<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 30 , 1998
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_______________
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
_______________
PAB BANKSHARES, INC.
(Exact name of registrant as specified in its charter)
GEORGIA 6711 58-1473302
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or Classification Code Number) Identification No.)
organization)
3102 NORTH OAK STREET EXTENSION
VALDOSTA, GEORGIA 31602
912/241-2775
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
R. BRADFORD BURNETTE
PAB BANKSHARES, INC.
3102 NORTH OAK STREET EXTENSION
VALDOSTA, GEORGIA 31602
(Address, including zip code, and telephone number, including area code, of
agent for service)
Copies to:
THOMAS O. POWELL, ESQUIRE EDWARD J. HARRELL, ESQUIRE
Troutman Sanders LLP Martin, Snow, Grant & Napier, LLP
600 Peachtree Street, N.E., Suite 5200 240 Third Street
Atlanta, Georgia 30308-2216 Macon, Georgia 31202-1508
404/885-3294 912/799-1727
_____________________
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As soon as practicable after the effective date of this Registration
Statement.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box.[_]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
====================================================================================================================================
TITLE OF EACH CLASS OF SECURITIES AMOUNT TO BE PROPOSED MAXIMUM OFFERING PROPOSED MAXIMUM AGGREGATE AMOUNT OF REGISTRATION
TO BE REGISTERED REGISTERED (1) PRICE PER SHARE OFFERING PRICE (2) FEE (2)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, no par value per
share.......................... 924,963 shares (2) 7,533,824 $2,223
====================================================================================================================================
</TABLE>
(1) The number of shares to be registered is based upon an estimate of the
maximum number of shares of common stock of PAB Bankshares, Inc. to be
issued to the shareholders of Eagle Bancorp, Inc. pursuant to the Merger
(as defined herein), assuming the exercise of all outstanding options to
purchase shares of common stock of Eagle Bancorp, Inc.
(2) In accordance with Rule 457(f)(2) under the Securities Act of 1933, as
amended, the registration fee was calculated based on the book value of the
common stock of Eagle Bancorp, Inc. computed as of the last practicable
date prior to the filing, which was $8.145 per share at August 31, 1998,
multiplied by the maximum number of shares of Eagle Bancorp, Inc. common
stock to be received by the Registrant in the Merger as described in
Note (1).
_________________
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
<PAGE>
EAGLE BANCORP, INC.
335 SOUTH MAIN STREET
STATESBORO, GEORGIA 30458
________ __, 1998
Dear Shareholder:
You are cordially invited to attend a special meeting of shareholders
(the "Special Meeting") of Eagle Bancorp, Inc. ("Eagle") to be held at the main
office of Eagle, located at 335 South Main Street, Statesboro, Georgia, at ____
p.m., Statesboro time, on ________ __, 1998.
At the Special Meeting, you will be asked to consider and vote upon
the approval of the Agreement and Plan of Merger, dated as of June 30, 1998 and
amended on September 29, 1998 (the "Merger Agreement"), by and between Eagle and
PAB Bankshares, Inc. ("PAB") whereby, among other matters, Eagle will merge with
and into PAB (the "Merger"). If the Merger is consummated, each outstanding
share of Eagle common stock (excluding treasury shares and shares held by
shareholders who perfect their dissenters' rights) shall cease to be outstanding
and shall be converted into and exchanged for the right to receive one share of
PAB common stock (as may be adjusted under certain circumstances). The
affirmative vote of the holders of at least a majority of the shares of Eagle
common stock entitled to vote at the Special Meeting is required for approval of
the Merger Agreement and the transactions contemplated therein.
Enclosed are the following: (i) Notice of Special Meeting, (ii) Proxy
Statement/Prospectus, and (iii) Proxy for the Special Meeting. The Proxy
Statement/Prospectus describes in more detail the Merger Agreement and the
proposed Merger, including a description of the conditions on consummation of
the Merger and the effects of the Merger on the rights of Eagle shareholders.
Please give this information your careful attention.
THE BOARD OF DIRECTORS OF EAGLE HAS UNANIMOUSLY APPROVED AND ADOPTED
THE MERGER AGREEMENT AND THE CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED
THEREIN AND UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR APPROVAL OF THE MERGER
AGREEMENT AND THE CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED THEREIN. IN
VIEW OF THE IMPORTANCE OF THE ACTION TO BE TAKEN, WE URGE YOU TO COMPLETE, SIGN
AND DATE THE ENCLOSED PROXY AND TO RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE,
WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING (IF YOU ATTEND THE SPECIAL
MEETING, YOU MAY ELECT TO VOTE IN PERSON EVEN IF YOU PREVIOUSLY RETURNED YOUR
PROXY).
We look forward to seeing you at the Special Meeting.
Sincerely,
/s/ James B. Lanier, Jr.
James B. Lanier, Jr.
Chairman
<PAGE>
EAGLE BANCORP, INC.
