereto dated as
April 26, 1996 (filed as part of Appendix A to ABC's
Registration on Form S-4 (Registration No. 333-05861),
filed with the Commission on June 12, 1996 and
incorporated herein by reference).
10.12 Agreement and Plan of Merger by and between ABC and
First National Financial Corporation dated as of April
15, 1996 (filed as Exhibit 10.12 to Amendment No. 1 to
ABC's Registration on Form S-4 (Registration No. 333-
2387), filed with the Commission on May 21, 1996 and
incorporated herein by reference).
10.13 Agreement and Plan of Merger by and between ABC and M
& F Financial Corporation dated as of September 12,
1996 (filed as Appendix A to ABC's Registration on
Form S-4 (Registration No. 333-14649), filed with the
Commission on October 23, 1996 and incorporated herein
by reference).
10.15 Form of Purchase and Assumption Agreement by and
between NationsBank, N.A. (South) and ABC Bancorp
dated as of February 26, 1997 and filed herewith
electronically.
50
<PAGE>
EXHIBIT NO DESCRIPTION
------------ ------------------------------------------------------
10.16 Form of Agreement and Plan of Merger by and between
ABC Bancorp and Irwin Bankcorp, Inc. dated as of May
15, 1997, filed herewith electronically.
10.17 Form of Omnibus Stock Ownership and Long-term
Incentive Plan, filed herewith electronically.
10.18 Form of Rights Agreement between ABC Bancorp and
SunTrust Bank dated as of February 17, 1998, filed
herewith electronically.
21.1 Schedule of subsidiaries of ABC Bancorp.
24.1 Power of Attorney relating to this Form 10-K is set
forth on the signature pages of this Form 10-K.
27 Financial Data Schedule.
(b) No Current Reports on Form 8-K have been filed during the quarterly
period ended December 31, 1997.
(c) See Item 14(a).
(d) See Item 14(a).
51
<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.
<TABLE>
<CAPTION>
ABC BANCORP
<S> <C>
Date: 3/17/98 By: /s/ Kenneth J. Hunnicutt
-------------------------- __________________________________________________________________________________
Kenneth J. Hunnicutt, President, Chief Executive Officer and Director
Date: 3/17/98 By: /s/ W. Edwin Lane, Jr.
-------------------------- __________________________________________________________________________________
W. Edwin Lane, Jr., Executive Vice President and Chief Financial Officer
</TABLE>
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 with 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.
<TABLE>
<S> <C>
Date: 3/17/98 /s/ Kenneth J. Hunnicutt
----------------------- ------------------------------------------------------------------------
Kenneth J. Hunnicutt, President, Chief Executive Officer and Director
Date: 3/17/98 /s/ W. Edwin Lane, Jr.
----------------------- ------------------------------------------------------------------------
W. Edwin Lane, Jr., Executive Vice President and Chief Financial
Officer
Date: 3/17/98 /s/ Johnny W. Floyd
----------------------- ------------------------------------------------------------------------
Johnny W. Floyd, Director
Date: 3/17/98 /s/ J. Raymond Fulp
----------------------- ------------------------------------------------------------------------
J. Raymond Fulp, Director
Date: 3/17/98 /s/ Daniel B. Jeter
----------------------- ------------------------------------------------------------------------
Daniel B. Jeter, Director
Date: /s/ /s/ Willard E. Lasseter
----------------------- ------------------------------------------------------------------------
Willard E. Lasseter, Director and Chairman of the Board
</TABLE>
52
<PAGE>
<TABLE>
<S> <C>
Date: 3/17/98 /s/ Bobby B. Lindsey
----------------------- --------------------------------------------
Bobby B. Lindsey, Director
Date: 3/17/98 /s/ Hal L. Lynch
----------------------- --------------------------------------------
Hal L. Lynch, Director
Date: 3/17/98 /s/ Eugene M. Vereen
----------------------- --------------------------------------------
Eugene M. Vereen, Jr., Director
Date: 3/17/98 /s/ Dogle Weltzbarker
----------------------- --------------------------------------------
Doyle Weltzbarker, Director and Vice
Chairman of the Board
Date: 3/17/98 /s/ Henry Wortman
----------------------- --------------------------------------------
Henry Wortman, Director
</TABLE>
53
<PAGE>
ABC BANCORP
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
Consolidated financial statements:
Independent Auditor's Report
Consolidated Balance Sheets - December 31, 1997 and 1996
Consolidated Statements of Income - Years ended December 31, 1997, 1996 and
1995
Consolidated Statements of Stockholders' Equity - Years ended December 31,
1997, 1996 and 1995
Consolidated Statements of Cash Flows - Years ended December 31, 1997, 1996
and 1995
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, 1997 and 1996, and the related
consolidated statements of income, stockholders' equity and cash flows for each
of the three years in the period ended December 31, 1997. 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 did not audit the financial statements of First National
Financial Corporation and Irwin Bankcorp, Inc., which statements reflect total
revenues of $4.6 million and $2.9 million, respectively, for the year ended
December 31, 1995. These statements were audited by other auditors whose report
has been furnished to us, and our opinion, insofar as it relates to data
included for First National Financial Corporation and Irwin Bankcorp, Inc. for
the year ended December 31, 1995 is based solely on the report of the other
auditors.
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, based upon our audits and the report of other
auditors, 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, 1997 and 1996, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1997, in conformity with generally accepted accounting principles.
/s/ Mauldin or Jenkins, LLC
Albany, Georgia
January 23, 1998
F-2
<PAGE>
ABC BANCORP AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
(Dollars in Thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Assets 1997 1996
- ------ ---------- -----------
<S> <C> <C>
Cash and due from banks $ 33,973 $ 42,901
Interest-bearing deposits in banks 2,288 -
Federal funds sold 890 8,620
Securities available for sale, at fair value 93,199 103,276
Securities held to maturity, at cost (fair value
$30,577 and $32,238) 30,020 31,990
Loans 490,244 452,844
Less allowance for loan losses 7,627 7,273
---------- -----------
Loans, net 482,617 445,571
---------- -----------
Premises and equipment, net 19,054 16,198
Excess of cost over net assets of banks acquired 9,291 7,239
Other assets 20,554 17,367
---------- -----------
$ 691,886 $ 673,162
========== ===========
Liabilities and Stockholders' Equity
- ------------------------------------
Deposits
Noninterest-bearing demand $ 90,109 $ 87,006
Interest-bearing demand 128,294 125,255
Savings 46,715 45,269
Time, $100,000 and over 85,937 82,535
Other time 249,656 237,840
---------- -----------
Total deposits 600,711 577,905
Federal funds purchased and securities sold under
agreements to repurchase 660 997
Other borrowings 15,400 24,200
Other liabilities 6,962 7,090
---------- -----------
Total liabilities 623,733 610,192
---------- -----------
COMMITMENTS AND CONTINGENT LIABILITIES
STOCKHOLDERS' EQUITY
Common stock, par value $1; 15,000,000 shares
authorized, 7,524,718 and 6,114,443
shares issued 7,525 6,114
Capital surplus 29,677 30,985
Retained earnings 32,264 27,483
Unrealized gains (losses) on securities
available for sale, net of taxes 242 (57)
---------- -----------
69,708 64,525
Less cost of shares acquired for the treasury,
272,353 and 217,882 shares (1,555) (1,555)
---------- -----------
Total stockholders' equity 68,153 62,970
---------- -----------
$ 691,886 $ 673,162
========== ===========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-3
<PAGE>
ABC BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(Dollars in Thousands)
________________________________________________________________________________
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Interest income
Interest and fees on loans $ 50,502 $ 42,322 $ 33,547
Interest on taxable securities 6,511 6,092 4,811
Interest on nontaxable securities 1,205 1,025 931
Interest on deposits in other banks 232 8 28
Interest on Federal funds sold 199 1,139 1,634
--------- ---------- ---------
58,649 50,586 40,951
--------- ---------- ---------
Interest expense
Interest on deposits 24,229 20,935 16,755
Interest on other borrowings 1,721 1,389 612
--------- ---------- ---------
25,950 22,324 17,367
--------- ---------- ---------
Net interest income 32,699 28,262 23,584
Provision for loan losses 2,731 1,919 1,241
--------- ---------- ---------
Net interest income after provision
for loan losses 29,968 26,343 22,343
--------- ---------- ---------
Other income
Service charges on deposit accounts 5,509 4,722 3,819
Other service charges, commissions a 474 500 422
Gain (loss) on sale of securities (22) (5) 1
Other 1,775 1,315 662
--------- ---------- ---------
7,736 6,532 4,904
--------- ---------- ---------
Other expenses
Salaries and employee benefits 13,742 11,354 9,200
Equipment expense 2,305 1,783 1,561
Occupancy expense 1,653 1,380 1,102
Merger and acquisition expense 406 708 -
Amortization of intangible assets 744 487 310
Data processing fees 528 586 551
Directors fees 555 562 530
FDIC premiums 111 378 528
Stationary and supplies expense 560 616 391
Other operating expenses 6,535 5,024 3,954
--------- ---------- ---------
27,139 22,878 18,127
--------- ---------- ---------
</TABLE>
F-4
<PAGE>
ABC BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(Dollars in Thousands)
________________________________________________________________________________
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Income before income taxes $ 10,565 $ 9,997 $ 9,120
Applicable income taxes 3,119 2,839 2,752
-------- -------- --------
Net income $ 7,446 $ 7,158 $ 6,368
======== ======== ========
Income per common share - Basic $ 1.03 $ 1.01 $ 0.95
======== ======== ========
Income per common share - Diluted $ 1.02 $ 1.01 $ 0.95
======== ======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
F-5
<PAGE>
ABC BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(Dollars in Thousands)
================================================================================
<TABLE>
<CAPTION>
UNREALIZED
GAINS (LOSSES)
ON SECURITIES
AVAILABLE
COMMON STOCK CAPITAL RETAINED FOR SALE,
-------------------------
SHARES PAR VALUE SURPLUS EARNINGS NET OF TAXES
------------------------- ---------- ---------- --------------
<S> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1994 4,658,084 $ 4,658 $ 26,142 $ 17,418 $ (784)
Net income - - - 6,368 -
Cash dividends declared, $.28 per share - - - (1,176) -
Cash dividends paid by pooled subsidiary - - - (355) -
Exercise of options by shareholders of pooled subsidiaries 10,038 10 75 - -
Four-for-three common stock split 899,087 899 899 - -
Purchase of fractional shares - - (3) - -
Net treasury stock transactions of pooled subsidiary - - (1) - -
Stock issued under stock option purchase plan - - - - -
Net change in unrealized losses on
securities available for sale, net of taxes - - - - 1,158
---------- -------- --------- ---------- ------------
BALANCE, DECEMBER 31, 1995 5,567,209 5,567 25,314 22,255 374
Net income - - - 7,158 -
Cash dividends declared, $.32 per share - - - (1,682) -
Cash dividends paid by pool subsidiary - - - (248) -
Adjustments to record acquisition of a purchased subsidiary 402,271 402 5,543 - (196)
Exercise of options and capital contributions by shareholders
of pooled subsidiaries prior to merger 144,963 145 109 - -
Purchase of fractional shares - - (7) - -
Net treasury stock transactions of pooled subsidiary - - 26 - -
Net change in unrealized gains on
securities available for sale, net of taxes - - - - (235)
---------- -------- --------- ---------- ------------
BALANCE, DECEMBER 31, 1996 6,114,443 6,114 30,985 27,483 (57)
Net income - - - 7,446 -
Cash dividends declared, $.38 per share - - - (2,665) -
Five-for-four common stock split 1,403,241 $ 1,403 (1,403) - -
Exercise of options by shareholders of pooled subsidiaries 7,034 8 102 - -
Purchase of fractional shares - - (7) - -
Net change in unrealized losses on
securities available for sale, net of taxes - - - - 299
---------- -------- --------- ---------- ------------
BALANCE, DECEMBER 31, 1997 7,542,718 $ 7,525 $ 29,677 $ 32,264 $ 242
========== ======== ========= ========== ============
<CAPTION>
TREASURY STOCK
-----------------------
SHARES COST TOTAL
---------- ----------- ----------
<S> <C> <C>
BALANCE, DECEMBER 31, 1994 183,412 $ (1,680) $ 45,754
Net income - - 6,368
Cash dividends declared, $.28 per share - - (1,176)
Cash dividends paid by pooled subsidiary - - (355)
Exercise of options by shareholders of pooled subsidiaries - - 85
Four-for-three common stock split 61,137 - -
Purchase of fractional shares - - (3)
Net treasury stock transactions of pooled subsidiary - - (1)
Stock issued under stock option purchase plan (26,667) 125 125
Net change in unrealized losses on
securities available for sale, net of taxes - - 1,158
--------- ----------- ----------
BALANCE, DECEMBER 31, 1995 217,882 (1,555) 51,955
Net income - - 7,158
Cash dividends declared, $.32 per share - - (1,682)
Cash dividends paid by pool subsidiary - - (248)
Adjustments to record acquisition of a purchased subsidiary - - 5,749
Exercise of options and capital contributions by shareholders
of pooled subsidiaries prior to merger - - 254
Purchase of fractional shares - - (7)
Net treasury stock transactions of pooled subsidiary - - 26
Net change in unrealized gains on
securities available for sale, net of taxes - - (235)
--------- ----------- ----------
BALANCE, DECEMBER 31, 1996 217,882 (1,555) 62,970
Net income - - 7,446
Cash dividends declared, $.38 per share - - (2,665)
Five-for-four common stock split 54,471 - -
Exercise of options by shareholders of pooled subsidiaries - - 110
Purchase of fractional shares - - (7)
Net change in unrealized losses on
securities available for sale, net of taxes - - 299
--------- ----------- ----------
BALANCE, DECEMBER 31, 1997 272,353 $ (1,555) $ 68,153
========= =========== ==========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-6
<PAGE>
ABC BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(Dollars in Thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 7,446 $ 7,158 $ 6,368
-------- --------- --------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 2,000 1,576 1,409
Amortization of intangible assets 744 487 310
Net (gains) losses on securities available for sale 22 5 (1)
Provision for loan losses 2,731 1,919 1,241
Provision for deferred taxes (449) (382) (193)
Increase in interest receivable (1,435) (513) (1,092)
Increase (decrease) in interest pay 56 (113) 487
Increase (decrease) in taxes payable 463 (528) 100
Other prepaids, deferrals and accruals, net (2,048) 1,499 (761)
-------- -------- --------
Total adjustments 2,084 3,950 1,500
-------- -------- --------
Net cash provided by operating activities 9,530 11,108 7,868
-------- -------- --------
INVESTING ACTIVITIES
(Increase) decrease in interest-bearing
deposits in banks (2,288) 199 199
Purchases of securities available for sale (48,972) (45,123) (40,536)
Purchases of securities held to maturity (6,102) (2,871) (2,653)
Proceeds from maturities of securities available for sale 48,633 31,064 13,615
Proceeds from sale of securities available for sale 10,851 4,638 8,430
Proceeds from maturities of securities held to maturity 8,072 1,894 17,146
(Increase) decrease in Federal funds so sold 7,730 48,235 (23,863)
Increase in loans, net (32,550) (53,968) (34,415)
Net cash paid for purchased subsidiary - (3,947) -
Net cash received from acquisition of deposits 16,398 - -
Purchase of premises and equipment (4,598) (3,728) (920)
Proceeds from the sale of premises and equipment - 48 24
-------- -------- --------
Net cash used in investing activities (2,826) (23,559) (62,973)
-------- -------- --------
</TABLE>
F-7
<PAGE>
ABC BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(Dollars in Thousands)
================================================================================
<TABLE>
<CAPTION>
1997 1996 1995
---------- --------- ---------
<S> <C> <C> <C>
FINANCING ACTIVITIES
Increase (decrease) in deposits $ (3,965) $ 20,092 $ 56,672
Decrease in Federal funds purchased and securities
sold under agreements to repurchase (337) (2,690) (451)
Proceeds from other borrowings 34,678 12,600 4,600
Repayment of other borrowings (43,478) (5,200) (150)
Dividends paid (2,633) (1,763) (1,395)
Proceeds from sale of stock of pooled subsidiary 110 324 102
Proceeds from exercise of stock options - - 125
Purchase of fractional shares (7) (7) (3)
Purchase of treasury shares of pooled subsidiary - (44) (18)
--------- --------- ---------
Net cash provided by (used in) financing activities (15,632) 23,312 59,482
--------- --------- ---------
Net (decrease) increase in cash and due from banks (8,928) 10,861 4,377
Cash and due from banks at beginning of year 42,901 32,040 27,663
--------- --------- ---------
Cash and due from banks at end of year $ 33,973 $ 42,901 $ 32,040
========= ========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION
Cash paid during the year for:
Interest $ 25,894 $ 22,437 $ 16,880
Income taxes $ 3,105 $ 3,749 $ 2,845
NONCASH TRANSACTION
Net change in unrealized gains (losses)
on securities available for sale $ 471 $ (340) $ 1,278
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
</TABLE>
F-8
<PAGE>
ABC BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS
ABC Bancorp, (the "Company") is a multi-bank holding company whose
business is presently conducted by its subsidiary banks (the
"Banks"). Through the Banks, the Company operates a full service
banking business and offers a broad range of retail and commercial
banking services to its customers located in a market area which
includes South Georgia and Southeast Alabama. The Company and the
Banks are subject to the regulations of certain Federal and state
agencies and are periodically examined by those regulatory agencies.
BASIS OF PRESENTATION
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 Company's consolidated financial statements include the accounts
of the Company and its subsidiaries. All significant intercompany
transactions and accounts have been eliminated in consolidation.
Results of operations of purchased banks are included from the dates
of acquisition. Following the purchase method of accounting, the
assets and liabilities of purchased banks are stated at estimated
fair values at the date of acquisition.
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
Securities are classified based on management's intention on the date
of purchase. Securities which management has the intent and ability
to hold to maturity are classified as held to maturity and reported
at amortized cost. All other debt securities are classified as
available for sale and carried at fair value with net unrealized
gains and losses included in stockholders' equity, net of tax.
Marketable equity securities are carried at fair value with net
unrealized gains and losses included in stockholders' equity. Other
equity securities without a readily determinable fair value are
carried at cost.
Interest and dividends on securities, including amortization of
premiums and accretion of discounts, are included in interest income.
Realized gains and losses from the sales of securities are determined
using the specific identification method.
A decline in the fair value below cost of any security that is deemed
other than temporary is charged to earnings resulting in the
establishment of a new cost basis for the security.
LOANS HELD FOR SALE
Loans held for sale include mortgage and other loans and are carried
at the lower of aggregate cost or fair value.
LOANS
Loans are carried at their 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.
Loan origination fees and certain direct costs of most loans are
recognized at the time the loan is recorded. Loan origination fees
and costs incurred for other loans are deferred and recognized as
income over the life of the loan. Because net origination loan fees
and costs are not material, the results of 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.
F-10
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Loans (Continued)
The allowance for loan losses is maintained at a level that
management believes to be adequate to absorb potential losses in the
loan portfolio. Management's determination of the adequacy of the
allowance is based on an evaluation of the portfolio, past loan loss
experience, current economic conditions, volume, growth, composition
of the loan portfolio, and other risks inherent in the portfolio. 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.
The accrual of interest on impaired loans is discontinued when, in
management's opinion, the borrower may be unable to meet payments as
they become due. When accrual of interest is discontinued, all
unpaid accrued interest is reversed. Interest income is subsequently
recognized only to the extent cash payments are received.
A loan is impaired when it is probable the Company will be unable to
collect all principal and interest payments due in accordance with
the terms of the loan agreement. Individually identified impaired
loans are measured based on the present value of payments expected to
be received, using the contractual loan rate as the discount rate.
Alternatively, measurement may be based on observable market prices
or, for loans that are solely dependent on the collateral for
repayment, measurement may be based on the fair value of the
collateral. If the recorded investment in the impaired loan exceeds
the measure of fair value, a valuation allowance is established as a
component of the allowance for loan losses. Changes to the valuation
allowance are recorded as a component of the provision for loan
losses.
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> <C>
Buildings and improvements 15-40
Furniture and equipment 5-7
</TABLE>
F-11
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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.
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 for
banks acquired prior to 1996. Excess acquisition cost of Southland
Bank acquired in 1996 and the Douglas branch of Citizens Security
Bank acquired in 1997 are being amortized on the straight-line method
over 15 years.
INCOME TAXES
Income tax expense consists of current and deferred taxes. Current
income tax provisions approximate taxes to be paid or refunded for
the applicable year. Deferred tax assets and liabilities are
recognized on the temporary differences between the bases of assets
and liabilities as measured by tax laws and their bases as reported
in the financial statements. Deferred tax expense or benefit is then
recognized for the change in deferred tax assets or liabilities
between periods.
Recognition of deferred tax balance sheet amounts is based on
management's belief that it is more likely than not that the tax
benefit associated with certain temporary differences, tax operating
loss carryforwards, and tax credits will be realized. A valuation
allowance is recorded for those deferred tax items for which it is
more likely than not that realization will not occur.
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.
F-12
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
EARNINGS PER SHARE
Basic earnings per share are calculated on the basis of the weighted
average number of common shares outstanding. Diluted earnings per
share are computed by dividing net income by the sum of the weighted
average number of common shares outstanding and potential common
shares. Earnings per common share for the prior periods have been
restated to reflect the adoption of FASB 128. All per share data for
prior years have been adjusted to reflect the five-for-four stock
split effected in the form of a 25% stock dividend to shareholders of
record as of April 15, 1997.
CURRENT ACCOUNTING DEVELOPMENTS
In June 1996, the Financial Accounting Standards Board (the "FASB")
issued Statement of Financial Accounting Standards No 125,
"Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities" ("SFAS No. 125"). This statement
provides standards for distinguishing transfers of financial assets
that are sales from those that are secured borrowings, and provides
guidance on the recognition and measurement of asset servicing
contracts and on debt extinguishments. As issued, SFAS No. 125 is
effective for transactions occurring after December 31, 1996.
However, as a result of an amendment to SFAS No. 125 by the FASB in
December 1996, certain provision of SFAS No. 125 are deferred for an
additional year. Adoption of the new accounting standard is not
expected to have a material impact on the Company's financial
statements.
In February 1997, the FASB issued SFAS No. 128, "Earnings per
Share". This statement simplifies the standards for computing
earnings per share previously set forth in APB Opinion No. 15,
"Earnings per Share", and makes them comparable to international
earnings per Share ("EPS") standards. It replaces the presentation
of primary EPS with a presentation of basic EPS. It also requires
dual presentation of basic and diluted EPS on the face of the income
statement for all entities with complex capital structures and
requires a reconciliation of the numerator and denominator of the
basic EPS computation to the numerator and denominator of the diluted
EPS computation. Basic EPS excludes dilution and is computed by
dividing income available to common stockholders by the weighted-
average number of common shares outstanding for the period. Diluted
EPS reflects the potential dilution that could occur if securities or
other contracts to issue common stock were exercised or converted
into common stock or resulted in the issuance of common stock that
then shared in the earnings of the entity. Diluted EPS is computed
similarly to fully diluted EPS pursuant to APB Opinion No. 15. This
statement is effective for financial statements issued for periods
ending after December 15, 1997. The adoption of this statement did
not have a material impact on the Company's financial statements.
F-13
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CURRENT ACCOUNTING DEVELOPMENTS (CONTINUED)
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income". This statement establishes standards for reporting and
display of comprehensive income and its components (revenues.
expenses, gains and losses) in a full set of general-purpose
financial statements. This statement requires that all items that
are required to be recognized under accounting standards as
components of comprehensive income be reported in a financial
statement that is displayed with the same prominence as other
financial statements. This statement does not require a specific
format for that financial statement but requires that an enterprise
display an amount representing total comprehensive income for the
period in that financial statement. This statement requires that an
enterprise classify items of other comprehensive income by their
nature in a financial statement and display the accumulated balance
or other comprehensive income by their nature in a financial
statement and display the accumulated balance or other comprehensive
income separately from retained earnings and additional paid-in
capital in the equity section of a statement of financial position.
This statement is effective for fiscal years beginning after December
15, 1997. The adoption of this statement is not expected to have a
material impact on the Company's financial statements.
In June 1997, The FASB issued SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information." This statement
requires that a public business enterprise report financial and
descriptive information about its reportable operating segments.
Operating segments are components of an enterprise about which
separate financial information is available that is evaluated
regularly by the chief operating decision maker in deciding how to
allocate resources and in assessing performance. Generally,
financial information is required to be reported on the basis that it
is used internally for evaluating segment performance and deciding
how to allocate resources to segments. The statement requires that a
business enterprise report a measure of segment profit or loss,
certain specific revenue and expense items and segment assets. It
requires reconciliations of total segment revenues, total segment
profit or loss, total segment assets and other amounts disclosed for
segments to corresponding amounts in the enterprise's general
purpose financial statements. It requires that the enterprise report
information about the revenues derived from the enterprise's products
or services, about the countries in which the enterprise earns
revenues and hold assets and about major customers. This statement is
effective for financial statements for periods beginning after
December 15, 1997. The adoption of this statement is not expected to
have a material impact on the Company's financial statements.
F-14
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
NOTE 2. ACQUISITIONS
On June 21, 1996, the Company acquired all of the outstanding common
stock of Southland Bancorporation ("Southland") in exchange for
402,271 shares of the Company's common stock and $5,880,000 in cash.
The excess of purchase price over net book value of assets acquired
amounted to $5,310,000. The fair value of assets acquired was deemed
to approximate their recorded value; therefore, the excess cost has
been accounted for as goodwill and is being amortized over a period of
15 years. Immediately following the merger, Southland was liquidated
and its wholly-owned subsidiary, Southland Bank, became a wholly-owned
subsidiary of the Company.
The acquisition has been accounted for as a purchase transaction and,
accordingly, the operations of Southland Bank have been included in
the consolidated financial statements of the Company only from June
21, 1996, the date of acquisition. Had the acquisition of Southland
Bank occurred on January 1, 1995, pro forma unaudited consolidated
results of operations (after restatement for the poolings of interest
described below) for the years ended December 31, 1996 and 1995 would
have been as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------
1996 1995
--------------- --------------
(DOLLARS IN THOUSANDS)
-----------------------------------
<S> <C> <C>
Net interest income $ 30,591 $ 27,519
Other income 7,099 6,486
Net income 7,348 6,803
Net income per share - basic 1.01 0.96
Net income per share - diluted 1.01 0.96
</TABLE>
F-15
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
NOTE 2. ACQUISITIONS (CONTINUED)
On July 31, 1996, the Company acquired all of the outstanding common
stock of Central Bankshares, Inc. ("Central") in exchange for 524,300
shares of the Company's common stock and a nominal amount of cash in
lieu of fractional shares. Immediately following the merger, Central
was liquidated and its wholly-owned subsidiary, Central Bank & Trust,
became a wholly-owned subsidiary of the Company. On August 31, 1996,
the Company acquired all of the outstanding common stock of First
National Financial Corporation ("First National") in exchange for
725,772 shares of the Company's common stock and a nominal amount of
cash in lieu of fractional shares. Immediately following the merger,
First National was liquidated and its wholly-owned subsidiary, First
National Bank of South Georgia, became a wholly-owned subsidiary of
the Company. On December 31, 1996, the Company acquired all of the
outstanding common stock of M & F Financial Corporation ("M & F") in
exchange for 365,026 shares of the Company's common stock and a
nominal amount of cash in lieu of fractional shares. Immediately
following the merger, M & F was liquidated and its wholly-owned
subsidiary, Merchants & Farmers Bank, became a wholly-owned subsidiary
of the Company. On August 31, 1997, the Company acquired all of the
outstanding common stock of Irwin Bankcorp, Inc ("Irwin") in exchange
for 507,034 shares of the Company's common stock and a nominal amount
of cash in lieu of fractional shares, Immediately following the
merger, Irwin was liquidated and its wholly-owned subsidiary, The Bank
of Ocilla, became a branch of Citizens Security Bank, a wholly-owned
subsidiary of the Company.
The acquisitions of Central, First National, M & F and Irwin have been
accounted for as poolings of interests and, accordingly, all prior
financial statements have been restated to include the accounts and
operations of the pooled companies. Net interest income and net
income of the separate companies for periods preceding the mergers are
summarized as follows:
F-16
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
NOTE 2. ACQUISITIONS (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1996 1995
--------------- -------------
(DOLLARS IN THOUSANDS)
----------------------------------
<S> <C> <C>
Net interest income:
ABC $ 26,641 $ 16,030
Central - 2,182
First National - 2,152
M & F - 1,642
Irwin 1,621 1,578
------------- ------------
Combined $ 28,262 $ 23,584
============= ============
Net income:
ABC $ 6,701 $ 4,341
Central - 499
First National - 612
M & F - 465
Irwin 457 451
------------- ------------
Combined $ 7,158 $ 6,368
============= ============
</TABLE>
NOTE 3. INVESTMENTS IN SECURITIES
The amortized cost and approximate fair values of investments in
securities at December 31, 1997 and 1996 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, 1997:
U. S. GOVERNMENT AND AGENCY SECURITIES $ 79,636 $ 287 $ (101) $ 79,822
MORTGAGE-BACKED SECURITIES 6,984 120 (19) 7,085
STATE AND MUNICIPAL SECURITIES 5,660 174 - 5,834
OTHER SECURITIES 525 - (67) 458
-------------- ------------- ------------- -------------
$ 92,805 $ 581 $ (187) $ 93,199
============== ============= ============= =============
</TABLE>
F-17
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
________________________________________________________________________________
NOTE 3. INVESTMENTS IN SECURITIES (CONTINUED)
<TABLE>
<CAPTION>
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
------------- ------------- ------------- -------------
(DOLLARS IN THOUSANDS)
--------------------------------------------------------------
<S> <C> <C> <C> <C>
December 31, 1996:
U. S. Government and agency securities $ 84,744 $ 251 $ (468) $ 84,527
Mortgage-backed securities 12,555 135 (52) 12,638
State and municipal securities 5,529 127 - 5,656
Other securities 525 - (70) 455
------------- ------------- ------------- -------------
$ 103,353 $ 513 $ (590) $ 103,276
============= ============= ============= =============
Securities Held to Maturity
December 31, 1997:
U. S. Government and Agency Securities $ 8,995 $ 1 $ (10) $ 8,986
Mortgage-backed Securities 2,951 27 (10) 2,968
State and Municipal Securities 18,074 557 (8) 18,623
------------- ------------- ------------- -------------
$ 30,020 $ 585 $ (28) $ 30,577
============= ============= ============= =============
December 31, 1996:
U. S. Government and agency securities $ 11,238 $ - $ (200) $ 11,038
Mortgage-backed securities 4,326 27 (44) 4,309
State and municipal securities 16,426 493 (28) 16,891
------------- ------------- ------------- -------------
$ 31,990 $ 520 $ (272) $ 32,238
============= ============= ============= =============
</TABLE>
F-18
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
________________________________________________________________________________
NOTE 3. INVESTMENTS IN SECURITIES (CONTINUED)
The amortized cost and fair value of securities as of December 31,
1997 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 $ 25,022 $ 25,067 $ 2,057 $ 2,063
Due from one year to five years 52,641 52,809 11,293 11,439
Due from five to ten years 5,755 5,834 13,020 13,365
Due after ten years 1,878 1,946 699 742
Mortgage-backed securities 6,984 7,085 2,951 2,968
Marketable equity securities 525 458 - -
--------------- --------------- --------------- ---------------
$ 92,805 $ 93,199 $ 30,020 $ 30,577
=============== =============== =============== ===============
</TABLE>
Securities with a carrying value of $69,033,000 and $79,946,000 at
December 31, 1997 and 1996, respectively, were pledged to secure
public deposits and for other purposes.
Gains and losses on sales of securities available for sale consist of
the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------------------------
1997 1996 1995
------------ ------------- ------------
(DOLLARS IN THOUSANDS)
-------------------------------------------------
<S> <C> <C> <C>
Gross gains on sales of securities $ 26 $ 13 $ 37
Gross losses on sales of securities (48) (18) (36)
------------- -------------- -------------
Net realized gains (losses) on sales of
securities available for sale $ (22) $ (5) $ 1
============= ============== =============
</TABLE>
F-19
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 4. LOANS AND ALLOWANCE FOR LOAN LOSSES
The composition of loans is summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------
1997 1996
--------------- ---------------
(DOLLARS IN THOUSANDS)
-----------------------------------
<S> <C> <C>
Commercial and financial $ 72,171 $ 69,772
Agricultural 41,882 35,525
Real estate - construction 13,117 13,612
Real estate - mortgage, farmland 55,245 52,978
Real estate - mortgage, commercial 108,339 89,708
Real estate - mortgage, residential 127,767 121,448
Consumer instalment loans 68,959 67,572
Other 2,764 2,229
--------------- ---------------
490,244 452,844
Allowance for loan losses 7,627 7,273
--------------- ---------------
$ 482,617 $ 445,571
=============== ===============
</TABLE>
The total recorded investment in impaired loans was $10,054,000 and
$5,130,000 at December 31, 1997 and 1996, respectively. Included in
these loans were $5,680,000 and $2,408,000 that had related allowances
for loan losses of $1,060,000 and $609,000 at December 31, 1997 and
1996, respectively. The average recorded investment in impaired loans
for 1997 and 1996 was $7,686,000 and $4,024,000, respectively.
Interest income on impaired loans of $383,000 and $159,000 was
recognized for cash payments received for the years ended 1997 and
1996, respectively.
F-20
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 4. LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
The Company has granted loans to certain directors, executive
officers, and related entities of the Company and the Banks. The
interest rates on these loans were substantially the same as rates
prevailing at the time of the transaction and repayment terms are
customary for the type of loan involved. Changes in related party
loans for the years ended December 31, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------
1997 1996
--------------- ---------------
(DOLLARS IN THOUSANDS)
-----------------------------------
<S> <C> <C>
BALANCE, BEGINNING OF YEAR $ 21,235 $ 13,153
Advances 18,708 16,310
Repayments (14,593) (8,609)
Transactions due to change(s) in related parties (1,708) 381
--------------- ---------------
BALANCE, END OF YEAR $ 23,642 $ 21,235
=============== ===============
</TABLE>
Changes in the allowance for loan losses are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------------------------
1997 1996 1995
------------- ------------- -------------
(DOLLARS IN THOUSANDS)
-------------------------------------------------
<S> <C> <C> <C>
BALANCE, BEGINNING OF YEAR $ 7,273 $ 5,890 $ 5,169
Allowance for loan losses of acquired subsidiary - 1,211 -
Provision charged to operations 2,731 1,919 1,241
Loans charged off (3,338) (2,291) (988)
Recoveries 961 544 468
------------- ------------- -------------
BALANCE, END OF YEAR $ 7,627 $ 7,273 $ 5,890
============= ============= =============
</TABLE>
F-21
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 5. PREMISES AND EQUIPMENT, NET
Major classifications of these assets are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------
1997 1996
------------- -------------
(DOLLARS IN THOUSANDS)
-------------------------------
<S> <C> <C>
Land $ 4,535 $ 3,777
Buildings 13,761 11,978
Equipment 14,291 13,553
Construction in progress 649 732
------------- -------------
33,236 30,040
Accumulated depreciation 14,182 13,842
------------- -------------
$ 19,054 $ 16,198
============= =============
</TABLE>
Depreciation expense for the years ended December 31, 1997, 1996 and
1995 was $1,923,000, $1,465,000 and $1,283,000, respectively.
NOTE 6. EMPLOYEE BENEFIT PLANS
The Company and its 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 1997, 1996 and 1995 amounted to $1,093,000, $879,000
and $588,000, respectively.
F-22
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 7. 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 $70,000, $12,000
and $55,000 for 1997, 1996 and 1995, respectively, and is included in
other operating expenses.
NOTE 8. STOCK OPTION PLANS
The Company has three fixed stock option plans under which it has
granted options to its Chief Executive Officer to purchase common
stock at the fair market price on the date of grant. All of the
options are intended to be incentive stock options qualifying under
Section 422 of the Internal Revenue Code for favorable tax treatment.
Under the 1985 plan, options to purchase 26,667 shares were granted.
All of these options were exercised in 1995. Under the 1992 plan,
options to purchase 8,334 shares were granted. None of these options
have been exercised, however, all of the options were exercisable as
of December 31, 1997. Options under the 1992 Plan expire in 2002.
Under the 1997 Plan, options to purchase 56,250 shares were granted.
Options under the 1997 Plan are fully vested and are exercisable over
a period of ten years subject to certain limitations as to aggregate
fair market value (determined as of the date of the grant) of all
options exercisable for the first time by the optionee during any
calendar year (the "$100,000 Per-year Limitation"). Under The 1997
Plan, options to purchase 6,625 shares were exercisable.
F-23
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 8. STOCK OPTION PLANS (CONTINUED)
A summary of the status of the three fixed plans at December 31, 1997,
1996 and 1995 and changes during the years ended on those dates is as
follows:
<TABLE>
<CAPTION>
1997 1996 1995
------------------------------ --------------------------- -----------------------------
WEIGHTED- WEIGHTED- WEIGHTED-
Average Average Average
EXERCISE EXERCISE EXERCISE
NUMBER Price NUMBER PRICE NUMBER PRICE
------------- ------------- ---------- ------------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C>
Under option, beginning of
the year 8,334 $ 5.40 8,334 $ 5.40 35,001 $ 4.86
Granted 56,250 13.60 - - - -
Exercised - - - - (26,667) 4.69
Forfeited - - - - - -
------------- ---------- ----------
Under option, end of year 64,584 12.54 8,334 5.40 8,334 5.40
============= ========== ==========
Exercisable at end of year 14,959 6,668 5,002
============= ========== ==========
Weighted-average fair
value per option of
options granted
during year $ 4.11 - -
============= ========== ==========
</TABLE>
A FURTHER SUMMARY ABOUT OPTIONS OUTSTANDING AT DECEMBER 31, 1997 IS AS
FOLLOWS:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
-------------------------------------------------------------------- --------------------------------
WEIGHTED-
Average WEIGHTED- WEIGHTED-
Range of Contractual Average Average
Exercise Number Life in Exercise Number Exercise
Prices Outstanding Years Price Outstanding Price
--------------- ------------- ------------- --------------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
$ 5.40 8,334 5.0 $ 5.40 8,334 $ 5.40
13.60 56,250 9.3 13.60 6,625 13.60
------------- -------------
64,584 8.75 12.54 14,959 9.03
============= =============
</TABLE>
F-24
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 8. STOCK OPTION PLANS (CONTINUED)
As permitted by Statement of Financial Accounting Standard No. 123,
"Accounting for Stock-Based Compensation" (SFAS No. 123), the Company
recognizes compensation cost for stock-based employee compensation
awards in accordance with APB Opinion No. 25, "Accounting for Stock
Issued to Employees". The Company recognized no compensation cost for
stock-based employee compensation awards for the years ended December
31, 1997, 1996 and 1995. If the Company had recognized compensation
cost in accordance with SFAS No. 123, net income and net income per
share would have been reduced as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------------------------------------------------------------------
1997 1996 1995
------------------------------- ------------------------------ ------------------------------
BASIC BASIC BASIC
NET NET INCOME NET NET INCOME NET NET INCOME
INCOME PER SHARE INCOME PER SHARE INCOME PER SHARE
------------ --------------- ------------ --------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
As reported $ 7,446 $ 1.03 $ 7,158 $ 1.01 $ 6,368 $ 0.95
Stock based
compensation,
net of related
tax effect (153) (0.02) - - - -
------------ --------------- ------------ --------------- ------------ ---------------
As adjusted $ 7,293 $ 1.01 $ 7,158 $ 1.01 $ 6,368 $ 0.95
============ =============== ============ =============== ============ ===============
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------------------------------------------------------------------
1997 1996 1995
------------------------------- ------------------------------ ------------------------------
DILUTED DILUTED DILUTED
NET NET INCOME NET NET INCOME NET NET INCOME
INCOME PER SHARE INCOME PER SHARE INCOME PER SHARE
------------ --------------- ------------ --------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
As reported $ 7,446 $ 1.02 $ 7,158 $ 1.01 $ 6,368 $ 0.95
Stock based
compensation,
net of related
tax effect (153) (0.02) - - - -
------------ --------------- ------------ --------------- ------------ ---------------
As adjusted $ 7,293 $ 1.00 $ 7,158 $ 1.01 $ 6,368 $ 0.95
============ =============== ============ =============== ============ ===============
</TABLE>
F-25
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 8. STOCK OPTION PLANS (CONTINUED)
The fair value of the options granted in 1997 was based upon the
discounted value of future cash flows of the options using the
following assumptions:
<TABLE>
<S> <C>
Risk-free interest rate 6.13%
Expected life of the options 10 years
Expected dividends (as a percent of the fair value of the stock) 1.92%
Expected volatility 13.17%
</TABLE>
At the annual meeting on April 15, 1997, the shareholders approved the
ABC Bancorp Omnibus Stock Ownership and Long-Term Incentive Plan (the
"Omnibus Plan"). Awards granted under the Omnibus Plan may be in the
form of Qualified or Nonqualified Stock Options, Restricted Stock,
Stock Appreciation Rights ("SARS"), Long-Term Incentive Compensation
Units consisting of a combination of cash and Common Stock, or any
combination thereof within the limitations set forth in the Omnibus
Plan. The Omnibus Plan provides that the aggregate number of shares
of the Company's Common Stock which may be subject to award may not
exceed 531,250, subject to adjustment in certain circumstances to
prevent dilution. As of December 31, 1997, no awards have been
granted under the Omnibus Plan.
NOTE 9. OTHER BORROWINGS
Other borrowings consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------
1997 1996
---------------- ----------------
<S> <C> <C>
(DOLLARS IN THOUSANDS)
------------------------------------
Advances under revolving credit agreement with $ 5,000 $ 5,000
SunTrust Bank with interest at the three month
LIBOR rate plus .9% (6.86% at December 31,
1997) due on March 30, 1998; unsecured.
Advances from Federal Home Loan Bank with interest 10,000 10,000
at adjustable rates (ranging from 5.72% to 6.22%
at December 31, 1997) due at various dates from
from April 1, 1998 to March 21, 2002.
Advance from Federal Home Loan Bank with interest at a 400 9,200
fixed rate (6.48% at December 31, 1997) due in annual
installments of $50,000 through June 5, 2005.
---------------- ----------------
$ 15,400 $ 24,200
================ ================
</TABLE>
F-26
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 9. OTHER BORROWINGS (CONTINUED)
The advances from the Federal Home Loan Bank are collateralized by the
pledging of first mortgage loans and other specific loans. One
subsidiary bank has also pledged mortgage-backed securities having an
aggregate market value of approximately $1,628,000 at December 31,
1997.
Other borrowings at December 31, 1997 have maturities in future years
as follows:
<TABLE>
<CAPTION>
(DOLLARS IN
THOUSANDS)
--------------
<S> <C>
1998 $ 9,050
1999 3,050
2000 2,050
2001 50
2002 1,050
Later years 150
--------------
$ 15,400
==============
</TABLE>
NOTE 10. INCOME TAXES
The total income taxes in the consolidated statements of income are as
follows:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------------------------
1997 1996 1995
------------- ------------- -------------
(DOLLARS IN THOUSANDS)
---------------------------------------------------
<S> <C> <C> <C>
Current $ 3,568 $ 3,221 $ 2,945
Deferred (449) (382) (193)
------------- ------------- -------------
$ 3,119 $ 2,839 $ 2,752
============= ============= =============
</TABLE>
F-27
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 10. 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,
-----------------------------------------------------------------------------------------
1997 1996 1995
---------------------------- ---------------------------- -------------------------
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
------------ ------------ ------------ ------------ ------------ ---------
(DOLLARS IN THOUSANDS)
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Tax provision at statutory rate $ 3,592 34 % $ 3,399 34 % $ 3,100 34 %
Increase (decrease) resulting
from:
Tax-exempt interest (439) (4) (359) (4) (336) (4)
Amortization of excess
cost over assets acquired 167 2 82 1 30 1
Changes in valuation allowance
for deferred taxes (94) (1) (228) (2) (67) (1)
Other (107) (1) (55) (1) 25 -
------------ ------------ ------------ ------------ ------------ ---------
Provision for income taxes $ 3,119 30 % $ 2,839 28 % $ 2,752 30 %
============ ============ ============ ============ ============ =========
</TABLE>
Net deferred income tax assets of $1,814,000 and $1,517,000 at
December 31, 1997 and 1996, respectively, are included in other
assets. The components of deferred income taxes are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------
1997 1996
------------- -------------
(DOLLARS IN THOUSANDS)
------------------------------
<S> <C> <C>
DEFERRED TAX ASSETS:
Loan loss reserves $ 1,853 $ 1,641
Deferred compensation 192 271
Unrealized loss on securities available for sale - 18
Other 78 -
Net operating loss tax carryforward 237 261
Alternative minimum tax credits 142 142
Less valuation allowance - (94)
------------- -------------
2,502 2,239
------------- -------------
DEFERRED TAX LIABILITIES:
Deprecation and amortization 554 690
Other - 32
Unrealized gain on securities available for sale 134 -
------------- -------------
688 722
------------- -------------
Net deferred tax assets $ 1,814 $ 1,517
============= =============
</TABLE>
F-28
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 11. EARNINGS PER COMMON SHARE
The following is a reconciliation of net income (the numerator) and
the weighted average shares outstanding (the denominator) used in
determining basic and diluted earnings per share. All amounts are
presented in thousands, except per share amounts.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
-------------------------------------------------------
INCOME SHARES PER SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT
---------------- -------------- ----------------
<S> <C> <C> <C>
BASIC EARNINGS PER SHARE
Net income $ 7,446 7,252 $ 1.03
EFFECT OF DILUTIVE SECURITIES
Stock options - 13
---------------- --------------
DILUTIVE EARNINGS PER SHARE
Net income $ 7,446 7,265 $ 1.02
================ ============== ================
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
-------------------------------------------------------
INCOME SHARES PER SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT
---------------- -------------- ----------------
<S> <C> <C> <C>
BASIC EARNINGS PER SHARE
Net income $ 7,158 7,056 $ 1.01
================
EFFECT OF DILUTIVE SECURITIES
Stock options - 5
---------------- --------------
DILUTIVE EARNINGS PER SHARE
Net income $ 7,158 7,061 $ 1.01
================ ============== ================
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
-------------------------------------------------------
INCOME SHARES PER SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT
---------------- -------------- ----------------
<S> <C> <C> <C>
BASIC EARNINGS PER SHARE
Net income $ 6,368 6,679 $ 0.95
================
EFFECT OF DILUTIVE SECURITIES
Stock options - 15
---------------- --------------
DILUTIVE EARNINGS PER SHARE
Net income $ 6,368 6,694 $ 0.95
================ ============== ================
</TABLE>
F-29
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 12. 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,
-------------------------------
1997 1996
------------- -------------
(DOLLARS IN THOUSANDS)
-------------------------------
<S> <C> <C>
Commitments to extend credit $ 81,682 $ 64,904
Credit card commitments 7,153 3,077
Standby letters of credit 1,584 1,436
------------- -------------
$ 90,419 $ 69,417
============= =============
</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.
Credit card commitments are unsecured.
F-30
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 12. COMMITMENTS AND CONTINGENT LIABILITIES (CONTINUED)
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 for the Company, any
liability resulting from such proceedings would not have a material
adverse effect on the Company's financial statements.
NOTE 13. CONCENTRATIONS OF CREDIT
The Banks make agricultural, agribusiness, commercial, residential and
consumer loans to customers primarily in counties in south Georgia and
southeast Alabama. 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.
The Company has a concentration of funds on deposit at its primary
correspondent banks at December 31, 1997, as follows:
Noninterest-bearing accounts $ 20,062,000
================
F-31
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 14. REGULATORY MATTERS
The Banks are subject to certain restrictions on the amount of
dividends that may be declared without prior regulatory approval. At
December 31, 1997, approximately $4,960,000 of retained earnings were
available for dividend declaration without regulatory approval.
The Company and the Banks are subject to various regulatory capital
requirements administered by the federal banking agencies. Failure to
meet minimum capital requirements can initiate certain mandatory, and
possibly additional discretionary, actions by regulators that, if
undertaken, could have a direct material effect on the financial
statements. Under capital adequacy guidelines and the regulatory
framework for prompt corrective action, the Company and Banks must
meet specific capital guidelines that involve quantitative measures of
the assets, liabilities, and certain off-balance-sheet items as
calculated under regulatory accounting practices. The Company and
Banks capital amounts and classification are also subject to
qualitative judgments by the regulators about components, risk
weightings, and other factors.
Quantitative measures established by regulation to ensure capital
adequacy require the Company and the Banks to maintain minimum amounts
and ratios of total and Tier I capital to risk-weighted assets and of
Tier I capital to average assets. Management believes, as of December
31, 1997, the Company and the Banks meet all capital adequacy
requirements to which it is subject.
As of December 31, 1997, the most recent notification from the
regulatory authorities categorized the Banks as well capitalized under
the regulatory framework for prompt corrective action. To be
categorized as well capitalized, the Banks must maintain minimum total
risk-based, Tier I risk-based, and Tier I leverage ratios as set forth
in the table. There are no conditions or events since that
notification that management believes have changed the Banks'
category.
F-32
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 14. REGULATORY MATTERS (CONTINUED)
The Company and Banks' actual capital amounts and ratios are presented
in the following table.
<TABLE>
<CAPTION>
TO BE WELL
FOR CAPITAL CAPITALIZED UNDER
ADEQUACY PROMPT CORRECTIVE
ACTUAL PURPOSES ACTION PROVISIONS
-------------------------- -------------------------- --------------------------
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
------------- ---------- ------------- ---------- ------------- ----------
(DOLLARS IN THOUSANDS)
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
AS OF DECEMBER 31, 1997
TOTAL CAPITAL
(TO RISK WEIGHTED ASSETS):
CONSOLIDATED $ 64,178 13.32% $ 38,534 8.00% $ 48,169 10.00%
AMERICAN BANKING COMPANY $ 11,298 11.55% $ 7,824 8.00% $ 9,780 10.00%
HERITAGE COMMUNITY BANK $ 3,785 13.11% $ 2,309 8.00% $ 2,887 10.00%
BANK OF THOMAS COUNTY $ 3,317 12.63% $ 2,101 8.00% $ 2,627 10.00%
CITIZENS SECURITY BANK $ 14,350 18.79% $ 6,110 8.00% $ 7,637 10.00%
CAIRO BANKING COMPANY $ 7,066 15.10% $ 3,743 8.00% $ 4,679 10.00%
SOUTHLAND BANK $ 11,511 11.16% $ 8,249 8.00% $ 10,312 10.00%
CENTRAL BANK AND TRUST $ 5,474 12.68% $ 3,453 8.00% $ 4,316 10.00%
FIRST NATIONAL BANK OF
SOUTH GEORGIA $ 4,841 12.38% $ 3,128 8.00% $ 3,909 10.00%
MERCHANTS AND FARMERS BANK $ 3,946 14.34% $ 2,202 8.00% $ 2,752 10.00%
TIER I CAPITAL
(TO RISK WEIGHTED ASSETS):
CONSOLIDATED $ 58,137 12.07% $ 19,267 4.00% $ 28,901 6.00%
AMERICAN BANKING COMPANY $ 10,075 10.30% $ 3,912 4.00% $ 5,868 6.00%
HERITAGE COMMUNITY BANK $ 3,424 11.86% $ 1,155 4.00% $ 1,732 6.00%
BANK OF THOMAS COUNTY $ 2,988 11.38% $ 1,051 4.00% $ 1,576 6.00%
CITIZENS SECURITY BANK $ 13,395 17.54% $ 3,055 4.00% $ 4,582 6.00%
CAIRO BANKING COMPANY $ 6,471 13.83% $ 1,872 4.00% $ 2,808 6.00%
SOUTHLAND BANK $ 10,218 9.91% $ 4,125 4.00% $ 6,187 6.00%
CENTRAL BANK AND TRUST $ 4,933 11.43% $ 1,726 4.00% $ 2,590 6.00%
FIRST NATIONAL BANK OF
SOUTH GEORGIA $ 4,351 11.13% $ 1,564 4.00% $ 2,346 6.00%
MERCHANTS AND FARMERS BANK $ 3,602 13.09% $ 1,101 4.00% $ 1,651 6.00%
</TABLE>
F-33
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 14. REGULATORY MATTERS (CONTINUED)
<TABLE>
<CAPTION>
TO BE WELL
FOR CAPITAL CAPITALIZED UNDER
ADEQUACY PROMPT CORRECTIVE
ACTUAL PURPOSES ACTION PROVISIONS
--------------------------- -------------------------- --------------------------
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
-------------- ---------- ------------- ---------- ------------- ----------
(DOLLARS IN THOUSANDS)
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
AS OF DECEMBER 31, 1997
(CONTINUED)
TIER I CAPITAL
(TO AVERAGE ASSETS):
CONSOLIDATED $ 58,137 8.60% $ 27,039 4.00% $ 33,799 5.00%
AMERICAN BANKING COMPANY $ 10,075 8.46% $ 4,792 4.00% $ 5,990 5.00%
HERITAGE COMMUNITY BANK $ 3,424 8.53% $ 1,617 4.00% $ 2,022 5.00%
BANK OF THOMAS COUNTY $ 2,988 8.25% $ 1,443 4.00% $ 1,804 5.00%
CITIZENS SECURITY BANK $ 13,395 10.89% $ 4,975 4.00% $ 6,219 5.00%
CAIRO BANKING COMPANY $ 6,471 8.66% $ 3,029 4.00% $ 3,786 5.00%
SOUTHLAND BANK $ 10,218 7.37% $ 5,543 4.00% $ 6,929 5.00%
CENTRAL BANK AND TRUST $ 4,933 8.36% $ 2,345 4.00% $ 2,931 5.00%
FIRST NATIONAL BANK OF
SOUTH GEORGIA $ 4,351 8.28% $ 2,101 4.00% $ 2,626 5.00%
MERCHANTS AND FARMERS BANK $ 3,602 8.45% $ 1,724 4.00% $ 2,156 5.00%
</TABLE>
F-34
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 14. REGULATORY MATTERS (CONTINUED)
<TABLE>
<CAPTION>
TO BE WELL
FOR CAPITAL CAPITALIZED UNDER
ADEQUACY PROMPT CORRECTIVE
ACTUAL PURPOSES ACTION PROVISIONS
-------------------------- -------------------------- --------------------------
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
------------- ---------- ------------- ---------- ------------- ----------
(DOLLARS IN THOUSANDS)
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
As of December 31, 1996
Total Capital
(to Risk Weighted Assets):
Consolidated $ 62,996 13.93% $ 36,184 8.00% $ 45,230 10.00%
American Banking Company $ 10,851 11.74% $ 7,394 8.00% $ 9,243 10.00%
Heritage Community Bank $ 3,778 13.15% $ 2,298 8.00% $ 2,873 10.00%
Bank of Thomas County $ 3,071 10.69% $ 2,298 8.00% $ 2,873 10.00%
Citizens Security Bank $ 11,952 18.44% $ 5,184 8.00% $ 6,481 10.00%
Cairo Banking Company $ 7,317 15.31% $ 3,823 8.00% $ 4,779 10.00%
Southland Bank $ 10,125 11.11% $ 7,291 8.00% $ 9,113 10.00%
Central Bank and Trust $ 5,254 13.11% $ 3,206 8.00% $ 4,008 10.00%
First National Bank of
South Georgia $ 5,625 18.74% $ 2,401 8.00% $ 3,002 10.00%
Merchants and Farmers Bank $ 4,503 15.59% $ 2,311 8.00% $ 2,889 10.00%
Tier I Capital
(to Risk Weighted Assets):
Consolidated $ 57,322 12.67% $ 18,092 4.00% $ 27,138 6.00%
American Banking Company $ 9,767 10.56% $ 3,700 4.00% $ 5,549 6.00%
Heritage Community Bank $ 3,418 11.90% $ 1,149 4.00% $ 1,723 6.00%
Bank of Thomas County $ 2,757 9.60% $ 1,149 4.00% $ 1,723 6.00%
Citizens Security Bank $ 11,137 17.19% $ 2,592 4.00% $ 3,888 6.00%
Cairo Banking Company $ 6,707 14.03% $ 1,912 4.00% $ 2,868 6.00%
Southland Bank $ 8,985 9.86% $ 3,645 4.00% $ 5,468 6.00%
Central Bank and Trust $ 4,753 11.86% $ 1,603 4.00% $ 2,405 6.00%
First National Bank of
South Georgia $ 5,249 17.49% $ 1,201 4.00% $ 1,801 6.00%
Merchants and Farmers Bank $ 4,195 14.52% $ 1,156 4.00% $ 1,733 6.00%
</TABLE>
F-35
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 14. REGULATORY MATTERS (CONTINUED)
<TABLE>
<CAPTION>
TO BE WELL
FOR CAPITAL CAPITALIZED UNDER
ADEQUACY PROMPT CORRECTIVE
ACTUAL PURPOSES ACTION PROVISIONS
--------------------------- -------------------------- --------------------------
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
-------------- ---------- ------------- ---------- ------------- ----------
(DOLLARS IN THOUSANDS)
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
As of December 31, 1996
(Continued)
Tier I Capital
(to Average Assets):
Consolidated $ 57,322 9.40% $ 24,648 4.00% $ 30,856 5.00%
American Banking Company $ 9,767 8.30% $ 4,707 4.00% $ 5,884 5.00%
Heritage Community Bank $ 3,418 8.72% $ 1,568 4.00% $ 1,960 5.00%
Bank of Thomas County $ 2,757 7.62% $ 1,447 4.00% $ 1,809 5.00%
Citizens Security Bank $ 11,137 9.64% $ 4,622 4.00% $ 5,777 5.00%
Cairo Banking Company $ 6,707 8.95% $ 2,998 4.00% $ 3,747 5.00%
Southland Bank $ 8,985 7.16% $ 5,020 4.00% $ 6,274 5.00%
Central Bank and Trust $ 4,753 8.54% $ 2,226 4.00% $ 2,783 5.00%
First National Bank of
South Georgia $ 5,249 9.46% $ 2,219 4.00% $ 2,774 5.00%
Merchants and Farmers Bank $ 4,195 10.13% $ 1,656 4.00% $ 2,071 5.00%
</TABLE>
NOTE 15. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used by the Company in
estimating its fair value disclosures for financial instruments. In
cases where quoted market prices are not available, fair values are
based on estimates using discounted cash flow methods. Those methods
are significantly affected by the assumptions used, including the
discount rates and estimates of future cash flows. In that regard,
the derived fair value estimates cannot be substantiated by comparison
to independent markets and, in many cases, could not be realized in
immediate settlement of the instrument. The use of different
methodologies may have a material effect on the estimated fair value
amounts. Also, the fair value estimates presented herein are based on
pertinent information available to management as of December 31, 1997
and 1996. Such amounts have not been revalued for purposes of these
financial statements since those dates and, therefore, current
estimates of fair value may differ significantly from the amounts
presented herein.
F-36
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 15. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
The following methods and assumptions were used by the Company in
estimating fair values of financial instruments as disclosed herein:
CASH, DUE FROM BANKS, AND FEDERAL FUNDS SOLD:
The carrying amounts of cash, due from banks, and Federal funds sold
approximate their fair value.
AVAILABLE FOR SALE AND HELD TO MATURITY SECURITIES:
Fair values for securities are based on quoted market prices. The
carrying values of equity securities with no readily determinable
fair value approximate fair values.
LOANS:
For variable-rate loans that reprice frequently and have no
significant change in credit risk, fair values are based on carrying
values. For other loans, the fair values are estimated using
discounted cash flow methods, using interest rates currently being
offered for loans with similar terms to borrowers of similar credit
quality. Fair values for impaired loans are estimated using
discounted cash flow methods or underlying collateral values.
DEPOSITS:
The carrying amounts of demand deposits, savings deposits, and
variable-rate certificates of deposit approximate their fair values.
Fair values for fixed-rate certificates of deposit are estimated
using discounted cash flow methods, using interest rates currently
being offered on certificates.
OTHER BORROWINGS:
The carrying amounts of the Company's other borrowings approximate
their fair value.
F-37
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 15. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
OFF-BALANCE SHEET INSTRUMENTS:
Fair values of the Company's off-balance sheet financial instruments
are based on fees charged to enter into similar agreements. However,
commitments to extend credit and standby letters of credit do not
represent a significant value to the Company until such commitments
are funded. The Company has determined that these instruments do not
have a distinguishable fair value and no fair value has been
assigned.
The carrying value and estimated fair value of the Company's
financial instruments were as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1997 DECEMBER 31, 1996
------------------------------ ------------------------------
CARRYING FAIR CARRYING FAIR
AMOUNT Value AMOUNT Value
------------- ------------- ------------- -------------
(DOLLARS IN THOUSANDS)
----------------------------------------------------------------
<S> <C> <C> <C> <C>
Financial assets:
Cash and short-term investments $ 37,151 $ 37,151 $ 51,521 $ 51,521
============= ============= ============= =============
Investments in securities $ 123,219 $ 123,776 $ 135,266 $ 135,514
============= ============= ============= =============
Loans $ 490,244 $ 505,637 $ 452,844 $ 438,263
Allowance for loan losses (7,627) - (7,273) -
------------- ------------- ------------- -------------
Loans, net $ 482,617 $ 505,637 $ 445,571 $ 438,263
============= ============= ============= =============
Financial liabilities:
Noninterest-bearing demand $ 90,109 $ 90,109 $ 87,006 $ 87,006
Interest-bearing demand 128,294 128,294 125,255 125,255
Savings 46,715 46,715 45,269 45,269
Time deposits 335,593 343,990 320,375 322,450
------------- ------------- ------------- -------------
Total deposits $ 600,711 $ 609,108 $ 577,905 $ 579,980
============= ============= ============= =============
Federal funds purchased and securities
sold under agreements to repurchase $ 660 $ 660 $ 997 $ 997
============= ============= ============= =============
Other borrowings $ 15,400 $ 15,400 $ 24,200 $ 24,200
============= ============= ============= =============
</TABLE>
F-38
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 16. CONDENSED FINANCIAL INFORMATION OF ABC BANCORP
(PARENT COMPANY ONLY)
<TABLE>
<CAPTION>
CONDENSED BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
(DOLLARS IN THOUSANDS)
1997 1996
------------- -------------
<S> <C> <C>
ASSETS
Cash $ 2,262 $ 2,081
Investment in subsidiaries 67,172 62,043
Other assets 5,189 5,160
------------- -------------
Total assets $ 74,623 $ 69,284
============= =============
LIABILITIES
Other borrowings $ 5,000 $ 5,000
Other liabilities 1,470 1,314
------------- -------------
Total liabilities 6,470 6,314
------------- -------------
STOCKHOLDERS' EQUITY 68,153 62,970
------------- -------------
Total liabilities and stockholders' equity $ 74,623 $ 69,284
============= =============
</TABLE>
F-39
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 16. CONDENSED FINANCIAL INFORMATION OF ABC BANCORP
(PARENT COMPANY ONLY) (CONTINUED)
<TABLE>
<CAPTION>
CONDENSED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(DOLLARS IN THOUSANDS)
1997 1996 1995
------------- ------------- -------------
<S> <C> <C> <C>
INCOME
Dividends from subsidiaries $ 7,911 $ 5,358 $ 2,423
Interest 63 44 145
Fee income 5,392 2,953 2,772
Other income 446 111 25
------------- ------------- -------------
Total income 13,812 8,466 5,365
------------- ------------- -------------
EXPENSE
Interest 353 230 114
Amortization and depreciation 567 477 485
Merger and acquisition expense 406 708 -
Other expense 6,365 4,408 2,997
------------- ------------- -------------
Total expense 7,691 5,823 3,596
------------- ------------- -------------
Income before income tax benefits
and equity in undistributed earnings
of subsidiaries 6,121 2,643 1,769
INCOME TAX BENEFITS 828 889 117
------------- ------------- -------------
Income before equity in undistributed
earnings of subsidiaries 6,949 3,532 1,886
EQUITY IN UNDISTRIBUTED EARNINGS
OF SUBSIDIARIES 497 3,626 4,482
------------- ------------- -------------
Net income $ 7,446 $ 7,158 $ 6,368
============= ============= =============
</TABLE>
F-40
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 16. CONDENSED FINANCIAL INFORMATION OF ABC BANCORP
(PARENT COMPANY ONLY) (CONTINUED)
<TABLE>
<CAPTION>
CONDENSED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(DOLLARS IN THOUSANDS)
1997 1996 1995
------------- ------------- -------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 7,446 $ 7,158 $ 6,368
------------- ------------- -------------
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 208 117 175
Amortization of intangible assets 359 360 310
Undistributed earnings of subsidiaries (497) (3,626) (4,482)
(Increase) decrease in interest receivable 6 10 (9)
Decrease in interest payable 79 (11) -
Increase (decrease) in taxes payable 199 (169) (148)
Provision for deferred taxes (231) (38) 14
(Increase) decrease in due from subsidiaries 136 (333) (56)
Other prepaids, deferrals and accruals, net 51 (240) (87)
------------- ------------- -------------
Total adjustments 310 (3,930) (4,283)
------------- ------------- -------------
Net cash provided by operating activities 7,756 3,228 2,085
------------- ------------- -------------
INVESTING ACTIVITIES
(Increase) decrease in interest-bearing deposits - 2,060 (560)
in banks
Purchases of premises and equipment (935) (482) (281)
Proceeds from sale of premises - 10 17
Contribution of capital to subsidiary bank (4,200) - -
Cash paid for purchased subsidiary - (6,216) -
Proceeds from maturities of securities
held t0 maturity 200 - -
------------- ------------- -------------
Net cash used in investing activities (4,935) (4,628) (824)
------------- ------------- -------------
</TABLE>
F-41
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 16. CONDENSED FINANCIAL INFORMATION OF ABC BANCORP
(PARENT COMPANY ONLY) (CONTINUED)
<TABLE>
<CAPTION>
CONDENSED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(DOLLARS IN THOUSANDS)
1997 1996 1995
------------- ------------- -------------
<S> <C> <C> <C>
FINANCING ACTIVITIES
Proceeds from other borrowings $ - $ 5,000 $ -
Repayment of other borrowings - (2,200) (150)
Proceeds from exercise of stock options - - 125
Proceeds from exercise of stock options
of pooled subsidiaries - 254 85
Treasury stock transactions, net - 26 (1)
Purchase of fractional shares (7) (7) (3)
Dividends paid (2,633) (1,763) (1,395)
------------- ------------- -------------
Net cash provided by (used in)
financing activities (2,640) 1,310 (1,339)
------------- ------------- -------------
Net increase (decrease) in cash 181 (90) (78)
Cash at beginning of year 2,081 2,171 2,249
------------- ------------- -------------
Cash at end of year $ 2,262 $ 2,081 $ 2,171
============= ============= =============
SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION
Cash paid during the year for interest $ 274 $ 241 $ 114
</TABLE>
F-42
<PAGE>
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF
ABC BANCORP
(A GEORGIA CORPORATION)
I.
The name of the corporation is ABC Bancorp (the "Corporation").
II.
Effective the date hereof, Article V of the Articles of Incorporation
is hereby amended to add the following:
"(1) DESIGNATION AND AMOUNT. Of the 5,000,000 authorized shares of
----------------------
Preferred Stock of the Corporation, 175,000 shall be designated as "Series A
Junior Participating Preferred Stock" (the "Series A Preferred Stock") and shall
possess the rights, powers, preferences and limitations set forth herein. Such
number of shares may be increased or decreased by resolution of the Board of
Directors of the Corporation (the "Board of Directors" or the "Board"); provided
--------
that no decrease shall reduce the number of shares of Series A Preferred Stock
to a number less than the number of shares then outstanding plus the number of
shares reserved for issuance upon the exercise of outstanding options, rights or
warrants or upon the conversion of any outstanding options, rights or warrants
or upon the conversion of any outstanding securities issued by the Corporation
convertible into Series A Preferred Stock.
(2) DIVIDENDS AND DISTRIBUTIONS.
---------------------------
(A) Subject to the rights of the holders of any shares of any series
of Preferred Stock (or any similar stock) ranking prior and superior to the
Series A Preferred Stock with respect to dividends, the holders of shares
of Series A Preferred Stock, in preference to the holders of Common Stock,
par value $1.00 per share (the "Common Stock"), of the Corporation, and of
any other junior stock, shall be entitled to receive, when, as and if
declared by the Board of Directors out of funds legally available for the
purpose, quarterly dividends payable in cash on the first day of March,
June, September and December in
<PAGE>
each year (each such date being referred to herein as a "Quarterly Dividend
Payment Date"), commencing on the first Quarterly Dividend Payment Date
after the first issuance of a share or fraction of a share of Series A
Preferred Stock, in an amount per share (rounded to the nearest cent) equal
to the greater of (a) $1.00 or (b) subject to the provision for adjustment
hereinafter set forth, 100 times the aggregate per share amount of all cash
dividends, and 100 times the aggregate per share amount (payable in kind) of
all non-cash dividends or other distributions, other than a dividend payable
in shares of Common Stock or a subdivision of the outstanding shares of
Common Stock (by reclassification or otherwise), declared on the Common
Stock since the immediately preceding Quarterly Dividend Payment Date or,
with respect to the first Quarterly Dividend Payment Date, since the first
issuance of any share or fraction of a share of Series A Preferred Stock.
In the event the Corporation shall at any time declare or pay any dividend
on the Common Stock payable in shares of Common Stock, or effect a
subdivision or combination or consolidation of the outstanding shares of
Common Stock (by reclassification or otherwise than by payment of a dividend
in shares of Common Stock) into a greater or lesser number of shares of
Common Stock, then in each such case the amount to which holders of shares
of Series A Preferred Stock were entitled immediately prior to such event
under clause (b) of the immediately preceding sentence shall be adjusted by
multiplying such amount by a fraction, the numerator of which is the number
of shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(B) The Corporation shall declare a dividend or distribution on the
Series A Preferred Stock as provided in paragraph (A) of this Section
immediately after it declares a dividend or distribution on the Common Stock
(other than a dividend payable in shares of Common Stock); provided that, in
the event no dividend or distribution shall have been declared on the Common
Stock during the period between any Quarterly Dividend Payment Date and the
next subsequent Quarterly Dividend Payment Date, a dividend of $1.00 per
share on the Series A Preferred Stock shall nevertheless be payable on such
subsequent Quarterly dividend Payment Date.
(C) Dividends shall begin to accrue and be cumulative on outstanding
shares of Series A Preferred Stock from the Quarterly Dividend Payment Date
next preceding the date of issue of such shares, unless the date of issue of
such shares is prior to the record date for the first Quarterly Dividend
Payment Date, in which case dividends on such shares shall begin to accrue
from the date of issue of such shares, or unless the date of issue is a
Quarterly Dividend Payment Date or is a date after the record date for the
determination of holders of shares of Series A Preferred Stock entitled to
receive a quarterly dividend and before such quarterly Dividend Payment
Date, in either of which events such dividends shall begin to accrue and be
cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid
dividends shall not bear interest. Dividends
A-2
<PAGE>
paid on the shares of Series A Preferred Stock in an amount less than the
total amount of such dividends at the time accrued and payable on such
shares shall be allocated pro rata on a share-by-share basis among all such
shares at the time outstanding. The Board of Directors may fix a record
date for the determination of holders of shares of Series A Preferred Stock
entitled to receive payment of a dividend or distribution declared thereon,
which record date shall not be more than 60 days prior to the date fixed for
the payment thereof.
(3) VOTING RIGHTS. The holders of shares of Series A Preferred Stock shall
-------------
have the following voting rights:
(A) Subject to the provision for adjustment hereinafter set forth, each
share of Series A Preferred Stock shall entitled the holder thereof to 100
votes on all matters submitted to a vote of the shareholders of the
Corporation. In the event the Corporation shall at any time declare or pay
any dividend on the Common Stock payable in shares of Common Stock, or
effect a subdivision or combination or consolidation of the outstanding
shares of Common Stock (by reclassification or otherwise than by payment of
a dividend in shares of Common Stock) into a greater or lesser number of
shares of Common Stock, then in each such case the number of votes per share
to which holders of shares of Series A Preferred Stock were entitled
immediately prior to such event shall be adjusted by multiplying such number
by a fraction, the numerator of which is the number of shares of Common
Stock outstanding immediately after such event and the denominator of which
is the number of shares of common Stock that were outstanding immediately
prior to such event.
(B) Except as otherwise provided herein, in any other Articles of
Amendment creating a series of Preferred Stock or any similar stock, or by
law, the holders of shares of Series A Preferred Stock and the holders of
shares of Common Stock and any other capital stock of the Corporation having
general voting rights shall vote together as one class on all matters
submitted to a vote of shareholders of the Corporation.
(C) Except as set forth herein, or as otherwise provided by law,
holders of Series A Preferred Stock shall have no special voting rights and
their consent shall not be required (except to the extent they are entitled
to vote with holders of Common Stock as set forth herein) for taking any
corporate action.
(4) CERTAIN RESTRICTIONS. Whenever quarterly dividends or other dividends
--------------------
or distributions payable on the Series A Preferred Stock as provided in Section
2 are in arrears, thereafter and until all accrued and unpaid dividends and
distributions, whether or not declared, or shares of Series A Preferred Stock
outstanding shall have been paid in full, the Corporation shall not:
A-3
<PAGE>
(i) declare or pay dividends, or make any other distributions, on
any shares of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series A Preferred Stock;
(ii) declare or pay dividends,or make any other distributions, on
any shares of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Preferred
Stock, except dividends paid ratably on the Series A Preferred Stock and
all such parity stock on which dividends are payable or in arrears in
proportion to the total amounts to which the holders of all such shares
are then entitled;
(iii) redeem or purchase or otherwise acquire for consideration
shares of any stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series A Preferred Stock,
provided that the Corporation may at any time redeem, purchase or
otherwise acquire shares of any such junior stock in exchange for shares
of any stock of the Corporation ranking junior (either as to dividends
or upon dissolution, liquidation or winding up) to the Series A
Preferred Stock; or
(iv) redeem or purchase or otherwise acquire for consideration any
shares of Series A Preferred Stock, or any shares of stock ranking on a
parity with the Series A Preferred Stock, except in accordance with a
purchase offer made in writing or by publication (as determined by the
Board of Directors) to all holders of such shares upon such terms as the
Board of Directors after consideration of the respective annual dividend
rates and other relative rights and preferences of the respective series
and lasses, shall determine in good faith will result in fair and
equitable treatment among the respective series or classes.
(B) The Corporation shall not permit any subsidiary of the Corporation
to purchase or otherwise acquire for consideration any shares of stock of
the Corporation unless the Corporation could, under paragraph (A) of this
Section, purchase or otherwise acquire such shares at such time and in such
manner.
(5) REACQUIRED SHARES. Any shares of Series A Preferred Stock purchased or
-----------------
otherwise acquired by the Corporation in any manner whatsoever shall be retired
and cancelled promptly after the acquisition thereof. All such shares shall
upon their cancellation become authorized but unissued shares of Preferred Stock
and may be reissued as part of a new series of Preferred Stock subject to the
conditions and restrictions on issuance set forth herein, in the Articles of
Incorporation, or in any other Articles of Amendment creating a series of
Preferred Stock or any similar stock or as otherwise required by law.
A-4
<PAGE>
(6) LIQUIDATION, DISSOLUTION OR WINDING UP. Upon any liquidation,
--------------------------------------
dissolution or winding up of the Corporation, no distribution shall be made (1)
to the holders of shares of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series A Preferred Stock unless,
prior thereto, the holders of shares of Series A Preferred Stock shall have
received $100 per share, plus an amount equal to accrued and unpaid dividends
and distributions thereon, whether or not declared, to the date of such payment
provided that the holders of shares of Series A Preferred Stock shall be
entitled to receive an aggregate amount per share subject to the provision for
adjustment hereinafter set forth, equal to 100 times the aggregate amount to be
distributed per share to holders of shares of Common Stock, or (2) to the
holders of shares of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Preferred Stock,
except distributions made ratably on the Series A Preferred Stock and all such
parity stock in proportion to the total amounts to which the holders of all such
shares are entitled upon such liquidation, dissolution or winding up. In the
event the Corporation shall at any time declare or pay any dividend on the
Common Stock payable in shares of Common Stock, or effect a subdivision or
combination or consolidation of the outstanding share of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common Stock then in each
such case the aggregate amount to which holders of share of Series A Preferred
Stock were entitled immediately prior to such event under the proviso in clause
(1) of the immediately preceding sentence shall be adjusted by multiplying such
amount by a fraction the numerator of which is the number of shares of Common
Stock outstanding immediately after such event and the denominator of which is
the number of shares of Common Stock that were outstanding immediately prior to
such event.
(7) CONSOLIDATION, MERGER, ETC. In case the Corporation shall enter into
--------------------------
any consolidation, merger, combination or other transaction in which the shares
of Common Stock are exchanged for or changed into other stock or securities,
cash and/or any other property, then in any such case each share of Series A
Preferred Stock shall at the same time be similarly exchanged or changed into an
amount per share, subject to the provision for adjustment hereinafter set forth,
equal to 100 times the aggregate amount of stock, securities, cash and/or any
other property (payable in kind), as the case may be, into which or for which
each share of Common Stock is changed or exchanged. In the event the
Corporation shall at any time declare or pay any dividend on the Common Stock
payable in shares of Common Stock, or effect a subdivision or combination or
consolidation of the outstanding shares of Common Stock (by reclassification or
otherwise than by payment of a dividend in shares of Common Stock) into a
greater or lesser number of shares of Common Stock, then in each such case the
amount set forth in the immediately preceding sentence with respect to the
exchange or change of shares of Series A Preferred Stock shall be adjusted by
multiplying such amount by a fraction, the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
A-5
<PAGE>
(8) NO REDEMPTION. The shares of Series A Preferred Stock shall not be
-------------
redeemable.
(9) RANK. The Series A Preferred Stock shall rank, with respect to the
----
payment of dividends and the distribution of assets, junior to all series of any
other class of the Corporation's Preferred Stock.
(10) AMENDMENT. The Articles of Incorporation of the Corporation shall not
---------
be amended in any manner which would materially alter or change the powers,
preferences or special rights of the Series A Preferred Stock so as to affect
them adversely without the affirmative vote of the holders of at least two-
thirds of the outstanding shares of Series A Preferred Stock, voting together as
a single class."
III.
All other provisions of the Articles of Incorporation shall remain in
full force and effect.
IV.
This Amendment was duly adopted by the Board of Directors of the Corporation
without shareholder approval (which was not required) in accordance with the
provisions of Section 14-2-602(d) of the Georgia Business Corporation Code
effective on the 17th day of February, 1998.
A-6
<PAGE>
IN WITNESS WHEREOF, these Articles of Amendment have been signed by an
authorized officer of the Corporation this ______ day of February, 1998.
ABC BANCORP
By: ________________________________
Kenneth J. Hunnicutt
President and Chief Executive Officer
[SEAL]
ATTEST:
By: ___________________________
Sara R. Hall
Secretary
<PAGE>
EXHIBIT 3.6
FORM OF AMENDMENT TO BYLAWS
Section 3. Notice of Meeting. Written notice of each annual or special
-----------------------------
meeting of shareholders, stating the date, time and place of such meeting, and
the purpose of any special meeting, shall be given personally or mailed to each
shareholder of record and entitled to vote at or to notice of such meeting at
his or her address shown on the books of the Corporation not less than ten (10)
nor more than sixty (60) days prior to such meeting unless such shareholder
waives notice of such meeting. Attendance of a shareholder at any annual or
special meeting thereof shall constitute a waiver of notice of such meeting and
of all objections to the place and time of such meeting, or the manner in which
it has been called or convened, except when a shareholder attends such meeting
solely for the purpose of stating at the beginning of such meeting any objection
such shareholder has to the transaction of any business. Notice need not be
given to any shareholder who executes a waiver of notice, in person or by proxy,
either before or after any annual or special meeting. Neither the business
transacted at, nor the purpose of, any annual or special meeting need be stated
in the waiver of notice of such meeting, except that, with respect to a waiver
of notice of an annual or special meeting at which a plan of merger or
consolidation, amendment of the Corporation's Articles of Incorporation, sale of
assets requiring shareholder approval or any other action that would entitle
shareholders to dissent under the Georgia Business Corporation Code is
considered, information as required by the Georgia Business Corporation Code
must be delivered to the shareholder prior to his or her execution of the waiver
of notice or the waiver itself must conspicuously and specifically waive the
right to such information. No notice need be given of the date, time and place
of the reconvening of any adjourned annual or special meeting if the date, time
and place to which such meeting is adjourned are announced at the adjourned
meeting; provided, however, that if a new record date is fixed for the adjourned
-------- -------
meeting, notice of the adjourned meeting must be given to persons who are
shareholders as of the new record date.
Section 4. Record Date. In order that the Corporation may determine the
-----------------------
shareholders entitled to notice of or to vote at any annual or special meeting
of shareholders or any adjournment thereof, or to express consent to corporate
action in writing without a meeting, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock or
for the purpose of any other lawful action, the board of directors may fix, in
advance, a record date, which shall not be more than 70 days and, in case of a
meeting of shareholders, not less than 10 days prior to the date on which the
particular action requiring such determination of shareholders is to be taken.
If no record date is fixed for the determination of shareholders entitled to
notice of or to vote at any annual or special meeting of shareholders, the
record date shall be at the close of business on the day next preceding the day
on which the notice is given, or, if notice is waived, at the close of business
on the day next preceding the day on which such meeting is held. If no record
date is fixed for other purposes, the record date shall be at the close of
business on the day next preceding the day on which the board of directors
adopts the resolution relating thereto. A determination of shareholders of
record entitled to notice of or to vote at an annual or special meeting of
shareholders shall apply to any adjournment of such meeting unless the board of
directors shall fix a new record date for the adjourned meeting.
<PAGE>
EXHIBIT 10.15
PURCHASE AND ASSUMPTION AGREEMENT
BETWEEN
NATIONSBANK, N.A. (SOUTH)
AND
ABC BANCORP
<PAGE>
PURCHASE AND ASSUMPTION AGREEMENT
---------------------------------
ARTICLE I - TRANSFER OF ASSETS AND LIABILITIES
Section 1.1. Transferred Assets
Section 1.2. Purchase Price
Section 1.3. Deposit Liabilities
Section 1.4. Loans Transferred
Section 1.5. Safe Deposit Business
Section 1.6. Employee Matters
Section 1.7. Records and Data Processing
Section 1.8. Security
Section 1.9. Taxes and Fees; Proration of Certain Expenses
Section 1.10. Real Property
ARTICLE II - CLOSING AND EFFECTIVE TIME
Section 2.1. Effective Time
Section 2.2. Closing
Section 2.3. Post-Closing Adjustments
ARTICLE III - INDEMNIFICATION
Section 3.1. Seller's Indemnification of Purchaser
Section 3.2. Purchaser's Indemnification of Seller
Section 3.3. Claims for Indemnity
Section 3.4. Limitations on Indemnification
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF SELLER
Section 4.1. Corporate Organization
Section 4.2. No Violation
Section 4.3. Corporate Authority
Section 4.4. Enforceable Agreement
Section 4.5. No Brokers
Section 4.6. Personal Property
Section 4.7. Real Property
Section 4.8. Condition of Property
Section 4.9. Limitation of Representations and Warrants
<PAGE>
ARTICLE V - REPRESENTATIONS AND WARRANTIES OF PURCHASER
Section 5.1. Corporate Organization
Section 5.2. No Violation
Section 5.3. Corporate Authority
Section 5.4. Enforceable Agreement
Section 5.5. No Brokers
ARTICLE VI - OBLIGATIONS OF PARTIES PRIOR TO AND AFTER EFFECTIVE TIME
Section 6.1. Full Access
Section 6.2. Delivery of Magnetic Media Records
Section 6.3. Application for Approval to Effect Purchase of Assets and
Assumption of Liabilities
Section 6.4. Conduct of Business; Maintenance of Properties
Section 6.5. No Solicitation by Seller
Section 6.6. No Solicitation by Purchaser
Section 6.7. Further Actions
Section 6.8. Fees and Expenses
Section 6.9. Breaches with Third Parties
Section 6.10. Insurance
Section 6.11. Public Announcements
Section 6.12. Tax Reporting
ARTICLE VII - CONDITIONS TO PURCHASER'S OBLIGATIONS
Section 7.1. Representations and Warranties True
Section 7.2. Obligations Performed
Section 7.3. No Adverse Litigation
Section 7.4. Regulatory Approval
ARTICLE VIII - CONDITIONS TO SELLER'S OBLIGATIONS
Section 8.1. Representations and Warranties True
Section 8.2. Obligations Performed
Section 8.3. No Adverse Litigation
Section 8.4. Regulatory Approval
ARTICLE IX - TERMINATION
Section 9.1. Methods of Termination
Section 9.2. Procedure Upon Termination
Section 9.3. Payment of Expenses
<PAGE>
ARTICLE X - MISCELLANEOUS PROVISIONS
Section 10.1. Amendment and Modification
Section 10.2. Waiver of Extension
Section 10.3. Assignment
Section 10.4. Confidentiality
Section 10.5. Addresses for Notices, Etc.
Section 10.6. Counterparts
Section 10.7. Headings
Section 10.8. Governing Law
Section 10.9. Sole Agreement
Section 10.10. Severability
Section 10.11. Parties in Interest
<PAGE>
PURCHASE AND ASSUMPTION AGREEMENT
---------------------------------
THIS AGREEMENT, dated as of February 26, 1997 by and between NATIONSBANK,
N.A.(South) a national banking association having its principal offices in
Atlanta, Georgia("Seller"), and ABC BANCORP a Georgia Corporation having its
principal offices in Moultrie, Georgia ("Purchaser");
W I T N E S S E T H:
-------------------
WHEREAS, Seller wishes to divest, upon the terms and conditions set forth
herein, certain assets and certain deposit and liabilities of the following
office (collectively, the "Banking Center"):
Douglas Main
100 South Pearl Avenue
Douglas, Georgia 31533-3836
(Coffee County)
WHEREAS, Purchaser wishes to buy such assets and assume such liabilities
upon the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and mutual agreements
hereinafter set forth, Seller and Purchaser agree as follow:
ARTICLE I
---------
TRANSFER OF ASSETS AND LIABILITIES
----------------------------------
Section 1.1. Transferred Assets.
- -------------------------------
(a) As of the Effective Time (as defined in Section 2.1 below) and upon
the terms and conditions set forth herein, Seller will sell, assign,
transfer, convey and deliver to Purchaser, and Purchaser will purchase
from Seller, all of the following assets associated with the Banking
Center and identified in this Agreement and the Exhibits hereto, and
not otherwise excluded from sale pursuant to the provisions of
Subsection 1.1(b) below:
(1) subject to Section 1.10 hereof, all transferable right, title and
interest of Seller in and to all real estate, fixtures and
improvements thereon at the Banking Center (the "Real Property"),
together with all rights and appurtenances pertaining thereto;
(2) except as provided in section 1.1(b), the furniture, equipment
and other tangible personal property located on or affixed to the
Real Property (the "Personal Property");
1
<PAGE>
(3) all leases affecting the Banking Center, including all equipment
leases for equipment located at the Banking Center (the
"Equipment Leases");
(4) all safe deposit contracts and leases for the safe deposit boxes
located at the Banking Center as of the Effective Time (the "Safe
Deposit Contracts");
(5) all loans transferred pursuant to Section 1.4;
(6) all coins and currency located at the Banking Center as of the
Effective Time (the "Coins and Currency").
(7) all maintenance, service, operating and other contracts or
agreements relating to the operation of the Banking Center (to
the extent that such contracts or agreements by their terms or
under applicable law are assignable to Purchaser); and
(8) except as otherwise provided herein, all business of the Banking
Center related to the transferred assets referred to in Section
1.1(a) and the goodwill associated therewith.
(b) Excluded from the assets, properties and rights being transferred,
conveyed and assigned to Purchaser under this Agreement are the assets
listed on Exhibit 1.1(b) hereto, debit and credit card merchant
--------------
services agreements related to customers of the Banking Center, assets
related to Seller's group banking program, Seller's rights in and to
the name "NationsBank, N.A." and any of Seller's corporate logos,
trademarks, trade names, signs, paper stock, forms and other supplies
containing any such logos, trademarks or trade names (the "Excluded
Assets"). Seller shall coordinate with Purchaser to remove the
Excluded Assets from the Banking Center on or prior to the Effective
Time. Seller shall remove the Excluded Assets at its own cost and,
apart from making any repairs necessitated by avoidable material
damage to the Real Property or Seller's negligence in removing the
Excluded Assets, Seller shall be under no obligation to restore the
Banking Center premises to their original condition, which shall be
the responsibility of Purchaser.
Section 1.2. Purchase Price.
- ----------- --------------
(a) As consideration for the purchase of the Banking Center, Purchaser
shall pay Seller a purchase price equal to the sum of the following:
(1) Two times Net Book Value (as defined in Section 1.2(d) hereof) as
of the Effective Time for the Personal Property at the Banking
Center;
(2) Two times tax value as of the Effective Time for the Real
Property;
2
<PAGE>
(3) A premium for the Deposit Liabilities (as defined in Section
1.3(a) hereof) and franchise value related to the Banking Center
equal to 9.15% of the Deposit Liabilities;
(4) The Net Book Value (as defined in Section 1.2(d) hereof),
including accrued interest, for the Loans as set forth in Section
1.4 hereof; and
(5) The face amount of the Coins and Currency.
(b) In addition, Purchaser shall assume, as of the Effective Time, all of
the duties, obligations and liabilities of Seller relating to any Real
Property or building leases, the Equipment Leases, the Safe Deposit
Contracts, the Deposit Liabilities (including all accrued interest
relating thereto) and all assignable operating contracts of the
Banking Center (excluding any master contracts); provided, that any
cash items paid by Seller and not cleared prior to the Effective Time
shall be the responsibility of Seller, subject to the terms of Section
1.3 below.
(c) Seller shall prepare a balance sheet (the "Pre-Closing Balance Sheet")
in accordance with generally accepted accounting principles
consistently applied as of a date not earlier than 30 calender days
prior to the Effective Time anticipated by the parties (the "Pre-
Closing Balance Sheet Date") reflecting the assets to be sold and
assigned hereunder and the liabilities to be transferred and assumed
hereunder all based on the book value of such assets and liabilities;
Seller agrees to pay to Purchaser at the Closing (as defined in
Section 2.1 hereof), in immediately available funds, the excess
amount, if any, of the amount of Deposit Liabilities assumed by
Purchaser pursuant to subsection (b) above as reflected by the Pre-
Closing Balance Sheet over the aggregate purchase price computed in
accordance with subsection (a) above, as reflected by the Pre-Closing
Balance Sheet. Purchaser agrees to pay Seller at the Closing, in
immediately available funds, the excess, if any, of the aggregate
purchase price computed in accordance with subsection (a) above, as
reflected by the Pre-Closing Balance Sheet over the amount of Deposit
Liabilities assumed by Purchaser pursuant to subsection (b) above as
reflected by the Pre-Closing Balance Sheet. Amounts paid at Closing
shall be subject to subsequent adjustment based on the Post-Closing
Balance Sheet (as defined in Section 2.3 hereof).
(d) For purposes of this Agreement, "Net Book Value" means the value
determined from the Post-Closing Balance Sheet; provided, however,
that such value shall not include the loan loss reserve attributable
to any Loan (as defined in Section 1.4 hereof) or any general reserve.
Section 1.3. Deposit Liabilities.
- ------------ -------------------
(a) "Deposit Liabilities" shall mean all of Seller's duties, obligations
and liabilities relating to the deposit accounts located at the
Banking Center as of the Effective Time (including accrued but unpaid
or uncredited interest thereon).
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(b) Except for those liabilities and obligations specifically assumed by
Purchaser under 1.2(b) above, Purchaser is not assuming any other
liabilities or obligations. Liabilities not assumed include, but are
not limited to, the following:
(1) Seller's cashier checks, letters of credit, money orders,
interest checks and expense checks issued prior to closing,
consignments of U.S. Government "E" and "EE" bonds and any and
all traveler's checks.
(2) Liabilities or obligations with respect to any litigation, suits,
claims, demands or governmental proceedings commenced or made
known to Seller prior to Closing and related to the Banking
Center.
(3) Deposit accounts associated with lines of credit where the line
of credit is excluded in accordance with Section 1.4(b).
(4) Deposit accounts associated with qualified retirement plans where
Seller is the trustee of such plan or the sponsor of a prototype
plan used by such plan.
(5) Deposit accounts associated with Seller's group banking program,
if any.
(6) Self-directed individual retirement accounts, if any.
(7) Deposit accounts associated with Seller's PC banking program, if
any.
(c) Seller does not represent or warrant that any deposit customers whose
accounts are assumed by Purchaser will become or continue to be
customers of Purchaser after the Effective Time.
(d) Purchaser agrees to pay in accordance with law and customary banking
practices all properly drawn and presented checks, drafts and
withdrawal orders presented to Purchaser by mail, over the counter or
through the check clearing system of the banking industry, by
depositors of the accounts assumed, whether drawn on the checks,
withdrawal or draft forms provided by Seller or by Purchaser, and in
all other respects to discharge, in the usual course of the banking
business, the duties and obligations of Seller with respect to the
balances due and owing to the depositors whose accounts are assumed by
Purchaser.
(e) If, after the Effective Time, any depositor, instead of accepting the
obligation of Purchaser to pay the Deposit Liabilities assumed, shall
demand payment from Seller for all or any part of any such assumed
Deposit Liabilities, Seller shall forward to Purchaser any paper
checks, drafts or withdrawal orders presented to if relating thereto,
and Seller shall not be liable or responsible for making any such
payment; provided, that if Seller shall pay the same, Purchaser agrees
to reimburse Seller for any such payments, and Seller shall not be
deemed to have made any representations or warranties to Purchaser
with respect to any such checks, drafts or withdrawal orders and any
such representations or warranties
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<PAGE>
implied by law are hereby expressly disclaimed. Seller and Purchaser shall
make arrangements to provide for the daily settlement with immediately
available funds by Purchaser of checks, drafts, withdrawal orders, returns
and other items presented to and paid by Seller within 60 calendar days
after the Effective Time and drawn on or chargeable to accounts that have
been assumed by Purchaser; provided, however, that Seller shall be held
harmless and indemnified by Purchaser for acting in accordance with such
arrangements.
(f) Purchaser agrees, at its cost and expense, (1) to assign new account
numbers to depositors of assumed accounts, (2) to notify such depositors,
on or before the Effective Time, in a form and on a date mutually
acceptable to Seller and Purchaser, of Purchaser's assumption of Deposit
Liabilities, and (3) to furnish such depositors with checks on the forms of
Purchaser and with instructions to utilize Purchaser's checks and to
destroy unused check, draft and withdrawal order forms of Seller. (If
Purchaser so elects, Purchaser may offer to buy from such depositors their
unused Seller check, draft and withdrawal order forms.) In addition,
subsequent to regulatory approval, Seller will notify its affected
customers by letter of the pending assignment of Seller's deposit accounts
to Purchaser, which notice shall be at Seller's cost and expense and shall
be in a form mutually agreeable to Seller and Purchaser.
(g) Purchaser agrees to pay promptly to Seller an amount equivalent to the
amount of any checks, drafts or withdrawal orders credited to an assumed
account as of the Effective Time that are returned to Seller after the
Effective Time.
(h) As of the Effective Time, Purchaser will assume and discharge Seller's
duties and obligations in accordance with the terms and conditions and
laws, rules and regulations that apply to the certificates, accounts and
other Deposit Liabilities assumed under this Agreement.
(i) As of the Effective Time, Purchaser will maintain and safeguard in
accordance with applicable law and sound banking practices all account
documents, deposit contracts, signature cards, deposit slips, canceled
items and other records related to the Deposit Liabilities assumed under
this Agreement, subject to Seller's right of access to such records as
provided in this Agreement.
(j) Seller will render a final statement to each depositor of an account
assumed under this Agreement as to transactions occurring through the
Effective Time and will comply with all laws, rules and regulations
regarding tax reporting of transactions of such accounts through the
Effective Time; provided, however, that Seller shall not be obligated to
render a final statement on any account not ordinarily receiving periodic
statements in the ordinary course of Seller's business. Seller will be
entitled to impose normal fees and service charges on a per-item basis, but
Seller will not impose periodic fees or blanket charges in connection with
such final statements.
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<PAGE>
(k) As of the Effective Time, Purchaser, at its expense, will notify all
Automated Clearing House ("ACH") originators of the transfers and
assumptions made pursuant to the Agreement; provided, however, that
Seller may, at its option, notify all such originators itself (on
behalf of Purchaser) also at the expense of Purchaser. For a period of
60 calendar days beginning on the Effective Time, Seller will honor
all ACH items related to accounts assumed under this Agreement which
are mistakenly routed or presented to Seller. Seller will make no
charge to Purchaser for honoring such items, and will electronically
transmit such ACH data to Purchaser. If Purchaser cannot receive an
electronic transmission, Seller will make available to Purchaser at
Seller's operations center receiving items from the Automated Clearing
House tapes containing such ACH data. Items mistakenly routed or
presented after the 60-day period should be returned to the presenting
party.
(l) As of the Effective Time, Purchaser agrees to use its best efforts to
collect from Purchaser's customers amounts equal to any Visa or
MasterCard charge backs under the MasterCard and Visa Merchant
Agreements between Seller and its customers and amounts equal to any
deposit items returned to Seller after the Effective Time which were
honored by Seller prior to the Effective Time and remit such amounts
so collected to Seller. Purchaser agrees to immediately freeze and
remit to Seller any funds, up to the amount of the charged back or
returned item that had been previously credited by Seller if such
funds are available at the time of notification by Seller to Purchaser
of the charged back or returned item. Notwithstanding the foregoing,
Purchaser shall have no liability or responsibility to remit funds for
any item or charge that has been improperly returned or charged to
Seller. Solely for the purposes of this Section 1.3(l), all references
to Seller shall be deemed to include seller and its assignees.
Section 1.4. Loans Transferred.
- ----------- -----------------
(a) Seller will transfer to Purchaser as of the Effective Time, subject to
the terms and conditions of this Agreement, all of Seller's right,
title and interest in (including all collateral, security agreements,
deeds of trust and financing statements relating thereto) the loans
maintained, serviced and listed in Seller's general ledger as loans of
the Banking Center (collectively, the "Loans"); provided, however, the
Loans shall not include any loans described in subsection (b) below.
Such Loans (as well as any security interest related thereto) shall be
transferred by means of a blanket (collective) assignment and not
individually (except as may be otherwise required by law); provided,
however, that Seller shall prepare and execute one Assignment of Deeds
to Secure Debt, in recordable form, for each county in which deeds of
trust are transferred pursuant to this agreement. Purchaser shall
inform Seller not less than 45 calendar days prior to the Effective
Time of any case in which individual assignments will be required by
law. Seller shall use its best efforts to cooperate with Purchaser to
obtain any such required individual assignment(s) as promptly as
possible. If any such assignment shall not be obtained or if any
attempted assignment would be ineffective or would materially impair
Purchaser's rights under the Loans in
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<PAGE>
question so that Purchaser would not in effect acquire the benefit of all
such rights. Purchaser may (but shall not be required to) put such loans
back to Seller upon written notice given within 30 days of Seller's
notification to Purchaser that such assignment cannot be obtained.
(b) Notwithstanding the provisions of subsection (a) above, the Loans shall not
include:
(1) nonaccruals (which term shall include loans in which the collateral
securing same has been repossessed or in which collection efforts have
been instituted or, claim and delivery or foreclosure proceedings have
been filed);
(2) loans 90 calendar days or more past due;
(3) loans upon which insurance has been fore-placed;
(4) loans in connection with which the borrower has filed a petition for
relief under the United States Bankruptcy Code prior to the Effective
Time; or
(5) loans identified by Purchaser in writing 45 calendar days or more
prior to the Effective Time as not being purchased because of failure
to meet the credit standards of Purchaser.
(c) Seller and Purchaser agree that Purchaser will become the beneficiary of
credit life insurance written on direct consumer installment loans and
coverage will continue to be the obligation of the current insurer after
the Effective Time and for the duration of such insurance as provided under
the terms of the policy or certificate. Seller shall (within the bounds of
applicable law) take whatever actions necessary to make Purchaser the named
beneficiary under such issuance policies from and after the Effective Time.
If Purchaser becomes the beneficiary of credit life insurance written on
direct consumer installment loans, Seller and Purchaser agree to cooperate
in good faith to develop a mutually satisfactory method by which the
current insurer will make rebate payments to and satisfy claims of the
holders of such certificates of insurance after the Effective Time. The
parties obligations in this section are subject to any restrictions
contained in existing insurance contracts as well as applicable laws and
regulations. Seller agrees that after the Effective Time it hold and will
promptly transfer and deliver to the Purchaser, from time to time as and
when received by Seller, any cash, checks with appropriate endorsements
(using its best efforts not to convert such checks into cash), or other
property that Seller may receive on or after the Effective Time with
respect to any insurance proceeds covered by this Section 1.4(c), and upon
Purchaser's reasonable request will account to Purchaser for all such
receipts.
7
<PAGE>
(d) In connection with the transfer of any loans requiring notice to the
borrower, Purchaser and Seller agree to comply with all notice and
reporting requirements of the loan documents or of any law or
regulation.
(e) All Loans transferred to Purchaser shall be valued at their Net Book
Value, such value to include accrued interest.
(f) All Loan will be transferred without recourse and without any
warranties or representations as to their collectibility or the
creditworthiness of any of the obligors of such Loans.
(g) Purchaser will at its expense issue new coupon books for payment of
Loans for which Seller provides coupon books with instructions to
utilize Purchaser's coupons and to destroy coupons furnished by
Seller.
(h) For a period of 30 calendar days after the Effective Time, Seller will
forward to Purchaser loan payments received by Seller. Purchaser shall
reimburse Seller upon demand for checks returned on payments forwarded
to Purchaser; however, to the extent possible, Seller will deduct the
amount of such returned checks from payments received and shall settle
with Purchaser by an official check.
(i) As of the Effective Time, Seller shall transfer and assign all files,
documents and records related to the Loans to Purchaser, and Purchaser
will be responsible for maintaining and safeguarding all such
materials in accordance with applicable law and sound banking
practices.
(j) If the Balance due on any Loan purchased pursuant to this Section 1.4
has been reduced by Seller as a result of a payment by check received
prior to the Effective Time, which item is returned after the
Effective Time, the asset value represented by the Loan transferred
shall be correspondingly increased and an amount in cash equal to such
increase shall be paid by Purchaser to Seller promptly upon demand.
(k) Seller shall grant to Purchaser as of the Effective Time a limited
power of attorney, in substantially the form attached hereto as
Exhibit 1.4(k) (the "Power of Attorney").
Section 1.5. Safe Deposit Business.
- ------------ ---------------------
(a) As of the Effective Time, Purchaser will assume and discharge Seller's
obligations with respect to the safe deposit box business at the
Banking Center in accordance with the terms and conditions of
contracts or rental agreements related to such business, and Purchaser
will maintain all facilities necessary for the use of such safe
deposit boxes by persons entitled to use them.
(b) As of the Effective Time, Seller shall transfer and assign the records
related to such safe deposit box business to Purchaser, and Purchaser
shall maintain and
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<PAGE>
safeguard all such records and be responsible for granting access to
and protecting the contents of safe deposit boxes at the Banking
Center.
(c) Safe deposit box rental payments (not including late payment fees)
collected by Seller before the Effective Time shall be prorated as of
the Effective Time.
(d) Seller agrees to use its best efforts to obtain any necessary consents
of the holders of the safe deposit boxes, and Seller will hold and
will promptly transfer and deliver to the Purchaser, from time to time
as and when received by Seller, any cash, checks with appropriate
endorsements (using its best efforts not to convert such checks into
cash), or other property that Seller may receive on or after the
Effective Time with respect to any safe deposit box rental payments
relating to the Banking Center and will upon Purchaser's reasonable
request account to Purchaser for all such receipts.
Section 1.6. Employee Matters.
- ------------ ----------------
(a) Purchaser shall offer employment to all employees employed by Seller
at the Banking Center as of the Effective Time (the "Employees"), in
their then current functional positions or substantially equivalent
functional positions at each office with remuneration not less than
that on the date of this Agreement (subject to normal salary
increases) and benefits generally equivalent to current levels,
provided that Purchaser shall not be required to provide any benefits
to Employees that are not provided to similarly situated employees of
Purchaser. Except for Purchaser's retirement plan(s). Employees shall
receive full credit for their prior service with Seller under
Purchaser's benefit plans and policies, including its vacation and
sick leave policies. As of the Effective Time, the Employees and their
dependents, if any, previously covered under Seller's health insurance
plan shall be covered under Purchaser's health insurance plan without
being subject to any pre-existing condition limitations or exclusions
except those excluded under Seller's health insurance plan. Employees
shall not be required to satisfy the deductible and employee payments
required by Purchaser's comprehensive medical and/or dental plans for
the calendar year of the Effective Time to the extent of amounts
previously credited during such calendar year under comparable plans
maintained by Seller. Employees shall receive full credit for their
prior service with Seller for purposes of determining their
participation eligibility and vesting rights under Purchaser's
retirement plan(s) benefits under any defined benefit pension plan
maintained by Purchaser shall accrue from the first day of service
with Purchaser and shall be based on the number of years of service
with Purchaser.
Seller shall be responsible for the payment of all employment
compensation and benefits to the Employees, including, without
limitation, all wages and commissions to the Employees accrued through
the Effective Time; provided that, Seller shall not pay for any unused
vacation days, sick leave or holiday pay as of the Effective Time. By
way of illustration and not in limitation or
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derogation of the foregoing, (i) Seller shall be responsible for all
compensation and the payment of any amounts due to the Employees as of
the Effective Time pursuant to any of Seller's bonus or other similar
incentive plans as a result of the employment of the Employees,
provided that in determining compensation, bonuses and other similar
payments due to the Employees for any period ended on or prior to the
Effective Time, Seller shall, if payment thereof will occur after the
Effective Time, waive any requirement that the Employees be employees
of Seller on the date such compensation, bonuses or other similar
payments are paid; (ii) Seller shall be responsible for reporting to
all governmental authorities all employee-related costs and
liabilities of the Employees accruing prior to the Effective Time,
whether payable on or after the Effective Time to the extent required
by law; (iii) Seller shall be responsible for all incurred but
unreported or unpaid medical claims occurring prior to the Effective
Time; provided that a proper claim if filed with the applicable
benefit plan of Seller within 12 months of the date the claim was
incurred and Seller shall be responsible for the cost associated with
any hospital confinement which commences prior to the Effective Time;
(iv) Purchaser shall become responsible for all cost and liabilities
attributable to the Employees accruing after the Effective Time;
provided, however, that Purchaser shall not be responsible for any
-------- -------
liabilities arising under Seller's benefit plans; and (v) effective as
of the Effective Time, Seller shall, and hereby does, release all of
the Employees from any employment and/or confidentiality agreement
previously entered into between Seller and such Employees to the
extent (but only to the extent) necessary for Purchaser to operate the
business acquired from Seller hereunder in the same manner as operated
by Seller prior to the Effective Time.
Seller shall cause the NationsBank Pension Plan and The NationsBank
Retirement Savings Plan to be amended effective as of the date of
Closing to fully (100%) vest the accrued benefits thereunder of all
employees of the Seller on the date of Closing who have become
participants in such plans by that time and who terminate their
employment with the Seller as a result of the transactions
contemplated by this Agreement (the "Affected Participants"). Seller
shall cause the NationsBank Pension Plan and The NationsBank
Retirement Savings Plan to pay the Affected Participants their accrued
benefits under such plans when and as provided in such plans, and for
purposes of determining when such benefits become payable, the
Affected Participants shall be deemed to have separated from service
on the date of Closing.
(b) Seller makes no representations or warranties about whether any of the
Employees will remain employed at the Banking Center after the
Effective Time. Seller will use its best efforts to maintain the
Employees as employees of Seller at the Banking Center until the
Effective Time. Any Employee whose employment shall be terminated for
any reason prior to the Effective Time or who shall elect not to be an
employee of Purchaser shall be dealt with by Seller in its sole and
absolute discretion. Seller agrees that, for a period of 12 months
after the Effective Time, it will not solicit for employment any
Employee who remains employed by Purchaser.
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(c) Purchaser agrees for a period of 12 months after the Effective Time it
will not terminate a transferred Employee without paying to such
Employee a severance benefit no less than the applicable severance
benefit set forth in Exhibit 1.6(c).
--------------
Section 1.7. Records and Data Processing.
- ------------ ---------------------------
(a) As of the Effective Time, Purchaser shall become responsible for
maintaining the files, documents and records referred to in this
Agreement. Purchaser will preserve and safekeep them as required by
applicable law and sound banking practice for the joint benefit of
Seller and Purchaser. After the Effective Time, Purchaser will permit
Seller and its representatives, for reasonable cause, at reasonable
times and upon reasonable notice and at Seller's expense, to examine,
inspect, copy and reproduce any files, documents or records regarding
the assets and liabilities transferred under this Agreement as Seller
deems reasonably necessary.
(b) As of the Effective Time, Seller will permit Purchaser and its
representatives, for reasonable cause, at reasonable times and upon
reasonable notice and at Purchaser's expense, to examine, inspect,
copy and reproduce files, documents or records retained by Seller
regarding the assets and liabilities transferred under this Agreement
as Purchaser deems reasonably necessary.
(c) It is understood that certain of Seller's records may be available
only in the form of photocopies, film copies or other non-original and
non-paper media.
Section 1.8. Security.
- ------------ --------
As of the Effective Time, Purchaser shall be solely responsible for the
security of and insurance on all persons and property located in or about the
Banking Center.
Section 1.9. Taxes and Fees: Proration of Certain Expenses.
- ------------ ---------------------------------------------
Purchaser shall be responsible for the payment of all fees and taxes
related to this transaction; except that Purchaser shall not be responsible for,
or have any liability with respect to, taxes on any income to Seller arising out
of this transaction and Seller agrees that it shall pay, or represents that it
has paid, in a timely manner any and all such income taxes. Except as otherwise
set forth herein (and expressly including pro-rated real and personal property
taxes). Purchaser shall not be responsible for any tax liabilities of Seller
arising from the business or operations of the Banking Center before the
Effective Time, and Seller shall not be responsible for any tax liabilities of
Purchaser arising from the business or operations of the Banking Center after
the Effective Time. Utility payments, telephone charges, real property taxes,
personal property taxes, rent, salaries, deposit insurance premiums, other
ordinary operating expenses of the Banking Center and other expenses related to
the liabilities assumed or assets purchased hereunder shall be prorated between
the parties as of the Effective Time. To the extent any such item has been
prepaid by Seller for a period extending beyond the Effective Time, there shall
be a proportionate monetary adjustment in favor of Seller.
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Section 1.10. Real Property.
- ------------ -------------
(a) Title Matters.
-------------
(i) Seller agrees to deliver to Purchaser as soon as reasonably
possible after the execution of this Agreement copies of all
title information in possession of Seller, including, but not
limited to, title insurance policies, attorneys' opinions on
title, surveys, covenants, deeds, notes and mortgages and
easements relating to the Real Property. Such delivery shall
constitute no warranty by Seller as to the accuracy or
completeness thereof or that Purchaser is entitled to rely
thereon.
(ii) Purchaser agrees to notify Seller in writing within 45 calendar
days after the date of this Agreement of any mortgages,
pledges, material liens, encumbrances, reservations, tenancies,
encroachments, overlaps or other title exceptions (including
but not limited to deeds to secure debt and use financing
statements) or zoning or similar land use violations (excluding
legal but nonconforming uses) related to the Real Property to
which Purchaser reasonably objects (the "Title Defects").
Purchaser agrees that Title Defects shall not include real
property taxes not yet due and payable and easements,
restrictions, tenancies, and rights of way which do not
materially interfere with the use of the Real Property as a
Banking Center. Seller shall make a good faith effort to
correct any such Title Defect to Purchaser's reasonable
satisfaction at least 10 calendar days prior to Closing;
provided, however, that Seller shall not be obligated to bring
any lawsuit or make any payments of money (except to pay liens
that Seller does not dispute in good faith) to cure a Title
Defect. If Seller is unable or unwilling to cure any such Title
Defects to Purchaser's reasonable satisfaction, Purchaser shall
have the option either to terminate this Agreement with respect
to the Banking Center or Banking Center at which the Real
Property having such Title Defects are located or to receive
title in its then existing condition. Upon termination of this
Agreement with respect to any Banking Center or Banking Center
pursuant to this Section 1.10, neither party shall have any
further liability to the other party under this Agreement with
respect to such Banking Center or Banking Center and the
purchase price shall be adjusted accordingly.
(iii) Purchaser shall have the right to update title matters at
Closing for any changes which may have arisen between the date
of Purchaser's original title search. If such update indicates
that any Title Defects have been placed of record since the
date of Purchaser's original title search, and Purchaser
reasonably objects thereto, then Seller may elect to delay the
Closing with respect to the affected Banking Center or Banking
Center for up to 30 calendar days while Seller makes a good
faith effort to cure any such Title Defect to Purchaser's
reasonable satisfaction; provided
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that Seller shall not be obligated to bring any lawsuit or make
any payments of money (except to pay liens that Seller does not
dispute in good faith) to cure a Title Defect. If Seller is
unable or unwilling to cure any such Title Defect within such 30
day period, Purchaser shall have the option to receive title in
the then existing condition or to terminate this Agreement with
respect to such Banking Center or Banking Center, in which event
neither party shall have any further liability to the other party
under this Agreement with respect to such Banking Center or
Banking Center and the purchase price shall be adjusted
accordingly.
(b) Environmental Matters.
---------------------
Purchaser shall have the right to conduct such investigation of
environmental matters with respect to the Real Property as it may
reasonably require and shall report the result of any such
investigation, together with its objections to any material violation
of applicable environmental law which impacts the Real Property or the
use thereof as a banking center, if any, to Seller no later than 45
calendar days after the date of this Agreement; provided, however,
that without the prior written consent of Seller, Purchaser shall not
conduct any ground water monitoring or install any test well or
undertake any other investigation which requires a permit or license
from, or the reporting of the investigation or the results thereof to,
a local or state environmental regulatory authority or the United
Stated Environmental Protection Agency. If Purchaser objects to any
material violation of applicable environmental law which impacts the
Real Property or the use thereof as a banking center, Seller shall
have the right, but not the obligation, to delay the Closing for up
to 30 calendar days while Seller makes a good faith effort to cure
any such material violation of law which is discovered by Purchaser's
investigation. If Seller either refuses to give such written consent
or refuses to cure any material violation of applicable environmental
law relating to the Real Property or the use thereof as a banking
center, Purchaser shall have the option either to purchase the Real
Property in its then existing condition or to terminate this Agreement
with respect to the Banking Center at which the Real Property affected
by such refusal is located in which event neither party shall have any
further liability to the other under this Agreement with respect to
such Banking Center and the purchase price shall be adjusted
accordingly.
ARTICLE II
----------
CLOSING AND EFFECTIVE TIME
--------------------------
Section 2.1. Effective Time.
- ----------- --------------
The purchase of assets and assumption of liabilities provided for in this
Agreement shall occur at a closing (the "Closing") to be held at the offices of
Seller in Atlanta, Georgia at 10:00 a.m. local time within 31 calendar days
following the date of all approvals by regulatory agencies and after all
statutory waiting periods have expired, or at such other place, time or date on
which the parties shall mutually agree. The effective time (the "Effective
Time") shall
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be 2:00 p.m., local time, on the day on which the Closing occurs. It is
understood and agreed that the Closing shall occur on a Thursday.
Section 2.2. Closing.
- ----------- -------
(a) All actions taken and documents delivered at the Closing shall be
deemed to have been taken and executed simultaneously, and no action
shall be deemed taken nor any document delivered until all have been
taken and delivered.
(b) At the Closing, subject to all the terms and conditions of this
Agreement, Seller shall deliver to Purchaser or, in the case of
subsections (b)(5), (6), (7), (9) and (10), make reasonably
available to Purchaser.
(1) A limited warranty deed transferring title to the Real Property
and an Owner's Affidavit in form satisfactory to a title company
to delete the standard exceptions from such company's title
insurance policy, including, without limitation, mechanics and
materialmen's liens and rights of parties in possession;
(2) A Bill of Sale, in substantially the form attached hereto as
Exhibit 2.2(b)(2) (the "Bill of Sale"), transferring to Purchaser
-----------------
all of Seller's interest in the Personal Property and in the
Loans;
(3) An Assignment and Assumption Agreement, in substantially the form
attached hereto as Exhibit 2.2(b)(3) (the "Assignment and
-----------------
Assumption Agreement"), assigning Seller's interest in the
Equipment Leases, the Safe Deposit Contracts, and the Deposit
Liabilities;
(4) Consents from third persons that are required to effect the
assignments set forth in the Assignment and Assumption Agreement,
including, but not limited to, the lessors under the Equipment
Leases (to the extent required by such leases);
(5) Seller's keys to the safe deposit boxes and Seller's records
related to the safe deposit box business at the Banking Center;
(6) Seller's files and records related to the Loans;
(7) Seller's records related to the deposit accounts assumed by
Purchaser;
(8) Immediately available funds in the net amount shown as owing to
Purchaser by Seller on the Closing Statement, if any;
(9) The Coins and Currency;
(10) Such of the other assets to be purchased as shall be capable of
physical delivery;
14
<PAGE>
(11) A certificate of a proper officer of Seller, dated as of the date of
Closing, certifying to the fulfillment of all conditions which are
the obligation of Seller and that all of the representations and
warranties of Seller set forth in this Agreement remain true and
correct in all material respects as of Effective Time;
(12) Certified copies of (A) the Articles of Association and Bylaws of
Seller and (B) a resolution of the Board of Directors of Seller, or
its Executive Committee, approving the sale of the Banking Center
contemplated hereby;
(13) Such certificates and other documents as Purchaser and its counsel
may reasonably require to evidence the receipt by Seller of all
necessary corporate and regulatory authorizations and approvals for
the consummation of the transactions provided for in this Agreement;
(14) A Closing Statement, substantially in the form attached hereto as
Exhibit 2.2(b)(14) (the "Closing Statement");
------------------
(15) An affidavit of Seller certifying that Seller is not a "foreign
person" as defined in the federal Foreign Investment in Real
Property Tax Act of 1980; and
(16) The Power of Attorney.
It is understood that the items listed in subsections b(5) and (9)
shall be transferred after the Banking Center has closed for
business on the date of Closing and that the records listed in
subsections b(6) and (7) will be transferred as soon as possible
after the Closing, but in no event more than five business days
after the Closing.
(c) At the Closing, subject to all the terms and conditions of this Agreement,
Purchaser shall deliver to Seller.
(1) The Assignment and Assumption Agreement;
(2) A certificate and receipt acknowledging the delivery and receipt of
possession of the property and records referred to in this
Agreement;
(3) Immediately available funds in the net amount shown as owing to
Seller by Purchaser on the Closing Statement, if any;
(4) A certificate of a proper officer of Purchaser, dated as of the Date
of Closing, certifying to the fulfillment of all conditions which
are the obligation of Purchaser and that all of the representations
and warranties of Purchaser set forth in this Agreement remain true
and correct in all material respects as of the Effective Time;
15
<PAGE>
(5) Certified copies of (A) the Articles of Incorporation and Bylaws
of the Purchaser and (B) a resolution of the Board of Directors,
or its Executive Committee, of Purchaser approving the purchase
of the Banking Center contemplated hereby;
(6) Such certificates and other documents as Seller and its counsel
may reasonably require to evidence the receipt of Purchaser of
all necessary corporate and regulatory authorizations and
approvals for the consummation of the transactions provided for
in this Agreement; and
(7) The Closing Statement.
(d) All instruments, agreements and certificates described in this Section
2.2 shall be in form and substance reasonably satisfactory to the
parties' respective legal counsel and Purchaser's title company.
Section 2.3 Post-Closing Adjustments.
- ------- ----------------------------
(a) Not later than 15 business days after the Effective Time (the "Post-
Closing Balance Sheet Delivery Date"), Seller shall deliver to
Purchaser a balance sheet dated as of the Effective Time and prepared
in accordance with generally accepted accounting principles
consistently applied reflecting the assets sold and assigned and the
liabilities transferred and assumed hereunder (the "Post-Closing
Balance Sheet"). Additionally, Seller shall deliver to Purchaser a
list of loans purchased, individually identified by account number,
which list shall be appended to the Bill of Sale. Seller shall afford
Purchaser and its accountants and attorneys the opportunity to review
all work papers and documentation used by Seller in preparing the
Post-Closing Balance Sheet. Within 15 business days following the
Post-Closing Balance Sheet Delivery Date (the "Adjustment Payment
Date"), Seller and Purchaser shall meet at the offices of Seller in
Atlanta, Georgia to effect the transfer of any funds as may be
necessary to reflect changes in such assets and liabilities between
the Pre-Closing Balance Sheet and the Post-Closing Balance Sheet
together with interest thereon computed from the Effective Time to the
Adjustment Payment Date at the applicable Federal Funds Rate (as
hereinafter defined).
(b) In the event that a dispute arises as to the appropriate amounts to be
paid to either party on the Adjustment Payment Date, each party shall
pay to the other on such Adjustment Payment Date all amounts other
than those as to which a dispute exists. Any disputed amounts retained
by a party which are later found to be due to the other party shall be
paid to such other party promptly upon resolution with interest
thereon from the Adjustment Payment Date to the date paid at the
applicable Federal Funds Rate.
16
<PAGE>
(c) The Federal Funds Rate shall be the mean of the high and low rates
quoted for Federal Funds in the Money Rates Column of the Wall Street
Journal adjusted as such mean may increase or decrease during the
period between the Effective Time and the Adjustment Payment Date.
ARTICLE III
-----------
INDEMNIFICATION
---------------
Section 3.1. Seller's Indemnification of Purchaser.
- --------------------------------------------------
Seller shall indemnify, hold harmless and defend Purchaser from and against
any breach by Seller or inaccuracy of any representation or warranty contained
herein and all claims, losses, liabilities, demands and obligations, including
reasonable attorneys' fees and expenses, arising out of any actions, suits or
proceedings commenced prior to the Effective Time (other than proceedings to
prevent or limit the consummation of this transaction) relating to operations at
the Banking Center, and, except as otherwise provided in this Agreement, Seller
shall further indemnify, hold harmless and defend Purchaser from and against all
claims, losses, liabilities, demands and obligations, including reasonable
attorneys' fees and expenses, real estate taxes, intangibles and franchise
taxes, sales and use taxes, social security and unemployment taxes, all
accounts payable and operating expenses (including salaries, rents and utility
charges) incurred by Seller prior to the Effective Time and which are claimed or
demanded on or after the Effective Time, or which arise out of any actions,
suits or proceedings commenced on or after the Effective Time and which relate
to operations at the Banking Center prior to the Effective Time.
Section 3.2. Purchaser's Indemnification of Seller.
- --------------------------------------------------
Purchaser shall indemnify, hold harmless and defend Seller from and against
any breach by Purchaser or inaccuracy of any representation or warranty
contained herein and all claims, losses, liabilities, demands and obligations,
including reasonable attorneys' fees and expenses, real estate taxes,
intangibles and franchise taxes, sales and use taxes, social security and
unemployment taxes, all accounts payable and operating expenses (including
salaries, rents and utility charges), which Seller may receive, suffer or incur
in connection with operations and transactions occurring after the Effective
Time and which involve the Banking Center, the assets transferred or the
liabilities assumed pursuant to this Agreement.
Section 3.3. Claims for Indemnity.
- ---------------------------------
(a) A claim for indemnity under Sections 3.1 or 3.2 of this Agreement may
be made by the claiming party at any time prior to 12 months after the
Effective Time by the giving of written notice thereof to the other
party. Such written notice shall set forth in reasonable detail the
basis upon which such claim for indemnity is made. In the event that
any such claim is made within such prescribed 12 month period, the
indemnity relating to such claim shall survive until such claim
17
<PAGE>
is resolved. Claims not made within such 12 month period shall cease
and no indemnity shall be made therefor.
(b) In the event that any person or entity not a party to this Agreement
shall make any demand or claim or file or threaten to file any
lawsuit, which demand, claim or lawsuit may result in any liability,
damage or loss to one party hereto of the kind for which such party is
entitled to indemnification pursuant to Section 3.1 or 3.2 hereof,
then, after written notice is provided by the indemnified party to the
indemnifying party of such demand, claim or lawsuit, the indemnifying
party shall have the option, at its cost and expense, to retain
counsel for the indemnified party to defend any such demand, claim or
lawsuit. In the event that the indemnifying party shall fail to
respond within five calendar days after receipt of such notice of any
such demand, claim or lawsuit, then the indemnified party shall retain
counsel and conduct the defense of such demand, claim or lawsuit as it
may in its discretion deem proper, at the cost and expense of the
indemnifying party. In effecting the settlement of any such demand,
claim or lawsuit, an indemnified party shall act in good faith, shall
consult with the indemnifying party and shall enter into only such
settlement as the indemnifying party shall approve (the indemnifying
party's approval will be implied if it does not respond within ten
calendar days of its receipt of the notice of such settlement offer).
Section 3.4. Limitations on Indemnification.
- -------------------------------------------
Notwithstanding anything to the contrary contained in this Article III, no
indemnification shall be required to be made by either party until the aggregate
amount of all such claims by a party exceeds $50,000. Once such aggregate amount
exceeds $50,000, such party shall thereupon be entitled to indemnification for
all amounts in excess of such $50,000. IN ADDITION, THE PARTIES SHALL HAVE NO
OBLIGATIONS UNDER THIS ARTICLE III FOR ANY CONSEQUENTIAL LIABILITY, DAMAGE OR
LOSS THE INDEMNIFIED PARTY MAY SUFFER AS THE RESULT OF ANY DEMAND, CLAIM OR
LAWSUIT.
ARTICLE IV
----------
REPRESENTATIONS AND WARRANTIES OF SELLER
----------------------------------------
Seller hereby represents and warrants to Purchaser as follows, which
representations and warranties shall survive the Effective Time for a period of
12 months:
Section 4.1. Corporate Organization.
- -----------------------------------
Seller is a national banking association duly organized, validly existing
and in good standing under the laws of the United States. Seller has the
corporate power and authority to own its properties, to carry on its business as
currently conducted and to effect the transactions contemplated herein.
18
<PAGE>
Section 4.2. No Violation.
- ----------- ------------
The Banking Center has been operated in all material respects in accordance
with applicable laws, rules and regulations. Neither the execution and delivery
of this Agreement, nor the consummation of the transactions contemplated herein,
will violate or conflict with (a) Seller's Articles of Association or Bylaws;
(h) any material provision of any material agreement or any other material
restriction of any kind to which Seller is a party or by which Seller is bound;
(c) any material statute, law, decree, regulation or order of any governmental
authority; or (d) any material provision which will result in a default under,
or which cause the acceleration of the maturity of, any material obligation or
loan to which Seller is a party.
Section 4.3. Corporate Authority.
- ----------- -------------------
The execution and delivery of this Agreement, and the consummation of the
transactions contemplated herein, have been duly authorized by Seller's Board of
Directors (or the Executive Committee thereof). No further corporate
authorization is necessary for Seller to consummate the transactions
contemplated hereunder.
Section 4.4. Enforceable Agreement.
- ----------- ---------------------
This Agreement has been duly authorized, executed and delivered by Seller
and is the legal, valid and binding agreement of Seller, enforceable in
accordance with its terms.
Section 4.5. No Brokers.
- ----------- ----------
All negotiations relative to this Agreement and the transactions
contemplated hereby have been carried on by Seller and Purchaser, and there has
been no participation or intervention by any other person, firm or corporation
employed or engaged by or on behalf of Seller in such a manner as to give rise
to any valid claim against Seller or Purchaser for a brokerage commission,
finder's fee or like commisssion.
Section 4.6. Personal Property.
- ----------- -----------------
Seller owns, and will convey to Purchaser at the Closing, all of Seller's
right, title and interest to all of the Personal Property free and clear of any
claims, mortgages, liens, security interests, pledges or encumbrances of any
kind, except as may otherwise be set forth in this Agreement.
Section 4.7. Real Property.
- ----------- -------------
Seller makes the following representations regarding the Real Property:
(a) Except as set forth in Exhibit 4.7, Seller has no knowledge of any
condemnation proceedings pending against the Real Property.
(b) Except as set forth in Exhibit 4.7, Seller has not entered into any
agreement regarding the Real Property, and the Real Property is not
subject to any claim,
19
<PAGE>
demand, suit, lien, proceeding or litigation of any kind, pending or
outstanding, or to the knowledge of Seller, threatened or likely to be
made or instituted, which would in any way be binding upon Purchaser
or its successors or assigns or materially affect or limit Purchaser's
or its successors' or assigns' use and enjoyment of the Real Property
or which would materially limit or restrict Purchaser's right or
ability to enter into this Agreement and consummate the sale and
purchase contemplated hereby.
(c) Seller has or will have at Closing good and marketable fee simple
title to the Real Property and, at Closing, will own the Real Property
outright subject to no mortgage, pledge, lien, security interest,
lease, charge, encumbrance or conditional sales or other title
retention agreement except for real property taxes not yet due and
payable, and easements and rights of way which do not materially
interfere with the use of the Real Property as a Banking Center.
Purchaser's sole remedy for a breach of the representations and
warranties in this Section 4.7 shall be to elect not to purchase a
Banking Center as provided in Section 1.10(a)(iii).
Section 4.8. Condition of Property.
- ----------- ---------------------
The Real Property and Personal Property to be purchased by Purchaser
hereunder are sold AS IS, WHERE IS, with no warranties or representations
whatsoever, except as may be expressly represented or warranted in this
Agreement.
Section 4.9. Limitation of Representations and Warranties.
- ----------- --------------------------------------------
Except as may be expressly represented or warranted in this Agreement by
Seller, Seller makes no representations or warranties whatsoever with regard to
any asset being transferred to Purchaser or any liability or obligation being
assumed by Purchaser or as to any other matter or thing.
ARTICLE V
---------
REPRESENTATIONS AND WARRANTIES OF PURCHASER
-------------------------------------------
Purchaser hereby represents and warrants to Seller as follows, which
representations and warranties shall survive the Effective Time for a period of
12 months:
Section 5.1. Corporate Organization.
- ----------- ----------------------
Purchaser is a corporation duly organized, validly existing and in good
standing under the laws of the state of Georgia. Purchaser has the corporate
power and authority to own the properties being acquired, to assume the
liabilities being transferred and to effect the transactions contemplated
herein.
20
<PAGE>
Section 5.2. No Violation.
- ------------ ------------
Neither the execution and delivery of this Agreement, nor the consummation
of the transactions contemplated herein, will violate or conflict with (a) the
Articles of Incorporation or Bylaws of Purchaser; any material provision of any
material agreement or any other material restriction of any kind to which
Purchaser is a party or by which Purchaser is bound; (b) any material statute,
law, decree, regulation or order of any governmental authority; or (d) any
material provision which will result in a default under, or cause the
acceleration of the maturity of, any material obligation or loan to which
Purchaser is a party.
Section 5.3. Corporate Authority.
- ------------ -------------------
The execution and delivery of this Agreement, and the consummation of the
transactions contemplated herein, have been duly authorized by the Board of
Directors (or Executive Committee) of Purchaser. No further corporate
authorization on the part of Purchaser is necessary to consummate the
transactions contemplated hereunder.
Section 5.4. Enforceable Agreement.
- ------------ --------------------
This Agreement has been duly authorized, executed and delivered by
Purchaser and is the legal, valid and binding agreement of Purchaser enforceable
in accordance with its terms.
Section 5.5. No Brokers.
- ------------ ---------
All negotiations relative to this Agreement and the transactions
contemplated hereby have been carried on by Seller and Purchaser, and there has
been no participation or intervention by any other person, firm or corporation
employed or engaged by or on behalf of Purchaser in such a manner as to give
rise to any valid claim against Seller or Purchaser for a brokerage commission,
finder's fee or like commission.
ARTICLE VI
----------
OBLIGATIONS OF PARTIES PRIOR TO AND AFTER EFFECTIVE TIME
--------------------------------------------------------
Section 6.1. Full Access.
- ------------ ----------
Seller shall afford to the officers and authorized representatives of
Purchaser, upon prior notice and subject to Seller's normal security
requirements, access to the properties, books and records pertaining to the
Banking Center in order that Purchaser may have full opportunity to make
reasonable investigations, at reasonable times without interfering with the
normal business and operations of the Banking Center, or the affairs of Seller
relating to the Banking Center. The officers of Seller shall furnish Purchaser
with one standard set of such additional financial and operating data and other
information as to its business and properties at the Banking Center, or where
otherwise located, as Purchaser may, from time to time, reasonably request and
as shall be available, including, without limitation, information required for
inclusion in all governmental applications necessary to effect this transaction.
Any additional copies of such information shall be produced and provided at
Purchaser's expense. Nothing in this Section 6.1 shall require Seller to breach
any obligation of confidentiality or to reveal any
21
<PAGE>
proprietary information, trade secrets or marketing or strategic plans. Records,
including credit information, relating to the Loans will be made available for
review by Purchaser no later than 30 calendar days after the execution of this
Agreement. It is understood that certain of Seller's records may be available
only in the form of photocopies, film copies or other non-original and non-paper
media.
Section 6.2. Delivery of Magnetic Media Records.
- ----------- ----------------------------------
Seller shall prepare at its expense and make available to Purchaser at
Seller's data processing center magnetic media records in Seller's field format
not later than 60 calendar days after the execution of this Agreement and
further shall make available to Purchaser such records updated as of the Closing
Date, which records shall contain the information related to the items described
in Subsections 2.2(b)(6) and (b)(7) above. Such updated records shall be made
available at such time after Closing as agreed to by the parties. At its option,
Seller may provide such reports in paper format instead of magnetic media
format.
Section 6.3. Application for Approval to Effect Purchase of Assets and
- ----------- ---------------------------------------------------------
Assumption of Liabilities.
- -------------------------
Within 30 calendar days following the execution of this Agreement,
Purchaser shall prepare and file applications required by law with the
appropriate regulatory authorities for approval to purchase and assume the
aforesaid assets and liabilities, to establish branches at the locations of the
Banking Center, and to effect in all other respects the transactions
contemplated herein. Purchaser agrees to process such applications in a diligent
manner and on a priority basis and to provide Seller promptly with a copy of
such applications as filed (except for any confidential portions thereof) and
all material notices, orders, opinions, correspondence and other documents with
respect thereto, and to use its best efforts to obtain all necessary regulatory
approvals. On the date hereof, Purchaser knows of no reason why such
applications should not receive all such approvals. Purchaser shall promptly
notify Seller upon receipt by Purchaser of notification that any application
provided for hereunder has been denied. Seller shall provide such assistance and
information to Purchaser as shall be reasonably necessary for Purchaser to
comply with the requirements of the applicable regulatory authorities.
Section 6.4. Conduct of Business: Maintenance of Properties.
- ----------- ----------------------------------------------
From the date hereof until the Effective Time, Seller covenants that it
will:
(a) Carry on the business of the Banking Center substantially in the same
manner as on the date hereof, use all reasonable efforts to preserve
intact its current business organization and preserve its business
relationships with depositors, customers and others having business
relationships with it and whose accounts will be retained at the
Banking Center, provided, however, that Seller need not, in its sole
discretion, advertise or promote new or substantially new customer
services in the principal market area of the Banking Center.
22
<PAGE>
(b) Cooperate with and assist Purchaser in assuring the orderly transition
of the business of the Banking Center to Purchaser from Seller; and
(c) Maintain the Real Property and the Personal Property in its current
condition, ordinary wear and tear excepted.
Section 6.5. No Solicitation by Seller.
- ----------- -----------------------
For a period of 12 months after the Effective Time, Seller will not
specifically target and solicit customers of the Banking Center utilizing any
customer or mailing list which consists primarily of customers of the Banking
Center, provided, however, these restrictions shall not restrict general mass
mailings, telemarketing calls, statement stuffers and other similar
communications directed to all the current customers of Seller or Seller's
affiliates, or to the public or newspaper, radio or television advertisements of
a general nature or otherwise prevent Seller from taking such actions as may be
required to comply with any applicable federal or state laws, rules or
regulations. In addition, these restrictions shall not restrict (a) the
solicitation of (i) commercial accounts normally established and maintained in
offices other than the Banking Center or (ii) any credit or debit card customer
which has an agreement with Seller or Seller's venture partner, Unified Merchant
Services, for merchant services or (b) the ability of Seller to install, operate
and serve customers needs through automated teller machines at any location. It
is understood that holders of the Deposit accounts described in Sections 1.3(b)
3-7 hereof shall not be deemed customers of the Banking Center for the purposes
of this Section 6.5.
Section 6.6. No Solicitation by Purchaser.
- ----------- ----------------------------
Purchaser shall not solicit any customer which has an agreement with
Seller or Seller's venture partner, Unified Merchant Services, for merchant
services during the term of any such agreements, including any renewal term
thereunder, or otherwise interfere in any way with Seller or Seller's venture
partner, Unified Merchant Services, relationship with any such customer.
Section 6.7. Further Actions.
- ----------- ---------------
The parties hereto shall execute and deliver such instruments and take
such other actions as the other party may reasonably require in order to carry
out the intent of this Agreement.
Section 6.8. Fees and Expenses.
- ----------- -----------------
Purchaser shall be responsible for the costs of all title examinations,
title insurance fees, surveys, its own attorneys' and accountants' fees and
expenses, recording costs, transfer fees, and other expenses arising in
connection therewith. Seller shall be responsible for its own attorneys' and
accountants' fees and expenses related to this transaction.
23
<PAGE>
Section 6.9. Breaches with Third Parties.
- ----------- ---------------------------
If the assignment of any material claim, contract, license, lease,
commitment, sales order or purchase order (or any material claim or right or any
benefit arising thereunder) (collectively, "Commitments") without the consent of
a third party would constitute a breach thereof or materially affect the rights
of Purchaser or Seller thereunder, then such assignment is hereby made subject
to such consent or approval being obtained. Seller, at its expense, shall use
its best efforts to obtain any such assignments as promptly as possible. If any
such assignments shall not be obtained or if any attempted assignment would be
ineffective or would materially impair Purchaser's rights under the Commitments
in question so that Purchaser would not in effect acquire the benefit of all
such rights, Seller, to the maximum extent permitted by law and the specific
Commitments and at Seller's expense, shall cooperate with Purchaser, to the
maximum extent permitted by law and the specific Commitment, is devising a
reasonable arrangement designed to provide such benefits to Purchaser.
Section 6.10. Insurance.
- ------------ ---------
As of the Effective Time, Seller will discontinue its insurance coverage
maintained in connection with the Banking Center and the activities conducted
thereon. Purchaser shall be responsible for all insurance protection for the
Banking Center premises and the activities conducted thereon immediately
following the Effective Time. Pending the Closing, risk of loss shall be the
responsibility of Seller.
Section 6.11. Public Announcements.
- ------------ --------------------
Seller and Purchaser agree that, from the date hereof, neither shall make
any public announcement or public comment, regarding this Agreement or the
transactions contemplated herein without first consulting with the other party
hereto and reaching an agreement upon the substance and timing of such
announcement or comment. Further, Seller and Purchaser acknowledge the
sensitivity of this transaction to the Employees and no announcements or
communications with the public or these Employees shall be made without the
prior approval of Seller.
Section 6.12. Tax Reporting.
- ------------ -------------
Seller shall comply with all tax reporting obligations in connection with
transferred assets and liabilities on or before the Effective Time, and
Purchaser shall comply with all tax reporting obligations with respect to the
transferred assets and liabilities after the Effective Time.
ARTICLE VII
-----------
CONDITIONS TO PURCHASER'S OBLIGATIONS
-------------------------------------
The obligation of Purchaser to complete the transactions contemplated in
this Agreement are conditioned upon fulfillment, on or before the Closing, of
each of the following conditions:
24
<PAGE>
Section 7.1. Representations and Warranties True.
- ----------- -----------------------------------
The representations and warranties made by Seller in this Agreement shall
be true in all material respects on and as of the Effective Time as though such
representations and warranties were made at and as of such time, except for any
changes permitted by the terms hereof or consented to by Purchaser.
Section 7.2. Obligations Performed.
- ----------- ---------------------
Seller shall (a) deliver or make available to Purchaser those items
required by Section 2.2 hereof, and (b) perform and comply in all material
respects with all obligations and agreements required by this Agreement to be
performed or complied with by it prior to or on the Effective Time.
Section 7.3. No Adverse Litigation.
- ----------- ---------------------
As of the Effective Time, no action, suit or proceeding shall be pending or
threatened against Seller which is reasonably likely to (a) materially and
adversely affect the business, properties and assets of the Banking Center, or
(b) materially and adversely affect the transactions contemplated herein.
Section 7.4. Regulatory Approval.
- ----------- -------------------
(a) Purchaser shall have received all necessary regulatory approvals of
the transactions provided in this Agreement, all notice and waiting
periods required by law to pass shall have passed, no proceeding to
enjoin, restrain, prohibit or invalidate such transactions shall have
been instituted or threatened, and any conditions of any regulatory
approval shall have been met.
(b) Such approvals shall not have imposed any condition which is
materially disadvantageous or burdensome to Purchaser.
ARTICLE VIII
------------
CONDITIONS TO SELLER'S OBLIGATIONS
----------------------------------
The obligation of Seller to complete the transactions contemplated in this
Agreement are conditioned upon fulfillment, on or before the Closing, of each of
the following conditions:
Section 8.1. Representations and Warranties True.
- ----------- -----------------------------------
The representations and warranties made by Purchaser in this Agreement
shall be true in all material respects at and as of the Effective Time as though
such representations and warranties were made at and as of such time, except for
any changes permitted by the terms hereof or consented to by Seller.
25
<PAGE>
Section 8.2. Obligations Performed.
- ----------- ---------------------
Purchaser shall (a) deliver to Seller those items required by Section 2.2
hereof, and (b) perform and comply in all material respects with all obligations
and agreements required by this Agreement to be performed or complied with by it
prior to or on the Effective Time.
Section 8.3. No Adverse Litigation.
- ----------- ---------------------
As of the Effective Time, no action, suit or proceeding shall be pending or
threatened against Purchaser or Seller which might materially and adversely
affect the transactions contemplated hereunder.
Section 8.4. Regulatory Approval.
- ----------- -------------------
(a) Purchaser shall have received from the appropriate regulatory
authorities approval of the transactions contemplated herein, waiting
periods required by law to pass shall have passed, no proceeding to
enjoin, restrain, prohibit or invalidate such transactions shall have
been instituted or threatened, and any conditions of any regulatory
approval shall have been met.
(b) Such approvals shall not have imposed any condition which is
materially disadvantageous or burdensome to Seller.
ARTICLE IX
----------
TERMINATION
-----------
Section 9.1. Methods of Termination.
- ----------- ----------------------
This Agreement may be terminated in any of the following ways:
(a) by either Purchaser or Seller, in writing five calendar days in
advance of such termination, if the Closing has not occurred by August
28, 1997;
(b) at any time on or prior to the Effective Time by the mutual consent in
writing of Purchaser and Seller;
(c) by Purchaser in writing if the conditions set forth in Article VII of
this Agreement shall not have been met by Seller or waived in writing
by Purchaser within 31 business days following the date of all
approvals by regulatory agencies and after all statutory waiting
periods have expired;
(d) by Seller in writing if the conditions set forth in Article VIII of
this Agreement shall not have been met by Purchaser or waived in
writing by Seller within 31 business days following the date of all
approvals by regulatory agencies and after all statutory waiting
periods have expired;
26
<PAGE>
(e) any time prior to the Effective Time, by Purchaser or Seller in
writing if the other shall have been in breach of any representation
and warranty in any material respect (as if such representation and
warranty had been made on and as of the date hereof and on the date of
the notice of breach referred to below), or in breach of any covenant,
undertaking or obligation contained herein, and such breach has not
been cured by the earlier of 30 calendar days after the giving of
notice to the breaching party of such breach or the Effective Time;
provided, however, that there shall be no cure period in connection
with any breach of Section 6.3 hereof, so long as such breach by
Purchaser was not caused by any action or inaction of Seller, and
Seller may terminate this Agreement immediately if regulatory
applications are not filed within 30 calendar days after the date of
this Agreement as provided in that Section;
(f) by Seller in writing at any time after any applicable regulatory
authority has denied approval of any application of Purchaser for
approval of the transactions contemplated herein; or
(g) in accordance with Section 1.10 hereof.
Section 9.2. Procedure Upon Termination.
- ----------- --------------------------
In the event of termination pursuant to Section 9.1 hereof, and except as
otherwise stated therein, written notice thereof shall be given to the
other party, and this Agreement shall terminate immediately upon receipt of
such notice unless an extension is consented to by the party having the
right to terminate.
If this Agreement is terminated as provided herein,
(a) each party will return all documents, work papers and other materials
of the other party, including photocopies or other duplications
thereof, relating to this transaction, whether obtained before or
after the execution hereof, to the party furnishing the same; and
(b) all information received by either party hereto with respect to the
business of the other party (other than information which is a matter
of public knowledge or which has heretofore been published in any
publication for public distribution or filed as public information
with any governmental authority) shall not at any time be used for any
business purpose by such party or disclosed by such party to third
persons.
Section 9.3. Payment of Expenses.
- ----------- -------------------
Should the transactions contemplated herein not be consummated because of a
party's breach of this Agreement, in addition to such damages as may be
recoverable in law or equity, the other party shall be entitled to recover from
the breaching party upon demand, itemization and documentation, its reasonable
outside legal, accounting, consulting and other out-of-pocket expenses.
27
<PAGE>
ARTICLE X
---------
MISCELLANEOUS PROVISIONS
------------------------
Section 10.1. Amendment and Modification.
- ------------ --------------------------
The parties hereto, by mutual consent of their duly authorized officers,
may amend, modify and supplement this Agreement in such manner as may be agreed
upon by them in writing.
Section 10.2. Waiver or Extension.
- ------------ -------------------
Except with respect to required approvals of the applicable governmental
authorities, either party, by written instrument signed by a duly authorized
officer, may extend the time for the performance of any of the obligations or
other acts of the other party and may waive (a) any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto or (b) compliance with any of the undertakings, obligations,
covenants or other acts contained herein.
Section 10.3. Assignment.
- ------------ ----------
This Agreement and all of the provisions hereof shall be binding upon, and
shall inure to the benefit of, the parties hereto and their permitted assigns,
but neither this Agreement nor any of the rights, interests or obligations
hereunder shall be assigned by either of the parties hereto without the prior
written consent of the other.
Section 10.4. Confidentiality.
- ------------ ---------------
Seller and Purchaser agree that the Confidentiality Agreement effective as
of February 2, 1997, between Seller and Purchaser (the "Confidentiality
Agreement") shall survive the execution hereof and the consummation of the
transactions contemplated herein.
Section 10.5. Addresses for Notices, Etc.
- ------------ --------------------------
All notices, requests, demands, consents and other communications provided
for hereunder and under the related documents shall be in writing and mailed (by
registered or certified mail, return receipt requested), telegraphed, telexed,
telecopied or personally delivered (with receipt thereof acknowledged) to the
applicable party at the address indicated below:
If to Seller: NationsBank, N.A.
NationsBank Corporate Center
100 North Tryon Street
NCI-007-12-02
Charlotte, North Carolina 28255-0065
Fax Number: (704) 386-6416
Attn: Tracey M. Hembrick
28
<PAGE>
with a copy to: Laura D. Fennell, Senior Counsel
NationsBank Corporate Center
100 North Tryon Street
NC1-007-20-01
Charlotte, North Carolina 28255-0065
Fax Number: (704) 386-6453
If to Purchaser: ABC Bancorp
310 First Street, S.E.
Moultrie, Georgia 31768
Attn: Mr. Kenneth J. Hunnicutt
Fax: (912) 890-2235
with a copy to: Rogers & Hardin
2700 International Tower
229 Peachtree Street, N.E.
Atlanta, Georgia 30303
Attn: Steven E. Fox, Esq.
Fax: (404) 525-2224
or, as to each party, at such other address as shall be designated by such
party in a written notice to the other party complying as to delivery with the
terms of this Section.
Section 10.6. Counterparts.
- ------------ ------------
This Agreement may be executed simultaneously in two or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
Section 10.7. Headings.
- ------------ --------
The headings of the Sections and Articles of this Agreement are inserted
for convenience only and shall not constitute a part thereof.
Section 10.8. Governing Law.
- ------------ -------------
This Agreement shall be governed by, and construed in accordance with, the
laws of the State of Georgia.
Section 10.9. Sole Agreement.
- ------------ --------------
Except for the Confidentiality Agreement, this Agreement and the exhibits
and attachments hereto represent the sole agreement between the parties hereto
respecting the transactions contemplated hereby and all prior or contemporaneous
written or oral proposals,
29
<PAGE>
agreements in principle, representations, warranties and understandings between
the parties with respect to such matters are superseded hereby and merged
herein.
Section 10.10. Severability.
- ------------- ------------
If any provision of this Agreement is invalid or unenforceable, the balance
of this Agreement shall remain in effect.
Section 10.11. Parties In Interest.
- ------------- -------------------
Nothing in this Agreement, express or implied, expressly including, without
limiting the generality of the foregoing in any way, the provisions of Section
1.6(a) hereof, is intended or shall be construed to confer upon or give to any
person (other than the parties hereto, their successors and permitted assigns)
any rights or remedies under or by reason of this Agreement, or any term
provision, condition, undertaking, warranty, representation, indemnity, covenant
or agreement contained herein.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their authorized officers as of the date first written above.
NATIONSBANK, N.A.(SOUTH)
By: /s/ A. Allen Kendle
---------------------------
Name: A. ALLEN KENDLE
---------------------------
Title: SENIOR VICE PRESIDENT
---------------------------
ABC BANCORP
By: /s/ Kenneth J. Hunnicutt
----------------------------
Name: KENNETH J. HUNNICUTT
----------------------------
Title: PRESIDENT & CEO
----------------------------
30
<PAGE>
PURCHASE AND ASSUMPTION AGREEMENT
Between
NATIONSBANK, N.A.(SOUTH)
and
ABC BANCORP
EXHIBIT LIST
Exhibit No. Description
----------- -----------
1.1(b) List of Excluded Assets
1.4(k) Power of Attorney
1.6(c) Severance Benefits
2.2(b)(2) Form of Bill of Sale
2.2(b)(3) Form of Assignment and
Assumption Agreement
2.2(b)(14) Form of Closing Statement
4.7 Real Property Exceptions
<PAGE>
EXHIBIT 1.1(b)
--------------
PURCHASE AND ASSUMPTION AGREEMENT
Between
NATIONSBANK, N.A. (SOUTH)
and
ABC BANCORP
LIST OF EXCLUDED ASSETS
All teller and platform automated computer equipment
Signature machine
Check protector
Rate board
Mandatory sign board
Furniture Fixtures and Equipment at the Banking Center not compatible with
Purchaser's banking operations; provided, however, that (1) Purchaser shall
notify Seller of all such assets in writing at least 45 days prior to the
Effective Time, and (2) the aggregate Net Book Value of all such assets shall
not exceed $10,000.
<PAGE>
EXHIBIT 1.41(K)
---------------
PURCHASE AND ASSUMPTION AGREEMENT
BETWEEN
NATIONSBANK, N.A. (SOUTH)
AND
ABC BANCORP
POWER OF ATTORNEY
THIS POWER OF ATTORNEY is dated this __________ day of February 1997, by
NationsBank, N.A. (South), a national banking association ("NationsBank"), to be
effective as of 2:00 p.m. on ____________ ______ 199_.
WITNESSETH:
-----------
WHEREAS, NationsBank and ABC Bancorp ("ABC") have entered into a Purchase
and Assumption Agreement dated as of ______ ____, 199_ (the "Agreement"), which
provides for the sale by NationsBank to ABC of certain personal property; and
WHEREAS, in a Bill of Sale to ABC dated _________ ____, 199_ (the "Bill of
Sale"), NationsBank has agreed, from time to time, at the request of ABC to
execute, acknowledge and deliver to any and all instruments, documents,
endorsements, assignments, information, materials and other papers that may be
reasonably required to (i) transfer to ABC certain Assets (as defined in the
Bill of Sale) being acquired by ABC pursuant to the Agreement, including loans
and the collateral therefor to the extent of NationsBank's interest in such
collateral and files and records relating to such loans, (ii) enable ABC to
bill, collect, service and administer the loans transferred thereby and (iii)
give full force and effect to the intent and purpose of the Bill of Sale.
NOW, THEREFORE, for good and valuable consideration, receipt of which is
hereby acknowledged, NationsBank hereby irrevocably appoints and authorizes the
President or any Vice President, or the Secretary or any Assistant Secretary, of
ABC as its attorney-in-fact solely for the purpose of endorsing and recording,
pursuant to the Bill of Sale, certificates of title for vehicles and similar
documents, provided, such power of attorney is not intended to and does not
--------
convey to ABC any right to endorse or record any documents of title relating to
collateral other than collateral transferred pursuant to the Bill of Sale as
described in the preceding paragraph.
<PAGE>
IN WITNESS WHEREOF, NationsBank has caused this Power of Attorney to be
duly executed by its duly authorized officer as of the day and year first above
written.
WITNESSES: NATIONSBANK, N.A. (SOUTH)
________________________________ By:________________________________
________________________________
________________________________ Its:_______________________________
STATE OF_______________________)
) PROBATE
COUNTY OF________________________________)
PERSONALLY APPEARED before me the undersigned witness and made oath that
s/he saw the within named NationsBank, N.A. (South), by ___________________, its
__________________, sign, and as its act and deed deliver the within Power of
Attorney and that s/he with the order witness whose name is subscribed above
witnessed the execution thereof.
WITNESS
Sworn to before me this
______th day of ______, 199_.
_____________________________
Notary Public for __________________
My Commission Expires:___________
<PAGE>
EXHIBIT 1.6(c)
--------------
PURCHASE AND ASSUMPTION AGREEMENT
Between
NATIONSBANK, N.A.(SOUTH)
and
ABC BANCORP
SEVERANCE BENEFITS
One week for every year of service with Seller.
<PAGE>
EXHIBIT 2.2(b)(2)
-----------------
PURCHASE AND ASSUMPTION AGREEMENT
Between
NATIONSBANK, N.A.(SOUTH)
and
ABC BANCORP
BILL OF SALE
THIS BILL OF SALE is dated this ____ day of _________,199_, by NationsBank,
N.A. a national banking association ("Seller").
W I T N E S S E T H:
-------------------
WHEREAS, Seller and ABC Bancorp a Georgia corporation, have entered into a
Purchase and Assumption Agreement dated as of February __, 1997 (the
"Agreement"), which provides for the sale by Seller to Purchaser of certain
personal property and loans related to Seller's offices located in Douglas,
Georgia (the "Banking Center"), all as set forth in the Agreement;
NOW, THEREFORE, Seller, for good and valuable consideration, receipt of
which is hereby acknowledged, does hereby grant, bargain, sell, assign, set
over, convey and transfer to Purchaser all of its right, title and interest in
and to the following assets (the "Assets");
(a) All furniture, fixtures, equipment and other tangible personal
property located in the Banking Center, except for those items listed
in Exhibit 1.1(b) of the Agreement;
(b) All of the loans maintained, serviced and listed in Seller's general
ledger as loans of the Banking Center (except for those loans
described in Section 1.4(b) of the Agreement), a list of such specific
loans to be attached hereto on the Post-Closing Balance Sheet Delivery
Date (the "Loans"); and
(c) All of Seller's files and records related to the Loans and the
Equipment Leases, Deposit Liabilities and other liabilities (as such
terms are defined or described in the Agreement).
(d) All maintenance, service, operating and other contracts or agreements
relating to the operation of the Banking Center (to the extent that
such contracts or agreements by their terms or under applicable law
are assignable to Purchaser); and
<PAGE>
(e) Except as provided in Section 1.1(b), all business of the Banking
Center related to the transferred assets referred to in Section 1.1(a)
and the goodwill associated therewith.
Seller, for itself and its successors and assigns, does hereby covenant and
agree to and with Purchaser and its successors and assigns that it (i) is seized
of, and has the right to convey to Purchaser, such title to the Assets as is
provided in the Agreement, (ii) will warrant and defend said title to the Assets
in the manner provided in the Agreement, and (iii) shall, from time to time, at
the request of Purchaser, execute, acknowledge and deliver to Purchaser any and
all further instruments, documents, endorsements, assignments, information,
materials and other papers that may be reasonably required to transfer the
Assets to Purchaser, to enable Purchaser to bill, collect, service and
administer the Loans and to give full force and effect to the full intent and
purposes of this Bill of Sale.
IN WITNESS WHEREOF, Seller has caused this Bill of Sale to be duly executed
by its duly authorized officers and its corporate seal to be affixed hereto, all
as of the day and year first above written.
NATIONSBANK, N.A.(SOUTH)
By: _____________________________
Name: ___________________________
Title: __________________________
ATTEST:
___________________________________
________________Secretary
<PAGE>
EXHIBIT 2.2(b)(3)
-----------------
PURCHASE AND ASSUMPTION AGREEMENT
Between
NATIONSBANK, N.A.(SOUTH)
and
ABC BANCORP
ASSIGNMENT AND ASSUMPTION AGREEMENT
THIS ASSIGNMENT AND ASSUMPTION AGREEMENT is entered into this ___day of
___________, 199_, by and between Nationsbank, N.A.(South), a national banking
association ("Seller"), and ABC Bancorp, a Georgia corporation ("Purchaser").
W I T N E S S E T H:
-------------------
WHEREAS, Seller and Purchaser have entered into a Purchase and Assumption
Agreement dated as of _________, 199_ (the "Agreement"), which provides for the
assignment by Seller of all of its rights and interests in and to certain
leases, contracts, deposit accounts and by Seller of all of its rights and
interests in and to certain leases, contracts, deposit accounts and other
liabilities related to Seller's offices located in Douglas, Georgia (the
"Banking Center"), and the assumption by Purchaser of all of Seller's
liabilities and obligations thereunder, all as set forth in the Agreement;
NOW, THEREFORE, in consideration of the foregoing, and for other good and
valuable consideration, receipt of which is hereby acknowledged by Seller and
Purchaser, Seller hereby assigns, transfers and sets over to Purchaser all of
Seller's rights and interest to, and Purchaser does hereby assume all of
Seller's liabilities and obligations in connection with, the following assets
(the "Assets");
(a) All equipment leases, except for leases listed on Exhibit 1.1(b) of
the Agreement, for equipment located at the Banking Center (the
"Equipment Leases");
(b) All deposit accounts located at the Banking Center, except for those
deposit accounts and liabilities described in Section 1.3(b) of the
Agreement (the "Deposit Liabilities"); and
(c) Safe Deposit Contracts.
This Assignment and Assumption Agreement shall be binding upon, and shall
inure to the benefit of, Seller, Purchaser and each of their successors and
assigns and shall be subject to the terms and conditions of the Agreement. In
the event of a conflict between any of the terms and provisions hereof and the
Agreement, the Agreement shall be deemed to control.
<PAGE>
This Assignment and Assumption Agreement, and the rights and obligations of
the parties hereunder, shall be governed by and construed in accordance with the
laws of the State of Georgia.
IN WITNESS WHEREOF, the parties hereto have caused this Assignment and
Assumption Agreement to be executed by their duly authorized officers and their
corporate seals to be affixed hereto, all as of the day and year first above
written.
NATIONSBANK, N.A.(SOUTH)
By: ____________________________
Title: _________________________
ATTEST:
______________________________
___________Secretary
ABC BANCORP
By: ____________________________
Title: _________________________
ATTEST:
______________________________
___________Secretary
<PAGE>
EXHIBIT 2.2(b)(14)
------------------
PURCHASE AND ASSUMPTION AGREEMENT
Between
NATIONSBANK, N.A.(SOUTH)
AND
ABC BANCORP
CLOSING STATEMENT
(Pre-Closing Balance Sheet as of _______)
CASH DUE PURCHASER FOR:
Deposit liability (including
accrued interest) _______
Pro rata safe deposit box rental _______
Pro rate real property taxes _______
Deed stamps _______
Total Cash due Purchaser _______
CASH DUE SELLER FOR:
Real and Personal Property _______
Coins and currency _______
Premium on deposits _______
Loans and other assets
(including accrued interest) _______
Pro rata FDIC insurance _______
Total Cash due Seller _______
Net cash due (Purchaser) (Seller) _______
<PAGE>
EXHIBIT 10.16
AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
ABC BANCORP
AND
IRWIN BANKCORP, INC.
AS OF MAY 15, 1997
<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...................................... 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........................... 4
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................................................ 11
4.14 Employee Benefit Plans......................................... 11
4.15 Material Contracts............................................. 13
4.16 Legal Proceedings.............................................. 13
4.17 Reports........................................................ 14
4.18 Statements True and Correct.................................... 14
4.19 Accounting, Tax and Regulatory Matters......................... 14
4.20 Charter Provisions............................................. 15
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF PURCHASER.................... 15
5.1 Organization, Standing and Power............................... 15
5.2 Authority; No Breach........................................... 15
5.3 Capital Stock.................................................. 16
5.4 PURCHASER Subsidiaries......................................... 16
5.5 Financial Statements........................................... 17
5.6 Absence of Undisclosed Liabilities............................. 17
5.7 Absence of Certain Changes or Events........................... 18
5.8 Tax Matters.................................................... 18
5.9 PURCHASER Allowance for Possible Loan Losses................... 18
5.10 Assets......................................................... 19
5.11 Environmental Matters.......................................... 19
5.12 Compliance with Laws........................................... 20
5.13 Labor Relations................................................ 21
5.14 Employee Benefit Plans......................................... 21
5.15 Legal Proceedings.............................................. 23
5.16 Reports........................................................ 23
5.17 Statements True and Correct.................................... 23
5.18 Accounting, Tax and Regulatory Matters......................... 24
5.19 Charter Provisions............................................. 24
ARTICLE 6 CONDUCT OF BUSINESS PENDING CONSUMMATION....................... 24
6.1 Affirmative Covenants of TARGET................................ 24
6.2 Negative Covenants of TARGET................................... 24
6.3 Covenants of PURCHASER......................................... 26
6.4 Adverse Changes in Condition................................... 26
6.5 Reports........................................................ 27
6.6 Pooling........................................................ 27
ARTICLE 7 ADDITIONAL AGREEMENTS.......................................... 27
7.1 Registration Statement; Proxy Statement; Shareholder Approval.. 27
7.2 Listing........................................................ 28
7.3 Applications................................................... 28
7.4 Filings with State Offices..................................... 28
7.5 Agreement as to Efforts to Consummate.......................... 28
7.6 Investigation and Confidentiality.............................. 28
7.7 Press Releases................................................. 29
7.8 No Solicitation................................................ 29
7.9 Tax Treatment.................................................. 31
7.10 Agreement of Affiliates........................................ 31
7.11 Employee Benefits and Contracts................................ 31
7.12 Large Deposits................................................. 32
7.13 Indemnification................................................ 32
7.14 Irrevocable Proxies............................................ 32
7.15 Employment Agreement........................................... 32
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
ARTICLE 8 CONDITIONS PRECEDENT TO OBLIGATIONS TO
CONSUMMATE............................................... 32
8.1 Conditions to Obligations of Each Party........................ 32
8.2 Conditions to Obligations of PURCHASER......................... 33
8.3 Conditions to Obligations of TARGET............................ 34
ARTICLE 9 TERMINATION.................................................... 35
9.1 Termination.................................................... 35
9.2 Effect of Termination.......................................... 37
ARTICLE 10 MISCELLANEOUS.................................................. 37
10.1 Definitions.................................................... 37
10.2 Expenses....................................................... 43
10.3 Brokers and Finders............................................ 44
10.4 Entire Agreement............................................... 44
10.5 Amendments..................................................... 44
10.6 Waivers........................................................ 44
10.7 Assignment..................................................... 45
10.8 Notices........................................................ 45
10.9 Governing Law.................................................. 46
10.10 Counterparts................................................... 46
10.11 Captions....................................................... 46
10.12 Enforcement of Agreement....................................... 46
10.13 Severability................................................... 46
10.14 Survival....................................................... 46
</TABLE>
iii
<PAGE>
LIST OF EXHIBITS
----------------
EXHIBIT NUMBER DESCRIPTION
- -------------- -----------
1. Form of agreement of affiliates of Irwin Bankcorp
Inc. ((S) 7.10).
2. Matters as to which Martin, Snow, Grant & Napier will
opine ((S) 8.2(d)).
3. Matters as to which Rogers & Hardin will opine ((S)
8.3(d)).
4. Irrevocable Proxy ((S)7.14).
5. Form of Employment Agreement between The Citizens
Bank of Tifton and C. Larry Young ((S) 8.2(f)).
iv
<PAGE>
AGREEMENT AND PLAN OF MERGER
----------------------------
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement") is made and entered
into as of May 15, 1997, by and between IRWIN BANKCORP, INC. ("TARGET"), a
corporation organized and existing under the laws of the State of Georgia, with
its principal office located in Ocilla, 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 TARGET and PURCHASER
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.
Simultaneous with the Closing of the Merger, The Bank of Ocilla, a wholly-
owned Georgia state bank subsidiary of TARGET, will be merged with and into The
Citizens Bank of Tifton ("Citizens Bank"), a wholly-owned Georgia state bank
subsidiary of PURCHASER, and will thereafter be operated as a branch of Citizens
Bank.
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
<PAGE>
executive officers or chief financial officers, may mutually agree (the "Closing
Date"). The place of Closing shall be at the main office of The Bank of Ocilla,
Ocilla, 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 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 officer or chief financial officer 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:
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) Each Outstanding TARGET Share shall automatically be converted
at the Effective Time into the right to receive that number of shares of
PURCHASER Common Stock (plus cash in lieu of fractional shares pursuant to
subsection (d) below, if applicable) in an amount equal to (i) 500,000 (subject
to possible increase pursuant to Section 3.3 and 3.7 of this Agreement) divided
-------
by (ii) the aggregate number of Outstanding TARGET Shares (the "Exchange
- --
Ratio").
(c) 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 fraction of a share, subject to subsection (d) below) of PURCHASER Common
Stock that shall be equal to (i) the Exchange Ratio multiplied by (ii) the
---------- --
aggregate number of Outstanding TARGET Shares such shareholder holds as of the
Effective Time (the "Merger Consideration").
(d) 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.
(e) 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.
(f) 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 shall not be converted in the
Merger. 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 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 any cash and certificates representing
PURCHASER Common Stock, which certificates shall be deposited with the Exchange
3
<PAGE>
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 he 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 PURCHASER changes the number
------------------------
of shares of PURCHASER Common Stock 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
-----------
operated as a branch of Citizens Bank.
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
4
<PAGE>
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; provided, however, that C. Larry Young and Don R. Vickers, who hold
options exercisable for an aggregate of 752 shares of TARGET Common Stock at an
aggregate exercise price of $108,959, shall be permitted to exercise any or all
such options at any time prior to the Closing Date, in which event the number of
shares of PURCHASER Common Stock into which Outstanding TARGET Shares will be
converted pursuant to Section 3.1(b) of this Agreement shall be increased by (i)
the aggregate exercise price of all of said options that are so exercised
divided by (ii) 16.
- ------- --
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 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.
5
<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 two-thirds 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 Laws, and other than Consents
required from Regulatory Authorities, and other than notices to or filings with
the IRS 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 5,000,000
shares of TARGET Common Stock, of which 29,230 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 outstanding shares of
capital stock of TARGET has been issued in violation of any preemptive rights of
the current or past shareholders of TARGET.
(b) There are no shares of capital stock or other equity securities
of TARGET outstanding and, except as set forth in Section 3.7 of this Agreement,
no outstanding options,
6
<PAGE>
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 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
7
<PAGE>
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 March 31, 1997 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 March 31, 1997,
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 March 31, 1997, (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, 1996, 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 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.
8
<PAGE>
(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 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.
9
<PAGE>
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) above, 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.
(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.
10
<PAGE>
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.
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
11
<PAGE>
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 IRS, 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 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
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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, (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
13
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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, 1994,
-------
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, without limitation, 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 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
14
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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.
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
15
<PAGE>
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 Laws, and rules of the NASD, and
other than Consents required from Regulatory Authorities, and other than notices
to or filings with the IRS 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)
15,000,000 shares of PURCHASER Common Stock, of which 6,745,701 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 595,833 shares of PURCHASER Common Stock for issuance
under the PURCHASER Stock Plans, pursuant to which options to purchase not more
than 64,583 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
16
<PAGE>
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 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 March 31, 1997 included in the PURCHASER Financial Statements or reflected in
the notes thereto. No PURCHASER Company has incurred or paid any Liability
since March 31, 1997, except for such Liabilities incurred or paid in the
ordinary course
17
<PAGE>
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 March 31, 1997, 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, 1996, 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
18
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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.
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
19
<PAGE>
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) above, 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. 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
20
<PAGE>
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 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 IRS, 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
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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.
(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.
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<PAGE>
(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, 1994, 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, without limitation, 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,
without limitation, 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
23
<PAGE>
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 8.1(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 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).
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.
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
24
<PAGE>
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) (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, provided that TARGET
shall be permitted (i) to pay a cash dividend in an amount not to exceed $50,000
if the Merger shall not have been consummated by September 30, 1997, so long as
the failure to consummate the Merger on or before such date was not caused by
any breach of this Agreement by TARGET, and (ii) to pay a cash dividend if, as
and to the extent that the consolidated after-tax net income of TARGET and its
Subsidiaries for calendar year 1997 (which shall be computed in accordance with
GAAP) is in excess of the sum of (A) the amount of any dividend paid pursuant to
clause (i) of this subsection (c) and (B) $1,370.00 multiplied by the number of
---------- --
full calendar days between January 1, 1997 and the day which is five (5)
calendar days prior to the Closing Date; 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 hereof, 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
25
<PAGE>
(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
to employees 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; or pay any bonus to, or grant
any increase in fees or other increases in compensation or other benefits to,
directors of any TARGET Company; 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
(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 (a) 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 (i) is reasonably likely to have,
26
<PAGE>
individually or in the aggregate, a Material Adverse Effect on it or (ii) is
reasonably likely to cause or constitute a material breach of any of its
representations, warranties, or covenants contained herein, and (b) 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.
6.6 POOLING. From and after the date of this Agreement, no Party, or
-------
any of its Affiliates, shall knowingly take or fail to take any action, other
than actions which such Party is required to take or abstain from taking
pursuant to this Agreement, which action or failure to act could reasonably be
expected to jeopardize the treatment of the Merger as a "pooling of interests"
for accounting purposes. From and after the date of this Agreement, each of the
Parties shall take all reasonable actions necessary to cause the Merger to be
characterized as a "pooling of interests" for accounting purposes.
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 applicable 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 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
and which shall include an explanation of the restrictions on resale with
respect to the shares of PURCHASER Common Stock received by the holders of
TARGET Common Stock in the Merger) 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
27
<PAGE>
shall recommend 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.
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 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
28
<PAGE>
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 position 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.
(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 constitutes, or may reasonably
be expected to lead to, any Takeover Proposal; provided, however, that, subject
to compliance with subsection (c) below and after receiving the written opinion
of independent outside legal counsel to the effect that the failure to do so
would constitute a breach by the TARGET Board of Directors of its fiduciary
duties to TARGET shareholders under applicable law, TARGET may, in response to
an unsolicited Takeover Proposal that (i) was not received in violation of this
Section 7.8, (ii) is not subject to financing and (iii) the TARGET Board of
Directors determines in good faith, after receipt of a written opinion of a
financial advisor of nationally recognized reputation to such effect, would
result in a transaction more favorable to TARGET shareholders than the Merger,
(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
29
<PAGE>
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 15% 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 15% 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, upon receipt of the written opinion of
independent outside legal counsel to the effect that failure to do so would
constitute a breach of 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) approve
or recommend (and, in connection therewith, withdraw or modify its approval or
recommendation of this Agreement or the Merger) 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. For purposes of this Agreement, a
"Superior Proposal" means any bona fide proposal (not subject to financing) 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 that the TARGET Board of Directors determines in its
good faith judgment (after receipt of a written opinion of a financial advisor
of nationally recognized reputation to such effect) to be more favorable to
TARGET shareholders than the Merger.
(c) In addition to the obligations of TARGET set forth in subsection (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.
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(d) Nothing contained in this Section 7.8 shall prohibit TARGET from
making any disclosure to TARGET's shareholders if, the TARGET Board of Directors
determines in good faith, after receipt of the written advice of outside counsel
to such effect, that it is required to do so in order to discharge properly its
fiduciary duties to shareholders under applicable law; provided that TARGET does
not, except as permitted by subsection (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.
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.
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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.
7.14 IRREVOCABLE PROXIES. Concurrent with the execution hereof, TARGET
-------------------
shall obtain and deliver to PURCHASER irrevocable proxies in substantially the
form of Exhibit 4 hereto from each member of TARGET'S Board of Directors and
from certain other affiliates of TARGET, which proxies represent not less than
55% of the outstanding shares of TARGET Common Stock.
7.15 EMPLOYMENT AGREEMENT. PURCHASER agrees to cause Citizens Bank to
--------------------
execute and deliver to C. Larry Young at Closing an Employment Agreement
substantially in the form of Exhibit 5 hereto.
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,
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<PAGE>
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 all Securities
Laws 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
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
33
<PAGE>
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,
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) NET INCOME. The consolidated after-tax net income for calendar
----------
year 1997 of TARGET and its Subsidiaries (which shall be computed in accordance
with GAAP) shall not be less than an amount equal to $1,100.00 multiplied by the
---------- --
number of full calendar days between January 1, 1997 and the day which is five
(5) calendar days prior to the Closing Date.
(e) OPINION OF COUNSEL. TARGET shall have delivered to PURCHASER an
------------------
opinion of Martin, Snow, Grant & Napier, counsel to TARGET, dated as of the
Closing Date, covering those matters set forth in Exhibit 2 hereto, which
opinion may be rendered in accordance with the Interpretive Standards on Legal
Opinions to Third Parties in Corporate Transactions promulgated by the Corporate
and Banking Law Section of the State Bar of Georgia (January 1, 1992) (the
"Interpretive Standards").
(f) 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.
(g) EMPLOYMENT AGREEMENT. C. Larry Young shall have executed and
--------------------
delivered an Employment Agreement substantially in the form of Exhibit 5 hereto.
(h) DISSENTING SHAREHOLDERS. Holders of not more than 5% of the
-----------------------
issued and outstanding shares of TARGET Common Stock shall have perfected their
rights as dissenting shareholders pursuant to Article 13 of the GBCC.
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
34
<PAGE>
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 Date,
covering those matters set forth in Exhibit 3 hereto, which opinion may be
rendered in accordance with the Interpretive Standards.
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
35
<PAGE>
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' Meeting where the transactions were
presented to such shareholders for approval and voted upon (assuming, for this
purpose, that PURCHASER votes the proxies granted to it pursuant to Section 7.14
hereof in favor thereof); or
(e) By the Board of Directors of either Party in the event that the
Merger shall not have been consummated by December 31, 1997, provided the
failure to consummate the Merger on or before such date was 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.
(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.
(h) By PURCHASER at any time prior to June 22, 1997, if PURCHASER
determines, in its sole good faith judgment, that the financial condition,
business or prospects of TARGET are unsatisfactory to PURCHASER based on
PURCHASER'S due diligence conducted prior to such date, provided that (i)
PURCHASER shall inform TARGET upon such termination as to the reasons for
PURCHASER'S determination and (ii) that this Section 9.1(h) shall not limit in
any way the due diligence investigation of TARGET which PURCHASER may perform or
otherwise affect any other rights which PURCHASER has after the date hereof
under the terms of this Agreement.
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<PAGE>
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
Sections 10.2 and 10.14, and (ii) a termination pursuant to Section 9.1(b) or
(c) of this Agreement shall entitle the non-breaching Party to the sum of
$300,000 to be paid by the breaching Party, as and for liquidated damages, which
shall be sole remedy of either Party against the other under this Agreement
pursuant to O.C.G.A. (S)13-6-7. The Parties agree that the amount specified as
liquidated damages hereunder represents a good faith and reasonable estimate by
the Parties of the amount of damages that the non-breaching Party would expect
to incur in the event of a default under this Agreement and is not intended as a
penalty.
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:
"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 closing
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.
"BHC Act" shall mean the federal Bank Holding Company Act of 1956, as
amended.
"Citizens Bank" shall have the meaning provided in the Preamble hereto.
"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.
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<PAGE>
"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.
"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 Affiliate" shall have the meaning provided in Section 4.14(c) of
this Agreement.
"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 5, 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.
"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.
38
<PAGE>
"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.
"Interpretive Standards" shall have the meaning provided in Section 8.2(d)
of this Agreement.
"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 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.
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<PAGE>
"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(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 3.2 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 mean all shares of TARGET outstanding
immediately prior to the Effective Time, other than shares held in TARGET'S
treasury which shall be cancelled without consideration at the Effective Time.
"Participation Facility" shall mean any facility or property in which the
Party in question or any of its Subsidiaries participates in the management
(including, without limitation, 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.
40
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"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,
(b) disclosed prior to the date of this Agreement by PURCHASER to TARGET in an
SEC Document delivered to TARGET in which the specific information has been
identified by PURCHASER, or (c) disclosed in writing during PURCHASER's due
diligence investigation pursuant to Section 9.1(h) by TARGET to PURCHASER in the
manner described in Section 10.8 of this Agreement and describing in reasonable
detail the matters contained therein.
"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
March 31, 1997, and as of December 31, 1996 and 1995, and the related statements
of income, changes in shareholders' equity, and cash flows (including related
notes and schedules, if any) for the three months ended March 31, 1997, and for
each of the three years ended December 31, 1996, 1995 and 1994, as filed by
41
<PAGE>
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 March 31, 1997.
"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.
"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 postponement 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.
"Superior Proposal" shall have the meaning provided in Section 7.8(b) of
this Agreement.
"Surviving Corporation" shall mean PURCHASER as the surviving corporation
resulting from the Merger.
42
<PAGE>
"Takeover Proposal" shall have the meaning provided in Section 7.8(a) of
this Agreement.
"TARGET Allowance" shall have the meaning provided in Section 4.9 of this
Agreement.
"TARGET Bank" shall mean The Bank of Ocilla, 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 $50.00 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 March 31,
1997, and as of December 31, 1996 and 1995, and the related statements of
income, changes in shareholders' equity, and cash flows (including related notes
and schedules, if any) for the three months ended March 31, 1997, and for each
of the three fiscal years ended December 31, 1996, 1995 and 1994, 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 March 31,
1997.
"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.
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.
43
<PAGE>
(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) $300,000 (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(c)), 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. If TARGET terminates this Agreement pursuant to Section
9.1(d)(2) under circumstances where clause (B) of the immediately preceding
sentence is not applicable, TARGET shall pay, or cause to be paid, in same day
funds to PURCHASER all of PURCHASER'S Expenses but shall not be obligated to pay
any Termination Fee. The amount of Expenses so payable shall be the reasonable
Expenses actually incurred by PURCHASER, proof of which shall be furnished to
TARGET.
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.
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.
44
<PAGE>
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
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
45
<PAGE>
TARGET: Irwin Bankcorp, Inc.
Irwin & 2nd Street
Ocilla, Georgia 31774-0165
Telecopy Number: (912) 468-5644
Attention: President
Copy to Counsel: Martin, Snow, Grant & Napier
240 Third Street
P.O. Box 1606
Macon, Georgia 31202-1606
Telecopy Number: (912) 743-4204
Attention: John T. McGoldrick, Jr.
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.
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.
46
<PAGE>
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\ Cindi Lewis By: \s\ Kenneth J. Hunnicut
- ---------------------------- -----------------------------
Secretary Its: CEO
----------------------
[CORPORATE SEAL]
ATTEST: IRWIN BANKCORP, INC.
\s\ Ruby Neil Courson By: \s\ C. Larry Young
- ----------------------------- -----------------------------
Secretary Its: V.P.
----------------------
[CORPORATE SEAL]
47
<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 Irwin Bankcorp, Inc. ("Target"), a
corporation organized under the laws of the State of Georgia and located in
Ocilla, 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 May 15, 1997 (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 $50.00 par value common stock of Target
("Target Common Stock") will be converted into and exchanged for 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 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
<PAGE>
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 pursuant to Section 13 of the Securities
Exchange Act of 1934, as amended (the "1934 Act"), 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.
2
<PAGE>
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, at
Purchaser's expense, 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 1934 Act.
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
_________________, 1997.
Very truly yours,
____________________________
Signature
____________________________
Print Name
____________________________
____________________________
____________________________
____________________________
Address
____________________________
Telephone No.
AGREED TO AND ACCEPTED as of
____________________, 1997
ABC BANCORP
By:_________________________
Its:_____________________
4
<PAGE>
EXHIBIT 2
---------
MATTERS AS TO WHICH
MARTIN, SNOW, GRANT & NAPIER 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 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 5,000,000 shares of Common
Stock, $50.00 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 and
(b) to own and use its Assets.
2. Purchaser's authorized shares consist of 15,000,000 shares of Common
Stock, $1.00 par value per share, 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
---------
IRREVOCABLE PROXY
-----------------
This Irrevocable Proxy is given by the undersigned, ______________
("Shareholder"), in favor of ABC Bancorp, a Georgia corporation ("ABC"), as of
the 15th day of May, 1997.
WHEREAS, ABC and Irwin Bankcorp, Inc., a Georgia corporation
("Target"), have entered into an Agreement and Plan of Merger dated as of May
15, 1997 (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 Target
by means of a merger (the "Merger") of Target with and into ABC;
WHEREAS, Shareholder owns, as of the date hereof, _________ shares of
Target Common Stock (the "Existing Shares", together with any shares of Target
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 the GBCC, 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, solely for the limited purpose set forth herein, with full power to
appoint a substitute or substitutes solely for the limited purpose set forth
herein. 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
Target (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
and the Merger Agreement. ABC shall have no right to vote the shares with
respect to any other matter. 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 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, or (iii) the termination of the Merger Agreement in accordance with the
terms thereof. Notwithstanding
<PAGE>
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 Target 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 first set forth above.
____________________________________
(Name)
__________________________
Witness
____________________________________
(Signature)
2
<PAGE>
EXHIBIT 5
---------
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT (the "Agreement") is effective as of ___________,
1997, by and between THE CITIZENS BANK OF TIFTON, a Georgia state bank (the
"Bank"), and C. LARRY YOUNG, 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 of Ocilla by means of a merger (the "Merger")
pursuant to an Agreement and Plan of Merger between ABC and Irwin Bankcorp, Inc.
dated as of May 15, 1997 (the "Merger Agreement");
WHEREAS, simultaneous with the Merger, The Bank of Ocilla was merged with
and into the Bank and is now operated as a branch of the Bank (the "Ocilla
Branch");
WHEREAS, the Executive was the President and Chief Executive Officer of The
Bank of Ocilla and desires to become the President of the Ocilla Branch;
WHEREAS, the Bank desires that the Executive serve in such capacity; 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 employment.
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 employ the Executive and the
Executive agrees serve as the President of the Ocilla Branch and to act in
accordance with the terms and conditions set forth herein. During the term of
this Agreement, the Executive agrees 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 Ocilla Branch,
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 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 Ocilla Branch.
<PAGE>
(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
Irwin & 2nd Street, Ocilla, Georgia, or at a comparable location within Irwin
County, Georgia.
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
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 $[ ] 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.
(B) 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.
(C) 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.
(D) VACATION AND PERQUISITES. For so long as the Executive is
------------------------
employed by the Bank hereunder, the Executive shall be entitled to such paid
vacation and such perquisites, including, without limitation, the use of an
automobile and a local country club membership, as are provided to other
executive officers of ABC's banking subsidiaries.
4. TERMINATION.
-----------
(a) This Agreement shall terminate on the earliest to occur of the
second anniversary of the date hereof or the occurrence of any of the following
events: (i) the mutual agreement of the Bank and the Executive; (ii) the
death or Disability (as hereinafter defined) of the Executive or Executive's
voluntary retirement; or (iii) immediately upon the Bank giving written notice
to the Executive of termination for Cause (as defined herein).
2
<PAGE>
(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.
(c) The Executive may terminate his employment under this Agreement
at any time for Good Reason. For purposes of this Agreement, "Good Reason"
shall mean (i) the assignment to the Executive of duties or responsibilities
which are materially inconsistent with the responsibilities of an executive
officer holding the office of the Executive; (ii) a material breach by the Bank
of any of the material provisions of this Agreement; or (iii) the Bank's
requiring the Executive to be based at any place outside a fifty mile radius
from Ocilla, Georgia, except for reasonably required travel on the Bank's
business.
(d) In the event that the Executive's employment hereunder is
terminated by reason of Disability or by the Bank other than for Cause, the
Executive shall be entitled to continue to receive his Salary from the Bank at
the rate in effect at the time of such termination until the second anniversary
of the date hereof. For purposes of this Agreement, "Disability" shall mean the
absence of the Executive from the Executive's duties hereunder on a full-time
basis for 120 consecutive business days (or such shorter period as will suffice
for the Executive to qualify for full disability benefits under the applicable
disability insurance policy or policies of the Bank) as a result of incapacity
due to mental or physical illness which is determined to be total and permanent
by a physician selected by the Bank or its insurers and reasonably acceptable to
the Executive or the Executive's legal representative.
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 and 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 Ocilla Branch which, if exploited by him in
contravention of this Agreement, would seriously adversely and irreparably
affect the value of the Ocilla Branch to the Bank and the ability of ABC to
continue to operate the Ocilla Branch following the consummation of the Merger;
(ii) the provisions of this Section 6 are reasonable and necessary to protect
the legitimate interests of ABC and the Bank; (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) 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, the
Ocilla Branch 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 upon 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 one (1) year after termination of the
Executive's employment hereunder pursuant to Section 4(b), or by reason of
Disability or by the Executive without Good 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
one (1) year after termination of the Executive's employment hereunder pursuant
to Section 4(b) by reason of Disability or by the Executive without Good 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 Irwin County, Georgia and the
contiguous counties thereto.
(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: C. Larry Young
The Bank of Ocilla
310 First Street, S.E.
Moultrie, Georgia 31768
Facsimile: (912) 890-2235
If to the Bank: The Bank of Ocilla
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. 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.
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.
THE CITIZENS BANK OF TIFTON
By:____________________________________________
Its:_____________________________________
_________________________________________(SEAL)
C. LARRY YOUNG
6
<PAGE>
EXHIBIT 10.17
EXECUTION COPY
--------------
ABC BANCORP
1997 OMNIBUS STOCK OWNERSHIP
AND LONG TERM INCENTIVE PLAN
INCENTIVE STOCK OPTION AGREEMENT
<TABLE>
<CAPTION>
Number of Date of
Grantee: Shares: Grant:
<S> <C> <C>
______________ _____________ _______________
Expiration Exercise Price
Date*: Per Share: Vesting Dates*:
______________ $____________ __________ (20% Shares)
__________ (20% Shares)
Exercisability __________ (20% Shares)
Date*: __________ (20% Shares)
__________ (20% Shares)
______________
</TABLE>
THIS AGREEMENT (this "Agreement") is made and entered into as of the date
of the grant set forth above (the "Grant Date"), by and between ABC Bancorp, a
Georgia corporation ("ABC"), and the above named individual (the "Grantee").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, ABC has established the "ABC Bancorp 1997 Omnibus Stock Ownership
and Long Term Incentive Plan" (the "Plan") to advance the interests of ABC and
any parent or subsidiary corporation of ABC (together with ABC, referred to
collectively as the "Company") by strengthening the Company's ability to attract
and retain individuals of training, experience and ability in the employ of the
Company and to furnish additional incentive to such key employees to promote the
Company's financial success.
__________
* Subject to acceleration as provided in Section 3 hereof.
<PAGE>
WHEREAS, pursuant to the provisions of the Plan and the respective Written
Consents executed on the Grant Date by the Board of Directors of ABC and the
Compensation Committee thereof appointed thereby (the "Committee"), the
Committee has the full power and authority to direct the execution and delivery
of this Agreement in the name and on behalf of ABC in order to evidence and to
set forth fully the terms of that certain grant of a stock option to the Grantee
as effected by said Written Consents.
NOW, THEREFORE, the parties hereto agree as follows:
1. Grant of ISO. Subject and pursuant to all terms and conditions stated
------------
in this Agreement and in the Plan, which is incorporated herein by this
reference and made a part hereof as though fully set forth herein, ABC grants to
the Grantee on the Grant Date an incentive stock option (the "ISO", as defined
under the Plan) within the meaning of Section 422 of the Internal Revenue Code
of 1986, as amended (the "Code"), to purchase the number of shares of ABC's
common stock, $1.00 par value per share ("Common Stock"), set forth above (the
"Option Shares"), at the exercise price per share set forth above (the "Per-
Share Price"), on or before the expiration date set forth above (the "Expiration
Date"). The Grantee hereby accepts the ISO on such terms and conditions. The
Grantee shall, subject to the limitations of this Agreement and the Plan, have
the right to exercise the ISO commencing on the exercisability date set forth
above (the "Exercisability Date") by purchasing all or any part of the Option
Shares then available for purchase under the vesting schedule set forth above.
2. Exercise of ISO. The Grantee may exercise all or any part of the ISO
---------------
by delivering written notice to the Committee (in the form attached hereto as
Exhibit A) of the number of Option Shares (in a multiple of 100, except in the
- ---------
case of a full exercise of the remaining vested portion of the ISO) to be
purchased together with payment in an amount equal to the product of the Per-
Share Price times the number of Option Shares to be purchased (the "Exercise
Price") made in one of the following forms or a combination thereof:
(a) The Committee may require the Grantee to make a cash payment to
the Company equal to the amount of the Exercise Price; or
(b) The Grantee may request, in lieu of cash payment, that the
Company either accept shares (of the same class as the Option Shares) owned by
the Grantee or withhold Option Shares, each as more fully described below. If
the Committee grants any such request in whole or in part, in its sole and
absolute discretion, any shares so accepted or withheld by the Company under
this paragraph (b) shall be valued at their fair market value, as determined in
good faith by the Board of Directors of the Company. In no such event shall any
fractional shares be accepted or withheld, and thus any deficiency remaining
after the acceptance or withholding of whole shares shall be satisfied by the
Grantee in cash.
In the event the Committee has indicated to the Grantee that it will permit
payment of the Exercise Price to be made in whole or in part with previously
issued stock owned by the Grantee, the stock certificates evidencing the
surrendered shares shall accompany the notice of
2
<PAGE>
exercise and shall be duly endorsed or accompanied by duly executed stock powers
to transfer the same to the Company. In the event that the Committee has
indicated to the Grantee that it will permit payment of the Exercise Price to be
made in whole or in part with Option Shares, the notice of exercise need not be
accompanied by any stock certificates but shall include a statement directing
the Company to retain that number of Option Shares as shall equal the number of
shares that would have been surrendered to the Company by the Grantee if the
Exercise Price had been paid with previously issued stock.
In the event the Grantee does not make such payment when requested, the
Company may refuse to issue or cause to be delivered any shares under this
Agreement or any other incentive plan agreement entered into by the Grantee and
the Company until such payment has been made or arrangements for such payment
satisfactory to the Company have been made.
Such notice of exercise shall be sent to the Committee at ABC Bancorp, 310
First Street Southeast, Moultrie, Georgia 31768 (or P. O. Box 3668, Moultrie,
Georgia 31766), Attention: Chairman. The ISO shall be deemed to have been
exercised on the date the written notice and required consideration are received
on behalf of the Committee.
3. Vesting and Exercisability of ISO.
---------------------------------
(a) Employment Termination Prior to Exercisability Date of ISO. In
----------------------------------------------------------
the case of any termination of the Grantee's employment with the Company,
voluntarily or involuntarily, prior to the Exercisability Date, the following
provisions shall apply:
(1) Unvested Portion of ISO. Any unvested portion of the ISO
-----------------------
shall immediately terminate upon the earlier of (i) the date the
employment of the Grantee with the Company terminates, or (ii) the date the
Grantee is given written notice of his or her discharge from such
employment; provided, however, that in the event such termination of
-------- -------
employment occurs due to Retirement, Disability, or Death (as each such
term is defined in paragraph (c) below), then the Committee, in its sole
and absolute discretion, may cause all or any part of such unvested portion
of the ISO to become fully vested immediately upon the date of such
employment termination (and thus become immediately exercisable and
otherwise subject to the terms and conditions of subparagraph (2)
immediately below).
(2) Vested Portion of ISO. Any vested portion of the ISO
---------------------
(including any portion of the ISO that vests in the discretion of the
Committee pursuant to subparagraph (1) immediately above) shall become
immediately exercisable but shall terminate effective three (3) months
after the earlier of (i) the date the employment of the Grantee with the
Company terminates, or (ii) the date the Grantee is given written notice of
his or her discharge from such employment; provided, however, that in the
-------- -------
event such termination of employment occurs due to either Disability or
Death (as each such term is defined in paragraph (c) below), such vested
portion of the ISO may be exercised at any time (i)
3
<PAGE>
within one (1) year from such Disability, or (ii) prior to the Expiration
Date in the case of employment termination by reason of Death.
(b) Employment Termination On or After Exercisability Date of ISO. In the
-------------------------------------------------------------
case of any termination of the Grantee's employment with the Company,
voluntarily or involuntarily, on or after the Exercisability Date, the
unexercised portion of the ISO (all of which shall have previously become
vested) shall terminate effective three (3) months after the earlier of (i) the
date the employment of the Grantee with the Company terminates, or (ii) the date
the Grantee is given written notice of his or her discharge from such
employment; provided, however, that in the event such employment termination
-------- -------
occurs due to Disability or Death (as each such term is defined in paragraph (c)
immediately below), the ISO may be exercised at any time (i) within one (1) year
from such Disability (but in all events prior to the Expiration Date) or (ii)
prior to the Expiration Date in the case of employment termination by reason of
Death.
(c) For purposes of this Section 3, the following initially capitalized
terms shall have the following meanings:
(1) Death. The date of death of the Grantee as established by the
------
relevant death certificate.
(2) Disability. The date on which the Grantee becomes permanently
-----------
and totally disabled within the meaning of Section 22(e)(3) of the Code,
which shall be determined by the Committee on the basis of such medical or
other evidence as it may reasonably require or deem appropriate.
(3) Retirement. The date of termination of the Grantee's employment
-----------
either (i) under conditions which would constitute "normal retirement" or
"early retirement" under any tax qualified retirement plan maintained by
the Company, or (ii) after attaining age 65.
4. Change in Control Transaction; Discretion to Accelerate.
--------------------------------------------------------
At any time prior to the date of consummation of a Change in Control
Transaction (as hereinafter defined), the Committee may, in its sole and
absolute discretion, determine that all or any part of the ISO (whether or not
then otherwise vested) shall become immediately exercisable in full and may
thereafter be exercised at any time before the date of consummation of the
Change in Control Transaction (except as otherwise provided in the Plan, and
except to the extent that such acceleration of exercisability would result in an
"excess parachute payment" within the meaning of Section 280G of the Code). In
the event that the Committee exercises its discretion as set forth herein, then
to the extent the ISO has not been fully exercised before the date of
consummation of the Change in Control Transaction, it shall terminate on such
date, unless a provision has been made in writing in connection with such
transaction for the assumption of the ISO, or the substitution for the ISO of
options to acquire the voting stock of a successor employer corporation, or a
parent or a subsidiary thereof, with appropriate
4
<PAGE>
adjustments as to the number and kind of shares and prices, in which event the
ISO shall continue in the manner and under the terms so provided. For purposes
of this Section 4, a "Change in Control Transaction" shall mean dissolution or
liquidation of the Company; a reorganization, merger or consolidation of the
Company as a result of which the outstanding securities of the class then
subject to Rights hereunder are changed into or exchanged for cash or property
or securities not of the Company's issue; or a sale of all or substantially all
of the assets of the Company to, or the acquisition of the stock representing
more than twenty-five percent (25%) of the voting power of the capital stock of
the Company then outstanding by, another corporation, bank, or other entity or
person.
5. Legal Restrictions. If in the opinion of legal counsel for the
------------------
Company the issuance or sale of any Option Shares would not be lawful for any
reason, including, without limitation, the inability of the Company to obtain
from any governmental authority or regulatory body having jurisdiction the
authority deemed by such counsel to be necessary to such issuance or sale, the
Company shall not be obligated to issue or sell any Option Shares pursuant to
the exercise of this ISO to the Grantee or any other authorized person unless a
registration statement that complies with the provisions of the Securities Act
of 1933, as amended (the "Act"), in respect of such Option Shares is in effect
at the time thereof, or other appropriate action has been taken under and
pursuant to the terms and provisions of the Act, or the Company receives
evidence satisfactory to such counsel that the issuance and sale of such Option
Shares, in the absence of an effective registration statement or other
appropriate action, would not constitute a violation of the Act or any
applicable state securities law. It is further agreed that the Company is in no
event obligated to register any Option Shares, to comply with any exemption from
registration requirements or to take any other action which may be required in
order to permit, or to remedy or remove any prohibition or limitation on, the
issuance or sale of such Option Shares to the Grantee. Grantee further
acknowledges that the Act and/or applicable state securities laws may restrict
the right and govern the manner in which the Grantee may dispose of Option
Shares, and Grantee agrees not to offer, sell or otherwise dispose of any such
shares in a manner which would violate the Act or any other federal or state
law.
6. Option Shares Delivered in Escrow. All Option Shares issued upon any
---------------------------------
exercise of the ISO shall be held in escrow for a period which ends on the later
of (i) two (2) years from the Grant Date or (ii) one (1) year after the issuance
of such shares pursuant to the exercise of the ISO. Such shares shall be held
by the Company or its designee. During such escrow period, the Grantee shall
have all rights of a shareholder of the Company, including, but not limited to,
the rights to vote, receive dividends and transfer such shares. The sole
purpose of the escrow is to inform the Company of any disqualifying disposition
(described in Section 422(a)(1) of the Code) of the Option Shares and it shall
be administered solely for this purpose.
7. No Rights as Shareholder or to Employment. Neither the Grantee nor
-----------------------------------------
any other person authorized to purchase Common Stock upon exercise of this ISO
shall have any interest in or shareholder rights with respect to any shares of
the Common Stock which are subject to this ISO until such shares have been
issued and delivered into escrow as provided in Section 6 hereof. Furthermore,
neither this Agreement nor the Plan shall confer upon the Grantee any
5
<PAGE>
rights of employment with the Company, including, without limitation, any right
to continue in the employ of the Company, or shall affect the right of the
Company to terminate the employment of the Grantee at any time, with or without
cause.
8. Withholding Taxes. As a condition of exercise of this ISO, the
-----------------
Committee may, in its sole discretion, withhold or require the Grantee to pay or
reimburse the Company for any taxes which the Company determines are required to
be withheld in connection with the grant or any exercise of this ISO.
9. Heirs and Successors. This Agreement and all terms and conditions
--------------------
hereof shall be binding upon the parties hereto, and their successors, heirs,
legatees and legal representatives.
10. Nontransferability; Who May Exercise. Neither this Agreement nor the
------------------------------------
ISO granted hereby may be transferred or assigned, other than by will or the
laws of descent and distribution, and the ISO may not be exercised by any person
other than the Grantee during the Grantee's lifetime.
11. Plan Controls. Copies of the Plan will be made available to the
-------------
Grantee upon request. In the event of any conflict between the Plan and this
Agreement, the Plan shall control and this Agreement shall be deemed to be
modified accordingly.
12. Governing Law; Venue. To the extent not superseded by federal law,
--------------------
the laws of the State of Georgia shall control in all matters relating to this
Agreement and any action relating to this Agreement must be brought in Colquitt
County, State of Georgia.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement, all as
of the Grant Date set forth herein.
ABC BANCORP
By:_________________________________
Chairman of the Committee
____________________________________
GRANTEE
6
<PAGE>
EXHIBIT A
---------
EXERCISE OF INCENTIVE
STOCK OPTION
---------------------
The undersigned Optionee under that certain ABC Bancorp Incentive
Stock Option Agreement dated as of _____________________________ (the
"Agreement"), hereby exercises the Incentive Stock Option granted under the
Agreement for the following number of shares of Common Stock, subject to the
terms and conditions of the Agreement:
Number of shares being purchased
(must be a multiple of 100
or full exercise)
________
Total purchase price submitted herewith: $________
_________________________
(Signature)
_________________________
(Date)
7
<PAGE>
EXHIBIT 10.18
PRIVILEGED AND CONFIDENTIAL
---------------------------
================================================================================
RIGHTS AGREEMENT
BETWEEN
ABC BANCORP
AND
SUNTRUST BANK, AS RIGHTS AGENT
DATED AS OF FEBRUARY 17, 1998
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Section 1. Certain Definitions.................................................. 1
Section 2. Appointment of Rights Agent.......................................... 8
Section 3. Issuance of Right Certificates....................................... 9
Section 4. Form of Right Certificates........................................... 12
Section 5. Countersignature and Registration.................................... 13
Section 6. Transfer, Split Up, Combination and Exchange of Right Certificates;
Mutilated, Destroyed, Lost or Stolen Right Certificates............. 14
Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights........ 15
Section 8. Cancellation and Destruction of Right Certificates................... 18
Section 9. Reservation and Availability of Preferred Shares..................... 18
Section 10. Preferred Shares Record Date......................................... 19
Section 11. Adjustment of Purchase Price, Number of Shares or Number of
Rights.............................................................. 20
Section 12. Certificate of Adjusted Purchase Price or Number of Shares........... 33
Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning
Power............................................................... 34
Section 14. Fractional Rights and Fractional Shares.............................. 36
Section 15. Rights of Action..................................................... 38
Section 16. Agreement of Right Holders........................................... 39
Section 17. Right Certificate Holder Not Deemed a Shareholder.................... 40
Section 18. Concerning the Rights Agent.......................................... 41
Section 19. Merger or Consolidation or Change of Name of Rights Agent............ 42
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
Section 20. Duties of Rights Agent.............................................. 43
Section 21. Change of Rights Agent.............................................. 48
Section 22. Issuance of New Right Certificates.................................. 49
Section 23. Redemption and Termination.......................................... 50
Section 24. Exchange............................................................ 52
Section 25. Notice of Certain Events............................................ 55
Section 26. Notices............................................................. 56
Section 27. Supplements and Amendments.......................................... 57
Section 28. Determination and Actions by the Board of Directors, etc............ 59
Section 29. Successors.......................................................... 60
Section 30. Benefits of this Agreement.......................................... 60
Section 31. Severability........................................................ 60
Section 32. Governing Law....................................................... 61
Section 33. Counterparts........................................................ 61
Section 34. Descriptive Headings................................................ 61
</TABLE>
EXHIBITS:
Exhibit A - Form of Articles of Amendment designating the relative rights,
preferences and limitations of the Series A Junior Participating
Preferred Stock of ABC Bancorp
Exhibit B - Form of Right Certificate
Exhibit C - Summary of Rights to Purchase Preferred Shares
ii
<PAGE>
________________
DEFINED TERM CROSS REFERENCE SHEET
Acquiring Person................... Section 1(a)
Affiliate.......................... Section 1(b)
Agreement.......................... Preface
Associate.......................... Section 1(b)
Beneficial Owner................... Section 1(c)
Beneficial Ownership............... Section 1(c)
Beneficially Own................... Section 1(c)
Business Day....................... Section 1(d)
Close of Business.................. Section 1(e)
Common Shares...................... Section 1(f)
Company............................ Preface
Current Per Share Market Price..... Section 11(d)(i)
Distribution Date.................. Section 3(a)
Equivalent Preferred Shares........ Section 11(b)
Exchange Act....................... Section 1(b)
Final Expiration Date.............. Section 7(a)
Person............................. Section 1(j)
Preferred Shares................... Section 1(k)
Purchase Price..................... Section 4
Record Date........................ Preface
Redemption Date.................... Section 7(a)
Redemption Price................... Section 23(a)
Right.............................. Preface
Right Certificate.................. Section 3(a)
Rights Agent....................... Preface
Rights Agreement................... Section 3(c)
Security........................... Section 11(d)(i)
Shares Acquisition Date............ Section 1(m)
Subsidiary......................... Section 1(n)
Summary of Rights.................. Section 3(b)
Then Outstanding................... Section 1(c)
Trading Day........................ Section 11(d)(i)
Transaction........................ Section 1(o)
Transaction Person................. Section 1(p)
iii
<PAGE>
RIGHTS AGREEMENT
RIGHTS AGREEMENT, dated as of February 17, 1998 (the "Agreement"), between
ABC BANCORP, a Georgia corporation (the "Company"), and SUNTRUST BANK (the
"Rights Agent").
The Board of Directors of the Company has authorized and declared a
dividend of one preferred share purchase right (a "Right") for each Common Share
(as hereinafter defined) of the Company outstanding on March 6, 1998 (the
"Record Date"), each Right representing the right to purchase one one-hundredth
of a Preferred Share (as hereinafter defined), upon the terms and subject to the
conditions herein set forth, and has further authorized and directed the
issuance of one Right with respect to each Common Share that shall become
outstanding between the Record Date and the earliest of the Distribution Date,
the Redemption Date and the Final Expiration Date (as such terms are hereinafter
defined).
Accordingly, in consideration of the premises and the mutual agreements
herein set forth, the parties hereby agree as follows:
SECTION 1. CERTAIN DEFINITIONS. For purposes of this Agreement, the
-------------------
following terms have the meanings indicated:
(a) "Acquiring Person" shall mean any Person (as such term is
hereinafter defined) who or which, together with all Affiliates and Associates
(as such
<PAGE>
terms are hereinafter defined) of such Person, shall be the Beneficial Owner (as
such term is hereinafter defined) of 15% or more of the Common Shares of the
Company then outstanding, but shall not include (i) the Company, (ii) any
Subsidiary (as such term is hereinafter defined) of the Company, (iii) any
employee benefit plan of the Company or any Subsidiary of the Company, (iv) any
entity holding Common Shares for or pursuant to the terms of any such plan, (v)
any Person, who or which together with all Affiliates and Associates of such
Person, becomes the Beneficial Owner of 15% or more of the Common Shares of the
Company then outstanding as a result of the acquisition of Common Shares
directly from the Company, or (vi) any Grandfathered Shareholder.
Notwithstanding the foregoing, no Person shall become an "Acquiring Person" as
the result of an acquisition of Common Shares by the Company which, by reducing
the number of shares outstanding, increases the proportionate number of shares
beneficially owned by such Person to 15% or more of the Common Shares of the
Company then outstanding; provided, however, that if a Person shall become the
-------- -------
Beneficial Owner of 15% or more of the Common Shares of the Company then
outstanding by reason of share purchases by the Company and shall, after such
share purchases by the Company, become the Beneficial Owner of any additional
Common Shares of the Company, then such Person shall be deemed to be an
"Acquiring Person". Notwithstanding the foregoing, if the Board of Directors of
the Company determines in good faith that a Person who would otherwise be an
"Acquiring Person", as defined pursuant to the foregoing provisions of this
paragraph (a), has become such inadvertently, and such Person divests as
promptly as
2
<PAGE>
practicable a sufficient number of Common Shares so that such Person would no
longer be an "Acquiring Person," as defined pursuant to the foregoing provisions
of this paragraph (a), then such Person shall not be deemed to be an "Acquiring
Person" for any purposes of this Agreement.
(b) "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under
the Securities Exchange Act of 1934, as amended, and in effect on the date of
this Agreement (the "Exchange Act").
(c) A Person shall be deemed the "Beneficial Owner" of, and shall
be deemed to "beneficially own" or have "beneficial ownership" of, any
securities:
(i) which such Person or any of such Person's Affiliates
or Associates beneficially owns, directly or indirectly;
(ii) which such Person or any of such Person's
Affiliates or Associates has (A) the right to acquire
(whether such right is exercisable immediately or only
after the passage of time) pursuant to any agreement,
arrangement or understanding (other than customary
agreements with and between underwriters and selling
group members with
3
<PAGE>
respect to a bona fide public offering of securities),
or upon the exercise of conversion rights, exchange
rights, rights (other than the Rights), warrants or
options, or otherwise; provided, however, that a Person
-------- -------
shall not be deemed the Beneficial Owner of, or to
beneficially own, securities tendered pursuant to a
tender or exchange offer made by or on behalf of such
Person or any of such Person's Affiliates or Associates
until such tendered securities are accepted for purchase
or exchange; or (B) the right to vote pursuant to any
agreement, arrangement or understanding; provided,
--------
however, that a Person shall not be deemed the
-------
Beneficial Owner of, or to beneficially own, any
security if the agreement, arrangement or understanding
to vote such security (1) arises solely from a revocable
proxy or consent given to such Person in response to a
public proxy or consent solicitation made pursuant to,
and in accordance with, the applicable rules and
regulations promulgated under the Exchange Act and (2)
is not also then reportable on Schedule 13D under the
Exchange Act (or any comparable or successor report); or
4
<PAGE>
(iii) which are beneficially owned, directly or indirectly,
by any other Person with which such Person or any of
such Person's Affiliates or Associates has any
agreement, arrangement or understanding (other than
customary agreements with and between underwriters and
selling group members with respect to a bona fide public
offering of securities) for the purpose of acquiring,
holding, voting (except to the extent contemplated by
the proviso to Section 1(c)(ii)(B)) or disposing of any
securities of the Company.
Notwithstanding anything in these definitions of Beneficial Owner,
beneficially own or beneficial ownership to the contrary, the phrase "then
outstanding," when used with reference to a Person's beneficial ownership of
securities of the Company, shall mean the number of such securities then issued
and outstanding, together with the number of such securities not then actually
issued and outstanding which such Person would be deemed to own beneficially
hereunder.
(d) "Business Day" shall mean any day other than a Saturday,
Sunday, or U.S. federal holiday.
5
<PAGE>
(e) "Close of business" on any given date shall mean 5:00 P.M.,
Atlanta, Georgia time, on such date; provided, however, that if such date is not
-------- -------
a Business Day it shall mean 5:00 P.M., Atlanta, Georgia time, on the next
succeeding Business Day.
(f) "Common Shares", when used with reference to the Company,
shall mean the shares of common stock, par value $1.00 per share, of the Company
or, in the event of a subdivision, combination or consolidation with respect to
such shares of common stock, the shares of common stock resulting from such
subdivision, combination or consolidation. "Common Shares", when used with
reference to any Person other than the Company, shall mean the capital stock (or
equity interest) with the greatest voting power of such other Person or, if such
other Person is a Subsidiary of another Person, the Person or Persons which
ultimately control such first-mentioned Person.
(g) "Distribution Date" shall have the meaning set forth in
Section 3 hereof.
(h) "Final Expiration Date" shall have the meaning set forth in
Section 7 hereof.
6
<PAGE>
(i) "Person" shall mean any individual, firm, corporation or
other entity, and shall include any successor (by merger or otherwise) of such
entity.
(j) "Preferred Shares" shall mean shares of Series A Junior
Participating Preferred Stock, no par value, of the Company having the rights
and preferences set forth in the Form of Articles of Amendment to the Articles
of Incorporation of ABC Bancorp attached to this Agreement as Exhibit A.
(k) "Redemption Date" shall have the meaning set forth in Section
7 hereof.
(l) "Shares Acquisition Date" shall mean the first date of public
announcement (which for purposes of this definition, shall include, without
limitation, a report filed pursuant to the Exchange Act) by the Company or an
Acquiring Person that an Acquiring Person has become such; provided that if such
--------
Person is determined not to have become an Acquiring Person pursuant to the last
sentence of Section 1(a), then no Shares Acquisition Date shall be deemed to
have occurred.
(m) "Subsidiary" of any Person shall mean any corporation or
other entity of which a majority of the voting power of the voting equity
securities or equity interest is owned, directly or indirectly, by such Person.
7
<PAGE>
(n) "Transaction" shall mean any merger, consolidation or sale of
assets described in Section 13 hereof or any acquisition of Common Shares of the
Company which would result in a Person becoming a Transaction Person.
(o) "Transaction Person" with respect to a Transaction shall mean
(x) any Person who (i) is or will become an Acquiring Person if the Transaction
were to be consummated and (ii) directly or indirectly proposed or nominated a
director of the Company which director is in office at the time of consideration
of the Transaction, or (y) an Affiliate or Associate of such a Person.
SECTION 2. APPOINTMENT OF RIGHTS AGENT. The Company hereby appoints the
---------------------------
Rights Agent to act as agent for the Company and the holders of the Rights (who,
in accordance with Section 3 hereof, shall prior to the Distribution Date also
be the holders of the Common Shares) in accordance with the terms and conditions
hereof, and the Rights Agent hereby accepts such appointment. The Company may
from time to time appoint such co-Rights Agents as it may deem necessary or
desirable.
SECTION 3. ISSUANCE OF RIGHT CERTIFICATES. (a) Until the earlier of (i)
------------------------------
the tenth day after the Shares Acquisition Date or (ii) the tenth business day
(or such later date as may be determined by action of the Board of Directors
prior to such time as any Person becomes an Acquiring Person) after the date of
the commencement by any Person (other than the Company, any Subsidiary of the
Company, any employee
8
<PAGE>
benefit plan of the Company or of any Subsidiary of the Company or any entity
holding Common Shares for or pursuant to the terms of any such plan) of, or of
the first public announcement of the intention of any Person (other than the
Company, any Subsidiary of the Company, any employee benefit plan of the Company
or of any Subsidiary of the Company or any entity holding Common Shares for or
pursuant to the terms of any such plan) to commence, a tender or exchange offer
the consummation of which would result in any Person becoming the Beneficial
Owner of Common Shares aggregating 15% or more of the then outstanding Common
Shares (including any such date which is after the date of this Agreement and
prior to the issuance of the Rights, with the earlier of such dates being herein
referred to as the "Distribution Date"), (x) the Rights will be evidenced
(subject to the provisions of Section 3(b) hereof) by the certificates for
Common Shares registered in the names of the holders thereof (which certificates
shall also be deemed to be Right Certificates) and not by separate Right
Certificates, and (y) the right to receive Right Certificates will be
transferable only in connection with the transfer of Common Shares. As soon as
practicable after the Distribution Date, the Company will prepare and execute,
the Rights Agent will countersign, and the Company will send or cause to be sent
(and the Rights Agent will, if requested, send) by first-class, insured,
postage-prepaid mail, to each record holder of Common Shares as of the close of
business on the Distribution Date, at the address of such holder shown on the
records of the Company, a Right Certificate, in substantially the form of
Exhibit B hereto (a "Right Certificate"),
9
<PAGE>
evidencing one Right for each Common Share so held. As of the Distribution
Date, the Rights will be evidenced solely by such Right Certificates.
(b) On the Record Date, or as soon as practicable thereafter, the
Company will send a copy of a Summary of Rights to Purchase Preferred Shares, in
substantially the form of Exhibit C hereto (the "Summary of Rights"), by first-
class, postage-prepaid mail, to each record holder of Common Shares as of the
close of business on the Record Date, at the address of such holder shown on the
records of the Company. With respect to certificates for Common Shares
outstanding as of the Record Date, until the Distribution Date, the Rights will
be evidenced by such certificates registered in the names of the holders thereof
together with a copy of the Summary of Rights attached thereto. Until the
Distribution Date (or the earlier of the Redemption Date or the Final Expiration
Date), the surrender for transfer of any certificate for Common Shares
outstanding on the Record Date, with or without a copy of the Summary of Rights
attached thereto, shall also constitute the transfer of the Rights associated
with the Common Shares represented thereby.
(c) Certificates for Common Shares which become outstanding
(including, without limitation, reacquired Common Shares referred to in the last
sentence of this paragraph (c)) after the Record Date but prior to the earliest
of the Distribution Date, the Redemption Date or the Final Expiration Date shall
have
10
<PAGE>
impressed on, printed on, written on or otherwise affixed to them the following
legend:
This certificate also evidences and entitles the holder hereof to
certain rights as set forth in a Rights Agreement between ABC
Bancorp and SunTrust Bank, dated as of February 17, 1998 (the
"Rights Agreement"), the terms of which are hereby incorporated
herein by reference and a copy of which is on file at the
principal executive offices of ABC Bancorp. Under certain
circumstances, as set forth in the Rights Agreement, such Rights
will be evidenced by separate certificates and will no longer be
evidenced by this certificate. ABC Bancorp will mail to the
holder of this certificate a copy of the Rights Agreement without
charge after receipt of a written request therefor. Under certain
circumstances, as set forth in the Rights Agreement, Rights
issued to, or held by, any Person who is, was or becomes an
Acquiring Person or Affiliate or Associate thereof (as defined in
the Rights Agreement) and certain related persons, whether
currently held by or on behalf of such Person or any subsequent
holder, may become null and void.
With respect to such certificates containing the foregoing legend, until the
Distribution Date, the Rights associated with the Common Shares represented by
such certificates
11
<PAGE>
shall be evidenced by such certificates alone, and the surrender for transfer of
any such certificate shall also constitute the transfer of the Rights associated
with the Common Shares represented thereby. In the event that the Company
purchases or acquires any Common Shares after the Record Date but prior to the
Distribution Date, any Rights associated with such Common Shares shall be deemed
cancelled and retired so that the Company shall not be entitled to exercise any
Rights associated with the Common Shares which are no longer outstanding.
SECTION 4. FORM OF RIGHT CERTIFICATES. The Right Certificates (and the
--------------------------
forms of election to purchase Preferred Shares and of assignment to be printed
on the reverse thereof) shall be substantially the same as Exhibit B hereto and
may have such marks of identification or designation and such legends, summaries
or endorsements printed thereon as the Company may deem appropriate and as are
not inconsistent with the provisions of this Agreement, or as may be required to
comply with any applicable law or with any rule or regulation made pursuant
thereto or with any rule or regulation of any stock exchange on which the Rights
may from time to time be listed, or to conform to usage. Subject to the
provisions of Section 11 and Section 22 hereof, the Right Certificates shall
entitle the holders thereof to purchase such number of one one-hundredths of a
Preferred Share as shall be set forth therein at the price per one one-hundredth
of a Preferred Share set forth therein (the "Purchase Price"), but the number of
such one one-hundredths of a Preferred Share and the Purchase Price shall be
subject to adjustment as provided herein.
12
<PAGE>
SECTION 5. COUNTERSIGNATURE AND REGISTRATION. (a) The Right Certificates
---------------------------------
shall be executed on behalf of the Company by its Chairman of the Board, its
Chief Executive Officer, its President, any of its Vice Presidents, or its
Treasurer, either manually or by facsimile signature, shall have affixed thereto
the Company's seal or a facsimile thereof, and shall be attested by the
Secretary or an Assistant Secretary of the Company, either manually or by
facsimile signature. The Right Certificates shall be manually countersigned by
the Rights Agent and shall not be valid for any purpose unless countersigned.
In case any officer of the Company who shall have signed any of the Right
Certificates shall cease to be such officer of the Company before
countersignature by the Rights Agent and issuance and delivery by the Company,
such Right Certificates, nevertheless, may be countersigned by the Rights Agent
and issued and delivered by the Company with the same force and effect as though
the Person who signed such Right Certificates had not ceased to be such officer
of the Company; and any Right Certificate may be signed on behalf of the Company
by any Person who, at the actual date of the execution of such Right
Certificate, shall be a proper officer of the Company to sign such Right
Certificate, although at the date of the execution of this Rights Agreement any
such Person was not such an officer.
(b) Following the Distribution Date, the Rights Agent will keep or
cause to be kept, at its principal office, books for registration and transfer
of the Right Certificates issued hereunder. Such books shall show the names and
addresses of the
13
<PAGE>
respective Holders of the Right Certificates, the number of Rights evidenced on
its face by each of the Right Certificates and the date of each of the Right
Certificates.
SECTION 6. TRANSFER, SPLIT UP, COMBINATION AND EXCHANGE OF RIGHT
-----------------------------------------------------
CERTIFICATES; MUTILATED, DESTROYED, LOST OR STOLEN RIGHT CERTIFICATES. (a)
- ---------------------------------------------------------------------
Subject to the provisions of Section 14 hereof, at any time after the close of
business on the Distribution Date, and at or prior to the close of business on
the earlier of the Redemption Date or the Final Expiration Date, any Right
Certificate or Right Certificates (other than Right Certificates representing
Rights that have become void pursuant to Section 11(a)(ii) hereof or that have
been exchanged pursuant to Section 24 hereof) may be transferred, split up,
combined or exchanged for another Right Certificate or Right Certificates,
entitling the registered holder to purchase a like number of one one-hundredths
of a Preferred Share as the Right Certificate or Right Certificates surrendered
then entitled such holder to purchase. Any registered holder desiring to
transfer, split up, combine or exchange any Right Certificate or Right
Certificates shall make such request in writing delivered to the Rights Agent,
and shall surrender the Right Certificate or Right Certificates to be
transferred, split up, combined or exchanged at the principal office of the
Rights Agent. Thereupon the Rights Agent shall countersign and deliver to the
Person entitled thereto a Right Certificate or Right Certificates, as the case
may be, as so requested. The Company may require payment of a sum sufficient to
cover any tax or governmental charge that may be imposed in connection with any
transfer, split up, combination or exchange of Right Certificates.
14
<PAGE>
(b) Upon receipt by the Company and the Rights Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction or mutilation of
a Right Certificate, and, in case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to them, and, at the Company's request,
reimbursement to the Company and the Rights Agent of all reasonable expenses
incidental thereto, and upon surrender to the Rights Agent and cancellation of
the Right Certificate if mutilated, the Company will make and deliver a new
Right Certificate of like tenor to the Rights Agent for delivery to the
registered holder in lieu of the Right Certificate so lost, stolen, destroyed or
mutilated.
SECTION 7. EXERCISE OF RIGHTS; PURCHASE PRICE; EXPIRATION DATE OF RIGHTS.
-------------------------------------------------------------
(a) The registered holder of any Right Certificate may exercise the Rights
evidenced thereby (except as otherwise provided herein) in whole or in part at
any time after the Distribution Date upon surrender of the Right Certificate,
with the form of election to purchase on the reverse side thereof duly executed,
to the Rights Agent at the principal office of the Rights Agent, together with
payment of the Purchase Price for each one one-hundredth of a Preferred Share as
to which the Rights are exercised, at or prior to the earliest of (i) the close
of business on March 6, 2008 (the "Final Expiration Date"), (ii) the time at
which the Rights are redeemed as provided in Section 23 hereof (the "Redemption
Date"), or (iii) the time at which such Rights are exchanged as provided in
Section 24 hereof.
15
<PAGE>
(b) The Purchase Price for each one one-hundredth of a Preferred
Share purchasable pursuant to the exercise of a Right shall initially be $81.00,
shall be subject to adjustment from time to time as provided in Section 11 or 13
hereof and shall be payable in lawful money of the United States of America in
accordance with paragraph (c) below.
(c) Upon receipt of a Right Certificate representing exercisable
Rights, with the form of election to purchase duly executed, accompanied by
payment of the Purchase Price for the shares to be purchased and an amount equal
to any applicable transfer tax required to be paid by the holder of such Right
Certificate in accordance with Section 9 hereof by certified check, cashier's
check or money order payable to the order of the Company, the Rights Agent shall
thereupon promptly (i) (A) requisition from any transfer agent of the Preferred
Shares certificates for the number of Preferred Shares to be purchased and the
Company hereby irrevocably authorizes its transfer agent to comply with all such
requests, or (B) requisition from the depositary agent depositary receipts
representing such number of one one-hundredths of a Preferred Share as are to be
purchased (in which case certificates for the Preferred Shares represented by
such receipts shall be deposited by the transfer agent with the depositary
agent) and the Company hereby directs the depositary agent to comply with such
request, (ii) when appropriate, requisition from the Company the amount of cash
to be paid in lieu of issuance of fractional shares in accordance with Section
14 hereof, (iii) after receipt of such certificates or depositary receipts,
cause the same to
16
<PAGE>
be delivered to or upon the order of the registered holder of such Right
Certificate, registered in such name or names as may be designated by such
holder and (iv) when appropriate, after receipt, deliver such cash to or upon
the order of the registered holder of such Right Certificate. In the event that
the Company is obligated to issue other securities (including Common Shares) of
the Company pursuant to Section 11(a) hereof, the Company will make all
arrangements necessary so that such other securities are available for
distribution by the Rights Agent, if and when appropriate.
(d) In case the registered holder of any Right Certificate shall
exercise less than all the Rights evidenced thereby, a new Right Certificate
evidencing Rights equivalent to the Rights remaining unexercised shall be issued
by the Rights Agent to the registered holder of such Right Certificate or to his
duly authorized assigns, subject to the provisions of Section 14 hereof, or the
Rights Agent shall place an appropriate notation on the Right Certificate with
respect to those Rights exercised.
SECTION 8. CANCELLATION AND DESTRUCTION OF RIGHT CERTIFICATES. All Right
--------------------------------------------------
Certificates surrendered for the purpose of exercise, transfer, split up,
combination or exchange shall, if surrendered to the Company or to any of its
agents, be delivered to the Rights Agent for cancellation or in cancelled form,
or, if surrendered to the Rights Agent, shall be cancelled by it, and no Right
Certificates shall be issued in lieu thereof except as expressly permitted by
any of the provisions of this Rights Agreement. The Company shall deliver to
the Rights Agent for cancellation and retirement, and the
17
<PAGE>
Rights Agent shall so cancel and retire, any other Right Certificate purchased
or acquired by the Company otherwise than upon the exercise thereof. The Rights
Agent shall deliver all cancelled Right Certificates to the Company, or shall,
at the written request of the Company, destroy such cancelled Right
Certificates, and in such case shall deliver a certificate of destruction
thereof to the Company.
SECTION 9. RESERVATION AND AVAILABILITY OF PREFERRED SHARES. (a) The
------------------------------------------------
Company covenants and agrees that it will cause to be reserved and kept
available out of its authorized and unissued Preferred Shares, or any authorized
and issued Preferred Shares held in its treasury, the number of Preferred Shares
that will be sufficient to permit the exercise in full of all outstanding Rights
in accordance with Section 7. The Company covenants and agrees that it will take
all such action as may be necessary to ensure that all Preferred Shares
delivered upon exercise of Rights shall, at the time of delivery of the
certificates for such Preferred Shares (subject to payment of the Purchase
Price), be duly and validly authorized and issued and fully paid and
nonassessable shares.
(b) The Company further covenants and agrees that it will pay when
due and payable any and all federal and state transfer taxes and charges which
may be payable in respect of the issuance or delivery of the Right Certificates
or of any Preferred Shares upon the exercise of Rights. The Company shall not,
however, be required to pay any transfer tax which may be payable in respect of
any transfer or
18
<PAGE>
delivery of Right Certificates to a Person other than, or the issuance or
delivery of certificates or depositary receipts for the Preferred Shares in a
name other than that of, the registered holder of the Right Certificate
evidencing Rights surrendered for exercise or to issue or to deliver any
certificates or depositary receipts for Preferred Shares upon the exercise of
any Rights until any such tax shall have been paid (any such tax being payable
by the holder of such Right Certificate at the time of surrender) or until it
has been established to the Company's reasonable satisfaction that no such tax
is due.
SECTION 10. PREFERRED SHARES RECORD DATE. Each Person in whose name any
----------------------------
certificate for Preferred Shares is issued upon the exercise of Rights shall for
all purposes be deemed to have become the holder of record of the Preferred
Shares represented thereby on, and such certificate shall be dated, the date
upon which the Right Certificate evidencing such Rights was duly surrendered and
payment of the Purchase Price (and any applicable transfer taxes) was made;
provided, however, that if the date of such surrender and payment is a date upon
- -------- -------
which the Preferred Shares transfer books of the Company are closed, such Person
shall be deemed to have become the record holder of such shares on, and such
certificate shall be dated, the next succeeding Business Day on which the
Preferred Shares transfer books of the Company are open. Prior to the exercise
of the Rights evidenced thereby, the holder of a Right Certificate shall not be
entitled to any rights of a holder of Preferred Shares for which the Rights
shall be exercisable, including, without limitation, the right to
19
<PAGE>
vote, to receive dividends or other distributions or to exercise any preemptive
rights, and shall not be entitled to receive any notice of any proceedings of
the Company, except as provided herein.
SECTION 11. ADJUSTMENT OF PURCHASE PRICE, NUMBER OF SHARES OR NUMBER OF
-----------------------------------------------------------
RIGHTS. The Purchase Price, the number of Preferred Shares covered by each
- ------
Right and the number of Rights outstanding are subject to adjustment from time
to time as provided in this Section 11.
(a) (i) In the event the Company shall at any time after the date
of this Agreement (A) declare a dividend on the Preferred Shares payable in
Preferred Shares, (B) subdivide the outstanding Preferred Shares, (C) combine
the outstanding Preferred Shares into a smaller number of Preferred Shares or
(D) issue any shares of its capital stock in a reclassification of the Preferred
Shares (including any such reclassification in connection with a consolidation
or merger in which the Company is the continuing or surviving corporation),
except as otherwise provided in this Section 11(a), the Purchase Price in effect
at the time of the record date for such dividend or of the effective date of
such subdivision, combination or reclassification, and the number and kind of
shares of capital stock issuable on such date, shall be proportionately adjusted
so that the holder of any Right exercised after such time shall be entitled to
receive the aggregate number and kind of shares of capital stock which, if such
Right had been exercised immediately prior to such date and at a time when the
Preferred Shares
20
<PAGE>
transfer books of the Company were open, he would have owned upon such exercise
and been entitled to receive by virtue of such dividend, subdivision,
combination or reclassification; provided, however, that in no event shall the
-------- -------
consideration to be paid upon the exercise of one Right be less than the
aggregate par value of the shares of capital stock of the Company issuable upon
exercise of one Right.
(ii) Subject to Section 24 of this Agreement, in the event any
Person becomes an Acquiring Person, each holder of a Right shall thereafter have
a right to receive, upon exercise thereof at a price equal to the then current
Purchase Price multiplied by the number of one one-hundredths of a Preferred
Share for which a Right is then exercisable, in accordance with the terms of
this Agreement and in lieu of Preferred Shares, such number of Common Shares of
the Company as shall equal the result obtained by (x) multiplying the then
current Purchase Price by the number of one one-hundredths of a Preferred Share
for which a Right is then exercisable and dividing that product by (y) 50% of
the then current per share market price of the Company's Common Shares
(determined pursuant to Section 11(d) hereof) on the date of the occurrence of
such event. In the event that any Person shall become an Acquiring Person and
the Rights shall then be outstanding, the Company shall not take any action
which would eliminate or diminish the benefits intended to be afforded by the
Rights. From and after the occurrence of such event, any Rights that are or were
acquired or beneficially owned by any Acquiring Person (or any Associate or
Affiliate of such Acquiring Person) shall be void and any holder of such Rights
shall thereafter
21
<PAGE>
have no right to exercise such Rights under any provision of this Agreement. No
Right Certificate shall be issued pursuant to Section 3 that represents Rights
beneficially owned by an Acquiring Person whose Rights would be void pursuant to
the preceding sentence or any Associate or Affiliate thereof; no Right
Certificate shall be issued at any time upon the transfer of any Rights to an
Acquiring Person whose Rights would be void pursuant to the preceding sentence
or any Associate or Affiliate thereof or to any nominee of such Acquiring
Person, Associate or Affiliate; and any Right Certificate delivered to the
Rights Agent for transfer to an Acquiring Person whose Rights would be void
pursuant to the preceding sentence shall be cancelled.
(iii) In the event that there shall not be sufficient Common Shares
issued but not outstanding or authorized but unissued to permit the exercise in
full of the Rights in accordance with the foregoing subparagraph (ii), the
Company shall take all such action as may be necessary to authorize additional
Common Shares for issuance upon exercise of the Rights. In the event the
Company shall, after good faith effort, be unable to take all such action as may
be necessary to authorize such additional Common Shares, the Company shall
substitute, for each Common Share that would otherwise be issuable upon exercise
of a Right, a number of Preferred Shares or fraction thereof such that the
current per share market price of one Preferred Share multiplied by such number
or fraction is equal to the current per share market price of one Common Share
as of the date of issuance of such Preferred Shares or fraction thereof.
22
<PAGE>
(b) In case the Company shall fix a record date for the issuance
of rights, options or warrants to all holders of Preferred Shares entitling them
(for a period expiring within 45 calendar days after such record date) to
subscribe for or purchase Preferred Shares (or shares having the same rights,
privileges and preferences as the Preferred Shares ("equivalent preferred
shares")) or securities convertible into Preferred Shares or equivalent
preferred shares at a price per Preferred Share or equivalent preferred share
(or having a conversion price per share, if a security convertible into
Preferred Shares or equivalent preferred shares) less than the then current per
share market price of the Preferred Shares (as defined in Section 11(d)) on such
record date, the Purchase Price to be in effect after such record date shall be
determined by multiplying the Purchase Price in effect immediately prior to such
record date by a fraction, the numerator of which shall be the number of
Preferred Shares outstanding on such record date plus the number of Preferred
Shares which the aggregate offering price of the total number of Preferred
Shares and/or equivalent preferred shares so to be offered (and/or the aggregate
initial conversion price of the convertible securities so to be offered) would
purchase at such current market price and the denominator of which shall be the
number of Preferred Shares outstanding on such record date plus the number of
additional Preferred Shares and/or equivalent preferred shares to be offered for
subscription or purchase (or into which the convertible securities so to be
offered are initially convertible); provided, however, that in no event shall
-------- -------
the consideration to be paid upon the exercise of one Right be less than the
aggregate par value of the shares of capital stock of the Company
23
<PAGE>
issuable upon exercise of one Right. In case such subscription price may be
paid in a consideration part or all of which shall be in a form other than cash,
the value of such consideration shall be as determined in good faith by the
Board of Directors of the Company, whose determination shall be described in a
statement filed with the Rights Agent. Preferred Shares owned by or held for
the account of the Company shall not be deemed outstanding for the purpose of
any such computation. Such adjustment shall be made successively whenever such
a record date is fixed; and in the event that such rights, options or warrants
are not so issued, the Purchase Price shall be adjusted to be the Purchase Price
which would then be in effect if such record date had not been fixed.
(c) In case the Company shall fix a record date for the making of
a distribution to all holders of the Preferred Shares (including any such
distribution made in connection with a consolidation or merger in which the
Company is the continuing or surviving corporation) of evidences of indebtedness
or assets (other than a regular quarterly cash dividend or a dividend payable in
Preferred Shares) or subscription rights or warrants (excluding those referred
to in Section 11(b) hereof), the Purchase Price to be in effect after such
record date shall be determined by multiplying the Purchase Price in effect
immediately prior to such record date by a fraction, the numerator of which
shall be the then current per share market price of the Preferred Shares on such
record date, less the fair market value (as determined in good faith by the
Board of Directors of the Company, whose determination shall be described in a
24
<PAGE>
statement filed with the Rights Agent) of the portion of the assets or evidences
of indebtedness so to be distributed or of such subscription rights or warrants
applicable to one Preferred Share and the denominator of which shall be such
current per share market price of the Preferred Shares; provided, however, that
-------- -------
in no event shall the consideration to be paid upon the exercise of one Right be
less than the aggregate par value of the shares of capital stock of the Company
to be issued upon exercise of one Right. Such adjustments shall be made
successively whenever such a record date is fixed; and in the event that such
distribution is not so made, the Purchase Price shall again be adjusted to be
the Purchase Price which would then be in effect if such record date had not
been fixed.
(d) (i) For the purpose of any computation hereunder, the "current
per share market price" of any security (a "Security" for the purpose of this
Section 11(d)(i)) on any date shall be deemed to be the average of the daily
closing prices per share of such Security for the 30 consecutive Trading Days
(as such term is hereinafter defined) immediately prior to such date; provided,
--------
however, that in the event that the current per share market price of the
- -------
Security is determined during a period following the announcement by the issuer
of such Security of (A) a dividend or distribution on such Security payable in
shares of such Security or securities convertible into such shares, or (B) any
subdivision, combination or reclassification of such Security and prior to the
expiration of 30 Trading Days after the ex-dividend date for such dividend or
distribution, or the record date for such subdivision, combination
25
<PAGE>
or reclassification, then, and in each such case, the current per share market
price shall be appropriately adjusted to reflect the current market price per
share equivalent of such Security. The closing price for each day shall be the
last sale price, regular way, or, in case no such sale takes place on such day,
the average of the closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting system with respect
to securities listed or admitted to trading on the New York Stock Exchange or,
if the Security is not listed or admitted to trading on the New York Stock
Exchange, as reported in the principal consolidated transaction reporting system
with respect to securities listed on the principal national securities exchange
on which the Security is listed or admitted to trading or, if the Security is
not listed or admitted to trading on any national securities exchange, the last
quoted price or, if not so quoted, the average of the high bid and low asked
prices in the over-the-counter market, as reported by the National Association
of Securities Dealers, Inc. Automated Quotations System ("NASDAQ") or such
other system then in use, or, if on any such date the Security is not quoted by
any such organization, the average of the closing bid and asked prices as
furnished by a professional market maker making a market in the Security
selected by the Board of Directors of the Company. The term "Trading Day"
shall mean a day on which the principal national securities exchange on which
the Security is listed or admitted to trading is open for the transaction of
business or, if the Security is not listed or admitted to trading on any
national securities exchange, a Business Day.
26
<PAGE>
(ii) For the purpose of any computation hereunder, the "current per
share market price" of the Preferred Shares shall be determined in accordance
with the method set forth in Section 11(d)(i). If the Preferred Shares are not
publicly traded, the "current per share market price" of the Preferred Shares
shall be conclusively deemed to be the current per share market price of the
Common Shares as determined pursuant to Section 11(d)(i) (appropriately adjusted
to reflect any stock split, stock dividend or similar transaction occurring
after the date hereof), multiplied by one hundred. If neither the Common Shares
nor the Preferred Shares are publicly held or so listed or traded, "current per
share market price" shall mean the fair value per share as determined in good
faith by the Board of Directors of the Company, whose determination shall be
described in a statement filed with the Rights Agent and shall be binding on the
Rights Agent.
(e) Anything herein to the contrary notwithstanding, no adjustment
in the Purchase Price shall be required unless such adjustment would require an
increase or decrease of at least 1% in the Purchase Price; provided, however,
-------- -------
that any adjustments which by reason of this Section 11(e) are not required to
be made shall be carried forward and taken into account in any subsequent
adjustment. All calculations under this Section 11 shall be made to the nearest
cent or to the nearest one one-millionth of a Preferred Share or one ten-
thousandth of any other share or security as the case may be. Notwithstanding
the first sentence of this Section 11(e), any adjustment required by this
Section 11 shall be made no later than the earlier of
27
<PAGE>
(i) three years from the date of the transaction which requires such adjustment
or (ii) the date of the expiration of the right to exercise any Rights.
(f) If as a result of an adjustment made pursuant to Section 11(a)
hereof, the holder of any Right thereafter exercised shall become entitled to
receive any shares of capital stock of the Company other than Preferred Shares,
thereafter the number of such other shares so receivable upon exercise of any
Right shall be subject to adjustment from time to time in a manner and on terms
as nearly equivalent as practicable to the provisions with respect to the
Preferred Shares contained in Section 11(a) through (c), inclusive, and the
provisions of Sections 7, 9, 10 and 13 with respect to the Preferred Shares
shall apply on like terms to any such other shares.
(g) All Rights originally issued by the Company subsequent to any
adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at the adjusted Purchase Price, the number of one one-hundredths of a
Preferred Share purchasable from time to time hereunder upon exercise of the
Rights, all subject to further adjustment as provided herein.
(h) Unless the Company shall have exercised its election as
provided in Section 11(i), upon each adjustment of the Purchase Price as a
result of the calculations made in Sections 11(b) and (c), each Right
outstanding immediately prior to the making of such adjustment shall thereafter
evidence the right to purchase, at
28
<PAGE>
the adjusted Purchase Price, that number of one one-hundredths of a Preferred
Share (calculated to the nearest one one-millionth of a Preferred Share)
obtained by (i) multiplying (x) the number of one one-hundredths of a share
covered by a Right immediately prior to this adjustment by (y) the Purchase
Price in effect immediately prior to such adjustment of the Purchase Price and
(ii) dividing the product so obtained by the Purchase Price in effect
immediately after such adjustment of the Purchase Price.
(i) The Company may elect on or after the date of any adjustment
of the Purchase Price to adjust the number of Rights, in lieu of any adjustment
in the number of one one-hundredths of a Preferred Share purchasable upon the
exercise of a Right. Each of the Rights outstanding after such adjustment of the
number of Rights shall be exercisable for the number of one one-hundredths of a
Preferred Share for which a Right was exercisable immediately prior to such
adjustment. Each Right held of record prior to such adjustment of the number of
Rights shall become that number of Rights (calculated to the nearest one ten-
thousandth) obtained by dividing the Purchase Price in effect immediately prior
to adjustment of the Purchase Price by the Purchase Price in effect immediately
after adjustment of the Purchase Price. The Company shall make a public
announcement of its election to adjust the number of Rights, indicating the
record date for the adjustment, and, if known at the time, the amount of the
adjustment to be made. This record date may be the date on which the Purchase
Price is adjusted or any day thereafter, but, if the Right Certificates have
29
<PAGE>
been issued, shall be at least 10 days later than the date of the public
announcement. If Right certificates have been issued, upon each adjustment of
the number of Rights pursuant to this Section 11(i), the Company shall, as
promptly as practicable, cause to be distributed to holders of record of Right
Certificates on such record date Right Certificates evidencing, subject to
Section 14 hereof, the additional Rights to which such holders shall be entitled
as a result of such adjustment, or, at the option of the Company, shall cause to
be distributed to such holders of record in substitution and replacement for the
Right Certificates held by such holders prior to the date of adjustment, and
upon surrender thereof, if required by the Company, new Right Certificates
evidencing all the Rights to which such holders shall be entitled after such
adjustment. Right Certificates so to be distributed shall be issued, executed
and countersigned in the manner provided for herein and shall be registered in
the names of the holders of record of Right Certificates on the record date
specified in the public announcement.
(j) Irrespective of any adjustment or change in the Purchase Price
or the number of one one-hundredths of a Preferred Share issuable upon the
exercise of the Rights, the Right Certificates theretofore and thereafter issued
may continue to express the Purchase Price and the number of one one-hundredths
of a Preferred Share which were expressed in the initial Right Certificates
issued hereunder.
30
<PAGE>
(k) Before taking any action that would cause an adjustment
reducing the Purchase Price below one one-hundredth of the then par value, if
any, of the Preferred Shares issuable upon exercise of the Rights, the Company
shall take any corporate action which may, in the opinion of its counsel, be
necessary in order that the Company may validly and legally issue fully paid and
nonassessable Preferred Shares at such adjusted Purchase Price.
(l) In any case in which this Section 11 shall require that an
adjustment in the Purchase Price be made effective as of a record date for a
specified event, the Company may elect to defer until the occurrence of such
event the issuing to the holder of any Right exercised after such record date of
the Preferred Shares and other capital stock or securities of the Company, if
any, issuable upon such exercise over and above the Preferred Shares and other
capital stock or securities of the Company, if any, issuable upon such exercise
on the basis of the Purchase Price in effect prior to such adjustment;
provided, however, that the Company shall deliver to such holder a due bill or
- -------- -------
other appropriate instrument evidencing such holder's right to receive such
additional shares upon the occurrence of the event requiring such adjustment.
(m) Anything in this Section 11 to the contrary notwithstanding,
the Company shall be entitled to make such reductions in the Purchase Price, in
addition to those adjustments expressly required by this Section 11, as and to
the extent that
31
<PAGE>
it in its sole discretion shall determine to be advisable in order that any
consolidation or subdivision of the Preferred Shares, issuance wholly for cash
of any Preferred Shares at less than the current market price, issuance wholly
for cash of Preferred Shares or securities which by their terms are convertible
into or exchangeable for Preferred Shares, dividends on Preferred Shares payable
in Preferred Shares or issuance of rights, options or warrants referred to
hereinabove in Section 11(b), hereafter made by the Company to holders of its
Preferred Shares shall not be taxable to such shareholders.
(n) In the event that at any time after the date of this Agreement
and prior to the Distribution Date, the Company shall (i) declare or pay any
dividend on the Common Shares payable in Common Shares or (ii) effect a
subdivision, combination or consolidation of the Common Shares (by
reclassification or otherwise than by payment of dividends in Common Shares)
into a greater or lesser number of Common Shares, then in any such case (A) the
number of one one-hundredths of a Preferred Share purchasable after such event
upon proper exercise of each Right shall be determined by multiplying the number
of one one-hundredths of a Preferred Share so purchasable immediately prior to
such event by a fraction, the numerator of which is the number of Common Shares
outstanding immediately before such event and the denominator of which is the
number of Common Shares outstanding immediately after such event, and (B) each
Common Share outstanding immediately after such event shall have issued with
respect to it that number of Rights which each Common Share
32
<PAGE>
outstanding immediately prior to such event had issued with respect to it. The
adjustments provided for in this Section 11(n) shall be made successively
whenever such a dividend is declared or paid or such a subdivision, combination
or consolidation is effected.
SECTION 12. CERTIFICATE OF ADJUSTED PURCHASE PRICE OR NUMBER OF SHARES.
----------------------------------------------------------
Whenever an adjustment is made as provided in Section 11 or 13 hereof, the
Company shall promptly (a) prepare a certificate setting forth such adjustment,
together with a brief statement of the facts accounting for such adjustment, (b)
file with the Rights Agent and with each transfer agent for the Common Shares or
the Preferred Shares a copy of such certificate and (c) mail a brief summary
thereof to each holder of a Right Certificate in accordance with Section 25
hereof. The Rights Agent shall be fully protected in relying on any such
certificate and on any adjustment therein contained and shall not be deemed to
have knowledge of such adjustment unless and until it shall have received such
certificate.
SECTION 13. CONSOLIDATION, MERGER OR SALE OR TRANSFER OF ASSETS OR EARNING
--------------------------------------------------------------
POWER. In the event, directly or indirectly, at any time after a Person has
- -----
become an Acquiring Person, (a) the Company shall consolidate with, or merge
with and into, any other Person, (b) any Person shall consolidate with the
Company, or merge with and into the Company and the Company shall be the
continuing or surviving corporation of such merger and, in connection with such
merger, all or part of the Common Shares
33
<PAGE>
shall be changed into or exchanged for stock or other securities of any other
Person (or the Company) or cash or any other property, or (c) the Company shall
sell or otherwise transfer (or one or more of its Subsidiaries shall sell or
otherwise transfer), in one or more transactions, assets or earning power
aggregating 50% or more of the assets or earning power of the Company and its
Subsidiaries (taken as a whole) to any other Person other than the Company or
one or more of its wholly-owned Subsidiaries, then, and in each such case,
proper provision shall be made so that (i) each holder of a Right (except as
otherwise provided herein) shall thereafter have the right to receive, upon the
exercise thereof at a price equal to the then current Purchase Price multiplied
by the number of one one-hundredths of a Preferred Share for which a Right is
then exercisable, in accordance with the terms of this Agreement and in lieu of
Preferred Shares, such number of Common Shares of such other Person (including
the Company as successor thereto or as the surviving corporation) as shall equal
the result obtained by (A) multiplying the then current Purchase Price by the
number of one one-hundredths of a Preferred Share for which a Right is then
exercisable and dividing that product by (B) 50% of the then current per share
market price of the Common Shares of such other Person (determined pursuant to
Section 11 (d) hereof) on the date of consummation of such consolidation,
merger, sale or transfer; (ii) the issuer of such Common Shares shall thereafter
be liable for, and shall assume by virtue of such consolidation, merger, sale or
transfer, all the obligations and duties of the Company pursuant to this
Agreement; (iii) the term "Company" shall thereafter be deemed to refer to such
issuer; and (iv) such issuer shall take such steps (including, but not
34
<PAGE>
limited to, the reservation of a sufficient number of its Common Shares in
accordance with Section 9 hereof) in connection with such consummation as may be
necessary to assure that the provisions hereof shall thereafter be applicable,
as nearly as reasonably may be, in relation to the Common Shares thereafter
deliverable upon the exercise of the Rights. The Company shall not consummate
any such consolidation, merger, sale or transfer unless prior thereto the
Company and such issuer shall have executed and delivered to the Rights Agent a
supplemental agreement so providing. The Company shall not enter into any
transaction of the kind referred to in this Section 13 if at the time of such
transaction there are any rights, warrants, instruments or securities
outstanding or any agreements or arrangements which, as a result of the
consummation of such transaction, would eliminate or substantially diminish the
benefits intended to be afforded by the Rights. The provisions of this Section
13 shall similarly apply to successive mergers or consolidations or sales or
other transfers.
SECTION 14. FRACTIONAL RIGHTS AND FRACTIONAL SHARES. (a) The Company
---------------------------------------
shall not be required to issue fractions of Rights or to distribute Right
Certificates which evidence fractional Rights. In lieu of such fractional
Rights, there shall be paid to the registered holders of the Right Certificates
with regard to which such fractional Rights would otherwise be issuable, an
amount in cash equal to the same fraction of the current market value of a whole
Right. For the purposes of this Section 14(a), the current market value of a
whole Right shall be the closing price of the Rights for the Trading Day
immediately prior to the date on which such fractional Rights would have
35
<PAGE>
been otherwise issuable. The closing price for any day shall be the last sale
price, regular way, or, in case no such sale takes place on such day, the
average of the closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting system with respect
to securities listed or admitted to trading on the New York Stock Exchange or,
if the Rights are not listed or admitted to trading on the New York Stock
Exchange, as reported in the principal consolidated transaction reporting system
with respect to securities listed on the principal national securities exchange
on which the Rights are listed or admitted to trading or, if the Rights are not
listed or admitted to trading on any national securities exchange, the last
quoted price or, if not so quoted, the average of the high bid and low asked
prices in the over-the-counter market, as reported by NASDAQ or such other
system then in use or, if on any such date the Rights are not quoted by any such
organization, the average of the closing bid and asked prices as furnished by a
professional market maker making a market in the Rights selected by the Board of
Directors of the Company. If on any such date no such market maker is making a
market in the Rights, the fair value of the Rights on such date as determined in
good faith by the Board of Directors of the Company shall be used.
(b) The Company shall not be required to issue fractions of
Preferred Shares (other than fractions which are integral multiples of one one-
hundredth of a Preferred Share) upon exercise of the Rights or to distribute
certificates which evidence fractional Preferred Shares (other than fractions
which are integral multiples
36
<PAGE>
of one one-hundredth of a Preferred Share). Fractions of Preferred Shares in
integral multiples of one one-hundredth of a Preferred Share may, at the
election of the Company, be evidenced by depositary receipts, pursuant to an
appropriate agreement between the Company and a depositary selected by it;
provided that such agreement shall provide that the holders of such depositary
- --------
receipts shall have all the rights, privileges and preferences to which they are
entitled as beneficial owners of the Preferred Shares represented by such
depositary receipts. In lieu of fractional Preferred Shares that are not
integral multiples of one one-hundredth of a Preferred Share, the Company shall
pay to the registered holders of Right Certificates at the time such Rights are
exercised as herein provided an amount in cash equal to the same fraction of the
current market value of one Preferred Share. For the purposes of this Section
14(b), the current market value of a Preferred Share shall be the closing price
of a Preferred Share (as determined pursuant to the second sentence of Section
11(d)(i) hereof) for the Trading Day immediately prior to the date of such
exercise.
(c) The holder of a Right by the acceptance of the Right expressly
waives his right to receive any fractional Rights or any fractional shares upon
exercise of a Right (except as provided above).
SECTION 15. RIGHTS OF ACTION. All rights of action in respect of this
----------------
Agreement, excepting the rights of action given to the Rights Agent under
Section 18 hereof, are vested in the respective registered holders of the Right
Certificates (and, prior to the
37
<PAGE>
Distribution Date, the registered holders of the Common Shares); and any
registered holder of any Right Certificate (or, prior to the Distribution Date,
of the Common Shares), without the consent of the Rights Agent or of the holder
of any other Right Certificate (or, prior to the Distribution Date, of the
Common Shares), may, in his own behalf and for his own benefit, enforce, and may
institute and maintain any suit, action or proceeding against the Company to
enforce, or otherwise act in respect of, his right to exercise the Rights
evidenced by such Right Certificate in the manner provided in such Right
Certificate and in this Agreement. Without limiting the foregoing or any
remedies available to the holders of Rights, it is specifically acknowledged
that the holders of Rights would not have an adequate remedy at law for any
breach of this Agreement and will be entitled to specific performance of the
obligations under, valid injunctive relief against actual or threatened
violations of the obligations of any Person subject to, this Agreement.
SECTION 16. AGREEMENT OF RIGHT HOLDERS. Every holder of a Right, by
--------------------------
accepting the same, consents and agrees with the Company and the Rights Agent
and with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be
transferable only in connection with the transfer of the Common Shares;
38
<PAGE>
(b) after the Distribution Date, the Right Certificates are
transferable only on the registry books of the Rights Agent if surrendered at
the principal office of the Rights Agent designated for such purpose, duly
endorsed or accompanied by a proper instrument of transfer and with the
appropriate form fully executed;
(c) the Company and the Rights Agent may deem and treat the Person
in whose name the Right Certificate (or, prior to the Distribution Date, the
associated Common Shares certificate) is registered as the absolute owner
thereof and of the Rights evidenced thereby (notwithstanding any notations of
ownership or writing on the Right Certificates or the associated Common Shares
certificate made by anyone other than the Company or the Rights Agent) for all
purposes whatsoever, and neither the Company nor the Rights Agent shall be
affected by any notice to the contrary; and
(d) notwithstanding anything in this Agreement to the contrary,
neither the Company nor the Rights Agent shall have any liability to any holder
of a Right or a beneficial interest in a Right or other Person as a result of
its inability to perform any of its obligations under this Agreement by reason
of any preliminary or permanent injunction or other order, decree or ruling
issued by a court of competent jurisdiction or by a governmental, regulatory or
administrative agency or commission, or any statute, rule, regulation or
executive order promulgated or enacted by any governmental authority,
prohibiting or otherwise restraining performance of such
39
<PAGE>
obligation; provided, however, the Company must use its best efforts to have any
-------- -------
such order, decree or ruling lifted or otherwise overturned as soon as possible.
SECTION 17. RIGHT CERTIFICATE HOLDER NOT DEEMED A SHAREHOLDER. No holder,
-------------------------------------------------
as such, of any Right Certificate shall be entitled to vote, receive dividends
or be deemed for any purpose the holder of the Preferred Shares or any other
securities of the Company which may at any time be issuable on the exercise of
the Rights represented thereby, nor shall anything contained herein or in any
Right Certificate be construed to confer upon the holder of any Right
Certificate, as such, any of the rights of a shareholder of the Company or any
right to vote for the election of directors or upon any matter submitted to
shareholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
shareholders (except as provided in Section 25 hereof), or to receive dividends
or subscription rights, or otherwise, until the Right or Rights evidenced by
such Right Certificate shall have been exercised in accordance with the
provisions hereof.
SECTION 18. CONCERNING THE RIGHTS AGENT. (a) The Company agrees to pay
---------------------------
to the Rights Agent reasonable compensation for all services rendered by it
hereunder and, from time to time, on demand of the Rights Agent, its reasonable
expenses and counsel fees and other disbursements incurred in the administration
and execution of this Agreement and the exercise and performance of its duties
hereunder. The
40
<PAGE>
Company also agrees to indemnify the Rights Agent for, and to hold it harmless
against, any loss, liability, or expense, incurred without gross negligence, bad
faith or willful misconduct on the part of the Rights Agent, for anything done
or omitted by the Rights Agent in connection with the acceptance and
administration of this Agreement, including the costs and expenses of defending
against any claim of liability in the premises. The indemnity provided for
herein shall survive the expiration of the Rights and the termination of this
Agreement.
(b) The Rights Agent shall be protected and shall incur no
liability for, or in respect of any action taken, suffered or omitted by it in
connection with, its administration of this Agreement in reliance upon any Right
Certificate or certificate for the Preferred Shares or Common Shares or for
other securities of the Company, instrument of assignment or transfer, power of
attorney, endorsement, affidavit, letter, notice, direction, consent,
certificate, statement, or other paper or document believed by it to be genuine
and to be signed, executed and, where necessary, verified or acknowledged, by
the proper Person or Persons, or otherwise upon the advice of counsel as set
forth in Section 20 hereof.
SECTION 19. MERGER OR CONSOLIDATION OR CHANGE OF NAME OF RIGHTS AGENT.
---------------------------------------------------------
Any corporation into which the Rights Agent or any successor Rights Agent may be
merged or with which it may be consolidated, or any corporation resulting from
any merger or consolidation to which the Rights Agent or any successor Rights
Agent shall
41
<PAGE>
be a party, or any corporation succeeding to the stock transfer or corporate
trust powers of the Rights Agent or any successor Rights Agent, shall be the
successor to the Rights Agent under this Agreement without the execution or
filing of any paper or any further act on the part of any of the parties hereto,
provided that such corporation would be eligible for appointment as a successor
- --------
Rights Agent under the provisions of Section 21 hereof. In case at the time
such successor Rights Agent shall succeed to the agency created by this
Agreement, any of the Right Certificates shall have been countersigned but not
delivered, any such successor Rights Agent may adopt the countersignature of the
predecessor Rights Agent and deliver such Right Certificates so countersigned;
and in case at that time any of the Right Certificates shall not have been
countersigned, any successor Rights Agent may countersign such Right
Certificates either in the name of the predecessor Rights Agent or in the name
of the successor Rights Agent; and in all such cases such Right Certificates
shall have the full force provided in the Right Certificates and in this
Agreement. In case at any time the name of the Rights Agent shall be changed
and at such time any of the Right Certificates shall have been countersigned but
not delivered, the Rights Agent may adopt the countersignature under its prior
name and deliver Right Certificates so countersigned; and in case at that time
any of the Right Certificates shall not have been countersigned, the Rights
Agent may countersign such Right Certificates either in its prior name or in its
changed name; and in all such cases such Right Certificates shall have the full
force provided in the Right Certificates and in this Agreement.
42
<PAGE>
SECTION 20. DUTIES OF RIGHTS AGENT. The Rights Agent undertakes the
----------------------
duties and obligations imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the holders of Right Certificates,
by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel (who may be legal
counsel for the Company), and the opinion of such counsel shall be full and
complete authorization and protection to the Rights Agent as to any action taken
or omitted by it in good faith and in accordance with such opinion.
(b) Whenever in the performance of its duties under this Agreement
the Rights Agent shall deem it necessary or desirable that any fact or matter be
proved or established by the Company prior to taking or suffering any action
hereunder, such fact or matter (unless other evidence in respect thereof be
herein specifically prescribed) may be deemed to be conclusively proved and
established by a certificate signed by any one of the Chairman of the Board, the
Chief Executive Officer, the President, any Vice President, the Treasurer or the
Secretary of the Company and delivered to the Rights Agent; and such certificate
shall be full authorization to the Rights Agent for any action taken or suffered
in good faith by it under the provisions of this Agreement in reliance upon such
certificate.
43
<PAGE>
(c) The Rights Agent shall be liable hereunder to the Company and any
other Person only for its own gross negligence, bad faith or willful misconduct.
(d) The Rights Agent shall not be liable for or by reason of any of
the statements of fact or recitals contained in this Agreement or in the Right
Certificates (except its countersignature thereof) or be required to verify the
same, but all such statements and recitals are and shall be deemed to have been
made by the Company only.
(e) The Rights Agent shall not be under any responsibility in respect
of the validity of this Agreement or the execution and delivery hereof (except
the due execution hereof by the Rights Agent) or in respect of the validity or
execution of any Right Certificate (except its countersignature thereof); nor
shall it be responsible for any breach by the Company of any covenant or
condition contained in this Agreement or in any Right Certificate; nor shall it
be responsible for any change in the exercisability of the Rights (including the
Rights becoming void pursuant to Section 11(a)(ii) hereof) or any adjustment in
the terms of the Rights (including the manner, method or amount thereof)
provided for in Section 3, 11, 13, 23 or 24, or the ascertaining of the
existence of facts that would require any such change or adjustment (except with
respect to the exercise of Rights evidenced by Right Certificates after actual
notice that such change or adjustment is required); nor shall it by any act
hereunder be deemed to make any representation or warranty as to the
44
<PAGE>
authorization or reservation of any Preferred Shares to be issued pursuant to
this Agreement or any Right Certificate or as to whether any Preferred Shares
will, when issued, be validly authorized and issued, fully paid and
nonassessable.
(f) The Company agrees that it will perform, execute, acknowledge and
deliver or cause to be performed, executed, acknowledged and delivered all such
further and other acts, instruments and assurances as may reasonably be required
by the Rights Agent for the carrying out or performing by the Rights Agent of
the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from any
one of the Chairman of the Board, the Chief Executive Officer, the President,
any Vice President, the Secretary or the Treasurer of the Company, and to apply
to such officers for advice or instructions in connection with its duties, and
it shall not be liable for any action taken or suffered by it in good faith in
accordance with instructions of any such officer or for any delay in acting
while waiting for those instructions. Any application by the Rights Agent for
written instructions from the Company may, at the option of the Rights Agent,
set forth in writing any action proposed to be taken or omitted by the Rights
Agent under this Rights Agreement and the date on or after which such action
shall be taken or such omission shall be effective. The Rights Agent shall not
be liable for any action taken by, or omission of,
45
<PAGE>
the Rights Agent in accordance with a proposal included in any such application
on or after the date specified in such application (which date shall not be less
than five Business Days after the date any officer of the Company actually
receives such application, unless any such officer shall have consented in
writing to an earlier date) unless,prior to taking any such action (or the
effective date in the case of an omission), the Rights Agent shall have received
written instruction in response to such application specifying the action to be
taken or omitted.
(h) The Rights Agent and any shareholder, director, officer or
employee of the Rights Agent may buy, sell or deal in any of the Rights or other
securities of the Company or become pecuniarily interested in any transaction in
which the Company may be interested, or contract with or lend money to the
Company or otherwise act as fully and freely as though it were not Rights Agent
under this Agreement. Nothing herein shall preclude the Rights Agent from
acting in any other capacity for the Company or for any other legal entity.
(i) The Rights Agent may execute and exercise any of the rights or
powers hereby vested in it or perform any duty hereunder either itself or by or
through its attorneys or agents, and the Rights Agent shall not be answerable or
accountable for any act, default, neglect or misconduct of any such attorneys or
agents or for any loss to the Company resulting from any such act, default,
neglect or misconduct,
46
<PAGE>
provided reasonable care was exercised in the selection and continued employment
thereof.
(j) No provision of this Agreement shall require the Rights Agent to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or in the exercise of its rights if
there shall be reasonable grounds for believing that repayment of such funds or
adequate indemnification against such risk or liability is not reasonably
assured to it.
(k) If, with respect to any Right Certificate surrendered to the
Rights Agent for exercise or transfer, the certificate attached to the form of
assignment or form of election to purchase, as the case may be, has not been
completed, the Rights Agent shall not take any further action with respect to
such requested exercise of transfer without first consulting with the Company.
SECTION 21. CHANGE OF RIGHTS AGENT. The Rights Agent or any successor
----------------------
Rights Agent may resign and be discharged from its duties under this Agreement
upon 30 days' notice in writing mailed to the Company and to each transfer agent
of the Common Shares or Preferred Shares by registered or certified mail, and to
the holders of the Right Certificates by first-class mail. The Company may
remove the Rights Agent or any successor Rights Agent upon 30 days' notice in
writing, mailed to the Rights Agent or successor Rights Agent, as the case may
be, and to each transfer
47
<PAGE>
agent of the Common Shares or Preferred Shares by registered or certified mail,
and to the holders of the Right Certificates by first-class mail. If the Rights
Agent shall resign or be removed or shall otherwise become incapable of acting,
the Company shall appoint a successor to the Rights Agent. If the Company shall
fail to make such appointment within a period of 30 days after giving notice of
such removal or after it has been notified in writing of such resignation or
incapacity by the resigning or incapacitated Rights Agent or by the holder of a
Right Certificate (who shall, with such notice, submit his Right Certificate for
inspection by the Company), then the registered holder of any Right Certificate
may apply to any court of competent jurisdiction for the appointment of a new
Rights Agent. Any successor Rights Agent, whether appointed by the Company or
by such a court, shall be a corporation organized and doing business under the
laws of the United States or of the State of Georgia (or of any other state of
the United States so long as such corporation is authorized to do business as a
banking institution in the State of Georgia), in good standing, having an office
in the State of Georgia, which is authorized under such laws to exercise
corporate trust or stock transfer powers and is subject to supervision or
examination by federal or state authority and which has at the time of its
appointment as Rights Agent a combined capital and surplus of at least $100
million. After appointment, the successor Rights Agent shall be vested with the
same powers, rights, duties and responsibilities as if it had been originally
named as Rights Agent without further act or deed; but the predecessor Rights
Agent shall deliver and transfer to the successor Rights Agent any property at
the time held by it hereunder, and execute and deliver
48
<PAGE>
any further assurance, conveyance, act or deed necessary for the purpose. Not
later than the effective date of any such appointment the Company shall file
notice thereof in writing with the predecessor Rights Agent and each transfer
agent of the Common Shares or Preferred Shares, and mail a notice thereof in
writing to the registered holders of the Right Certificates. Failure to give
any notice provided for in this Section 21, however, or any defect therein,
shall not affect the legality or validity of the resignation or removal of the
Rights Agent or the appointment of the successor Rights Agent, as the case may
be.
SECTION 22. ISSUANCE OF NEW RIGHT CERTIFICATES. Notwithstanding any of
----------------------------------
the provisions of this Agreement or of the Rights to the contrary, the Company
may, at its option, issue new Right Certificates evidencing Rights in such form
as may be approved by its Board of Directors to reflect any adjustment or change
in the Purchase Price and the number or kind or class of shares or other
securities or property purchasable under the Right Certificates made in
accordance with the provisions of this Agreement.
SECTION 23. REDEMPTION AND TERMINATION. (a) The Board of Directors of
--------------------------
the Company may, at its option, at any time prior to such time as any Person
becomes an Acquiring Person, redeem all but not less than all the then
outstanding Rights at a redemption price of $.01 per Right, appropriately
adjusted to reflect any stock split, stock dividend or similar transaction
occurring after the date hereof (such redemption
49
<PAGE>
price being hereinafter referred to as the "Redemption Price"). The redemption
of the Rights by the Board of Directors may be made effective at such time, on
such basis and with such conditions as the Board of Directors in its sole
discretion may establish. The Company may, at its option, pay the Redemption
Price either in Common Shares (based on the "current per share market price," as
defined in Section 11(d) hereof, of the Common Shares at the time of redemption)
or cash, provided that if the Company elects to pay the Redemption Price in
--------
Common Shares, the Company shall not be required to issue any fractional Common
Shares and the number of Common Shares issuable to each holder of Rights shall
be rounded down to the next whole share.
(b) Notwithstanding the provisions of Section 23(a), in the event
that a majority of the board of Directors of the Company is comprised of Persons
elected at a meeting of shareholders who were not nominated by the Board of
Directors in office immediately prior to such meeting, then (i) the Rights may
not be redeemed for a period of 180 days following the effectiveness of such
election if such redemption is reasonably likely to have the purpose or effect
of facilitating a Transaction with a Transaction Person and (ii) the Rights may
not be redeemed following such 180 day period, if such redemption is reasonably
likely to have the purpose or effect of facilitating a Transaction with a
Transaction Person and if during such 180-day period, the Company enters into
any agreement, arrangement or understanding with any Transaction Person which is
reasonably likely to have the purpose or effect of facilitating a Transaction
with any Transaction Person.
50
<PAGE>
(c) Immediately upon the action of the Board of Directors of the
Company ordering the redemption of the Rights pursuant to paragraph (a) of this
Section 23, and without any further action and without any notice, the right to
exercise the Rights will terminate and the only right thereafter of the holders
of Rights shall be to receive the Redemption Price. The Company shall promptly
give public notice of any such redemption; provided, however, that the failure
-------- -------
to give, or any defect in, any such notice shall not affect the validity of such
redemption. Within 10 days after such action of the Board of Directors ordering
the redemption of the Rights, the Company shall mail a notice of redemption to
all the holders of the then outstanding Rights at their last addresses as they
appear upon the registry books of the Rights Agent or, prior to the Distribution
Date, on the registry books of the transfer agent for the Common Shares. Any
notice which is mailed in the manner herein provided shall be deemed given,
whether or not the holder receives the notice. Each such notice of redemption
will state the method by which the payment of the Redemption Price will be made.
Neither the Company nor any of its Affiliates or Associates may redeem, acquire
or purchase for value any Rights at any time in any manner other than that
specifically set forth in this Section 23 or in Section 24 hereof, and other
than in connection with the purchase of Common Shares prior to the Distribution
Date.
51
<PAGE>
SECTION 24. EXCHANGE. (a) The Board of Directors of the Company may, at
--------
its option, at any time after any Person becomes an Acquiring Person, exchange
all or part of the then outstanding and exercisable Rights (which shall not
include Rights that have become void pursuant to the provisions of Section
11(a)(ii) hereof) for Common Shares at an exchange ratio of one Common Share per
Right, appropriately adjusted to reflect any stock split, stock dividend or
similar transaction occurring after the date hereof (such exchange ratio being
hereinafter referred to as the "Exchange Ratio"). Notwithstanding the
foregoing, the Board of Directors shall not be empowered to effect such exchange
at any time after any Person (other than the Company, any Subsidiary of the
Company, any employee benefit plan of the Company or any such Subsidiary, or any
entity holding Common Shares for or pursuant to the terms of any such plan),
together with all Affiliates and Associates of such Person, becomes the
Beneficial Owner of 50% or more of the Common Shares then outstanding.
(b) Immediately upon the action of the Board of Directors of the
Company ordering the exchange of any Rights pursuant to paragraph (a) of this
Section 24 and without any further action and without any notice, the right to
exercise such Rights shall terminate and the only right thereafter of a holder
of such Rights shall be to receive that number of Common Shares equal to the
number of such Rights held by such holder multiplied by the Exchange Ratio. The
Company shall promptly give public notice of any such exchange; provided,
--------
however, that the failure
- -------
52
<PAGE>
to give, or any defect in, such notice shall not affect the validity of such
exchange. The Company promptly shall mail a notice of any such exchange to all
of the holders of such Rights at their last addresses as they appear upon the
registry books of the Rights Agent. Any notice which is mailed in the manner
herein provided shall be deemed given, whether or not the holder receives the
notice. Each such notice of exchange will state the method by which the
exchange of the Common Shares for Rights will be effected and, in the event of
any partial exchange, the number of Rights which will be exchanged. Any partial
exchange shall be effected pro rata based on the number of Rights (other than
Rights which have become void pursuant to the provisions of Section 11(a)(ii)
hereof) held by each holder of Rights.
(c) In the event that there shall not be sufficient Common Shares
issued but not outstanding or authorized but unissued to permit any exchange of
Rights as contemplated in accordance with this Section 24, the Company shall
take all such action as may be necessary to authorize additional Common Shares
for issuance upon exchange of the Rights. In the event the Company shall, after
good faith effort, be unable to take all such action as may be necessary to
authorize such additional Common Shares, the Company shall substitute, for each
Common Share that would otherwise be issuable upon exchange of a Right, a number
of Preferred Shares or fraction thereof such that the current per share market
price of one Preferred Share multiplied by such number or fraction is equal to
the current per share market
53
<PAGE>
price of one Common Share as of the date of issuance of such Preferred Shares or
fraction thereof.
(d) The Company shall not be required to issue fractions of Common
Shares or to distribute certificates which evidence fractional Common Shares.
In lieu of such fractional Common Shares, the Company shall pay to the
registered holders of the Right Certificates with regard to which such
fractional Common Shares would otherwise be issuable an amount in cash equal to
the same fraction of the current market value of a whole Common Share. For the
purposes of this paragraph (d), the current market value of a whole Common Share
shall be the closing price of a Common Share (as determined pursuant to the
second sentence of section 11(d)(i) hereof) for the Trading Day immediately
prior to the date of exchange pursuant to this Section 24.
SECTION 25. NOTICE OF CERTAIN EVENTS. (a) In case the Company shall
------------------------
propose (i) to pay any dividend payable in stock of any class to the holders of
its Preferred Shares or to make any other distribution to the holders of its
Preferred Shares (other than a regular quarterly cash dividend), (ii) to offer
to the holders of its Preferred Shares rights or warrants to subscribe for or to
purchase any additional Preferred Shares or shares of stock of any class or any
other securities, rights or options, (iii) to effect any reclassification of its
Preferred Shares (other than a reclassification involving only the subdivision
of outstanding Preferred Shares), (iv) to effect any
54
<PAGE>
consolidation or merger into or with, or to effect any sale or other transfer
(or to permit one or more of its Subsidiaries to effect any sale or other
transfer), in one or more transactions, of 50% or more of the assets or earning
power of the Company and its Subsidiaries (taken as a whole) to, any other
Person, (v) to effect the liquidation, dissolution or winding up of the Company,
or (vi) to declare or pay any dividend on the Common Shares payable in Common
Shares or to effect a subdivision, combination or consolidation of the Common
Shares (by reclassification or otherwise than by payment of dividends in Common
Shares), then, in each such case, the Company shall give to each holder of a
Right Certificate, in accordance with Section 26 hereof, a notice of such
proposed action, which shall specify the record date for the purposes of such
stock dividend, or distribution of rights or warrants, or the date on which such
reclassification, consolidation, merger, sale, transfer, liquidation,
dissolution, or winding up is to take place and the date of participation
therein by the holders of the Common Shares and/or Preferred Shares, if any such
date is to be fixed, and such notice shall be so given in the case of any action
covered by clause (i) or (ii) above at least 10 days prior to the record date
for determining holders of the Preferred Shares for purposes of such action, and
in the case of any such other action, at least 10 days prior to the date of the
taking of such proposed action or the date of participation therein by the
holders of the Common Shares and/or Preferred Shares, whichever shall be the
earlier.
55
<PAGE>
(b) In case the event set forth in Section 11(a)(ii) hereof shall
occur, then the Company shall as soon as practicable thereafter give to each
holder of a Right Certificate, in accordance with Section 26 hereof, a notice of
the occurrence of such event, which notice shall describe such event and the
consequences of such event to holders of Rights under Section 11(a)(ii) hereof.
SECTION 26. NOTICES. Notices or demands authorized by this Agreement to
-------
be given or made by the Rights Agent or by the holder of any Right Certificate
to or on the Company shall be sufficiently given or made if sent by first-class
mail, postage prepaid, addressed (until another address is filed in writing with
the Rights Agent) as follows:
ABC Bancorp
310 First Street, S.E.
Moultrie, Georgia 31768
Attention: Corporate Secretary
Subject to the provisions of Section 21 hereof, any notice or demand authorized
by this Agreement to be given or made by the Company or by the holder of any
Right Certificate to or on the Rights Agent shall be sufficiently given or made
if sent by first-class mail, postage prepaid, addressed (until another address
is filed in writing with the Company) as follows:
SunTrust Bank
58 Edgewood Avenue
Room 225
Atlanta, Georgia 30303
Attention: Department Manager
56
<PAGE>
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Right Certificate shall be
sufficiently given or made if sent by first-class mail, postage prepaid,
addressed to such holder at the address of such holder as shown on the registry
books of the Company.
SECTION 27. SUPPLEMENTS AND AMENDMENTS. Prior to the Distribution Date,
--------------------------
the Company and the Rights Agent shall, if the Company so directs, supplement or
amend any provision of this Agreement without the approval of any holders of
certificates representing Common Shares. From and after the Distribution Date,
the Company and the Rights Agent shall, if the Company so directs, supplement or
amend this Agreement without the approval of any holders of Right Certificates
in order (i) to cure any ambiguity, (ii) to correct or supplement any provision
contained herein which may be defective or inconsistent with any other
provisions herein, (iii) to shorten or lengthen any time period hereunder or
(iv) to change or supplement the provisions hereunder in any manner which the
Company may deem necessary or desirable and which shall not adversely affect the
interests of the holders of Right Certificates (other than an Acquiring Person
or an Affiliate or Associate of an Acquiring Person); provided, however, that
-------- -------
this Agreement may not be supplemented or amended to lengthen, pursuant to
clause (iii) of this sentence, (A) a time period relating to when the Rights may
be redeemed at such time as the Rights are not then redeemable, or (B) any other
time period unless such lengthening is for the purpose of protecting, enhancing
or clarifying rights of, and/or the benefits to, the holders of Rights. Upon
57
<PAGE>
the delivery of a certificate from an appropriate officer of the Company which
states that the proposed supplement or amendment is in compliance with the terms
of this Section 27, the Rights Agent shall execute such supplement or amendment,
provided that such supplement or amendment does not adversely affect the rights
- --------
or obligations of the Rights Agent under Section 18 or Section 20 of this
Agreement. Prior to the Distribution Date, the interests of the holders of
Rights shall be deemed coincident with the interests of the holders of Common
Shares. Notwithstanding anything contained in this Agreement to the contrary,
in the event that a majority of the Board of Directors of the Company is
comprised of (i) persons elected at a meeting of or by written consent of
shareholders and who were not nominated by the Board of Directors in office
immediately prior to such meeting or action by written consent and/or (ii)
successors of such persons elected to the Board of Directors for the purpose of
either facilitating a Transaction with a Transaction Person or circumventing
directly or indirectly the provisions of this Section 27, then for a period of
180 days following the effectiveness of such action, this Agreement shall not be
amended or supplemented in any manner reasonably likely to have the purpose or
effect of facilitating a Transaction with a Transaction Person.
SECTION 28. DETERMINATION AND ACTIONS BY THE BOARD OF DIRECTORS, ETC. The
--------------------------------------------------------
Board of Directors of the Company shall have the exclusive power and authority
to administer this Agreement and to exercise all rights and powers specifically
granted to the Board, or the Company, or as may be necessary or advisable in the
58
<PAGE>
administration of this Agreement, including, without limitation, the right and
power to (i) interpret the provisions of this Agreement and (ii) make all
determinations deemed necessary or advisable for the administration of this
Agreement (including, without limitation, a determination to redeem or not
redeem the Rights or to amend the Agreement and whether any proposed amendment
adversely affects the interests of the holders of Right Certificates). For all
purposes of this Agreement, any calculation of the number of Common Shares or
other securities outstanding at any particular time, including for purposes of
determining the particular percentage of such outstanding Common Shares or any
other securities of which any Person is the Beneficial Owner, shall be made in
accordance with the last sentence of Rule 13d-3(d)(1)(i) of the General Rules
and Regulations under the Exchange Act as in effect on the date of this
Agreement. All such actions, calculations, interpretations and determinations
(including, for purposes of clause (y) below, all omissions with respect to the
foregoing) which are done or made by the Board in good faith, shall (x) be
final, conclusive and binding on the Company, the Rights Agent, the holders of
the Right Certificates and all other parties, and (y) not subject the Board to
any liability to the holders of the Right Certificates.
SECTION 29. SUCCESSORS. All the covenants and provisions of this
----------
Agreement by or for the benefit of the Company or the Rights Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.
59
<PAGE>
SECTION 30. BENEFITS OF THIS AGREEMENT. Nothing in this Agreement shall
--------------------------
be construed to give to any Person or corporation other than the Company, the
Rights Agent and the registered holders of the Right Certificates (and, prior to
the Distribution Date, the Common Shares) any legal or equitable right, remedy
or claim under this Agreement; but this Agreement shall be for the sole and
exclusive benefit of the Company, the Rights Agent and the registered holders of
the Right Certificates (and, prior to the Distribution Date, the Common Shares).
SECTION 31. SEVERABILITY. If any term, provision, covenant or restriction
------------
of this Agreement is held by a court of competent jurisdiction or other
authority to be invalid, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions of this Agreement shall remain in full
force and effect and shall in no way be affected, impaired or invalidated.
SECTION 32. GOVERNING LAW. This Agreement and each Right Certificate
-------------
issued hereunder shall be deemed to be a contract made under the laws of the
State of Georgia and for all purposes shall be governed by and construed in
accordance with the laws of such State applicable to contracts to be made and
performed entirely within such State.
SECTION 33. COUNTERPARTS. This Agreement may be executed in any number of
------------
counterparts and each of such counterparts shall for all purposes be deemed to
be
60
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an original, and all such counterparts shall together constitute but one and the
same instrument.
SECTION 34. DESCRIPTIVE HEADINGS. Descriptive headings of the several
--------------------
Sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, sealed and attested, all as of the day and year first above
written.
ABC BANCORP
[SEAL]
ATTEST:
By /s/ Sara R. Hall By /s/ Kenneth J. Hunnicutt
_______________________ _________________________
Name: Sara R. Hall Name: Kenneth J. Hunnicutt
Title: Vice-President and Title: President & CEO
Corporate Secretary
[SEAL]
ATTEST: SUNTRUST BANK
By /s/ Bryan Echols By /s/ T.J. Donaldson
________________________ _________________________
Name: Bryan Echols Name: T.J. Donaldson
Title: Vice President Title: Group Vice President
61
<PAGE>
Exhibit 21.1
REGISTRANT'S SUBSIDIARIES
Following is a list of the Registrant's subsidiaries and the state of
incorporation or other jurisdiction.
<TABLE>
<CAPTION>
STATE OF INCORPORATION OR
NAME OF SUBSIDIARY OTHER JURISDICTION
- -------------------------------------- -------------------------------------------------
<S> <C>
American Banking Company State of Georgia
Heritage Community Bank State of Georgia
Bank of Thomas County State of Georgia
Citizens Security Bank State of Georgia
Cairo Banking Company State of Georgia
Southland Bank State of Alabama
Central Bank & Trust State of Georgia
First National Bank of South Georgia The Office of the Comptroller of the Currency
Merchants & Farmers Bank State of Georgia
</TABLE>
Each subsidiary conducts business under the name listed above.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 33,973
<INT-BEARING-DEPOSITS> 2,288
<FED-FUNDS-SOLD> 890
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 93,199
<INVESTMENTS-CARRYING> 30,020
<INVESTMENTS-MARKET> 30,577
<LOANS> 490,244
<ALLOWANCE> 7,627
<TOTAL-ASSETS> 691,886
<DEPOSITS> 600,711
<SHORT-TERM> 9,710
<LIABILITIES-OTHER> 6,962
<LONG-TERM> 6,350
0
0
<COMMON> 7,525
<OTHER-SE> 60,628
<TOTAL-LIABILITIES-AND-EQUITY> 691,886
<INTEREST-LOAN> 50,502
<INTEREST-INVEST> 7,716
<INTEREST-OTHER> 431
<INTEREST-TOTAL> 58,649
<INTEREST-DEPOSIT> 24,229
<INTEREST-EXPENSE> 25,950
<INTEREST-INCOME-NET> 32,699
<LOAN-LOSSES> 2,731
<SECURITIES-GAINS> (22)
<EXPENSE-OTHER> 27,139
<INCOME-PRETAX> 10,565
<INCOME-PRE-EXTRAORDINARY> 10,565
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,446
<EPS-PRIMARY> 1.03
<EPS-DILUTED> 1.02
<YIELD-ACTUAL> 5.47
<LOANS-NON> 10,101
<LOANS-PAST> 59
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 10,042
<ALLOWANCE-OPEN> 7,273
<CHARGE-OFFS> 3,338
<RECOVERIES> 961
<ALLOWANCE-CLOSE> 7,627
<ALLOWANCE-DOMESTIC> 6,178
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 1,449
</TABLE>