335 SOUTH MAIN STREET
STATESBORO, GEORGIA 30458
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD AT ______ P.M. ON ________ __, 1998
_______ __, 1998
To the Shareholders of Eagle Bancorp, Inc.:
NOTICE IS HEREBY GIVEN that a special meeting of shareholders (the
"Special Meeting") of Eagle Bancorp, Inc. ("Eagle") will be held at the main
office of Eagle, located at 335 South Main Street, Statesboro, Georgia, at ____
p.m., Statesboro time, on ________ __, 1998, for the following purposes:
1. THE MERGER. To consider and vote upon a proposal to approve the
Agreement and Plan of Merger, dated as of June 30, 1998 and amended on September
29, 1998 (the "Merger Agreement"), by and between Eagle and PAB Bankshares, Inc.
("PAB"), pursuant to which, among other matters, Eagle will merge with and into
PAB (the "Merger") and the outstanding shares of Eagle common stock will be
converted into the right to receive shares of PAB common stock, all as more
fully described in the accompanying Proxy Statement/Prospectus. A copy of the
Merger Agreement is set forth as Appendix A to the accompanying Proxy
Statement/Prospectus and is hereby incorporated by reference herein.
2. OTHER BUSINESS. To transact such other business as may properly
come before the Special Meeting or any adjournments thereof.
Only shareholders of record at the close of business on _______ __,
1998 are entitled to receive notice of and to vote at the Special Meeting or any
adjournments thereof. Approval of the Merger Agreement and the consummation of
the transactions contemplated therein requires the affirmative vote of the
holders of a majority of the shares of Eagle common stock entitled to vote at
the Special Meeting.
THE BOARD OF DIRECTORS OF EAGLE UNANIMOUSLY RECOMMENDS THAT
SHAREHOLDERS VOTE FOR APPROVAL OF THE MERGER AGREEMENT AND THE CONSUMMATION OF
THE TRANSACTIONS CONTEMPLATED THEREIN.
NOTICE OF RIGHT TO DISSENT. IF PROPOSAL 1 ABOVE IS APPROVED AND THE
MERGER CONTEMPLATED THEREIN IS CONSUMMATED, EACH SHAREHOLDER OF EAGLE WILL HAVE
THE RIGHT TO DISSENT FROM APPROVAL OF THE MERGER AND WILL BE ENTITLED TO THE
RIGHTS AND REMEDIES OF DISSENTING SHAREHOLDERS PROVIDED IN TITLE 14, CHAPTER 2,
ARTICLE 13 ("ARTICLE 13") OF THE GEORGIA BUSINESS CORPORATION CODE (THE "GBCC").
THE RIGHT OF ANY SUCH SHAREHOLDER TO ANY DISSENTERS' RIGHTS IS CONTINGENT UPON
CONSUMMATION OF THE MERGER AND UPON STRICT COMPLIANCE WITH THE REQUIREMENTS SET
FORTH IN ARTICLE 13 OF THE GBCC, THE FULL TEXT OF WHICH IS SET FORTH AS APPENDIX
C TO THE ACCOMPANYING PROXY STATEMENT/PROSPECTUS. FOR A SUMMARY OF THE
REQUIREMENTS OF ARTICLE 13, SEE "THE MERGER - DISSENTERS' RIGHTS" IN THE
ACCOMPANYING PROXY STATEMENT/PROSPECTUS.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ W. Dale Parker
W. Dale Parker
Secretary
PLEASE MARK, SIGN, DATE AND RETURN YOUR PROXY
IN THE ENCLOSED ENVELOPE PROMPTLY WHETHER OR NOT
YOU PLAN TO ATTEND THE SPECIAL MEETING.
<PAGE>
EAGLE BANCORP, INC.
PROXY STATEMENT
---------------
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON ________ __, 1998
PAB BANKSHARES, INC.
PROSPECTUS
----------
COMMON STOCK (NO PAR VALUE PER SHARE)
This Proxy Statement/Prospectus is being furnished to holders of
common stock, $1.00 par value (the "Eagle Common Stock"), of Eagle Bancorp,
Inc., a Georgia corporation ("Eagle"), in connection with the solicitation of
proxies by the Eagle Board of Directors for use at a special meeting of Eagle
shareholders to be held at ________, Statesboro time, on ________ __, 1998, at
the main office of Eagle, located at 335 South Main Street, Statesboro, Georgia,
and at any adjournment thereof (the "Special Meeting").
The purpose of the Special Meeting is to consider and vote upon a
proposal to approve an Agreement and Plan of Merger, dated as of June 30, 1998
and amended on September 29, 1998 (the "Merger Agreement"), by and between Eagle
and PAB Bankshares, Inc., a Georgia corporation ("PAB"), which provides for,
among other things, the merger of Eagle with and into PAB (the "Merger").
This Proxy Statement/Prospectus also constitutes a Prospectus of PAB
relating to the shares of PAB Common Stock issuable to Eagle shareholders in the
Merger and any shares of PAB Common Stock issuable upon exercise of the Eagle
stock options (the "Eagle Options") following consummation of the Merger. Upon
consummation of the Merger, each outstanding share of Eagle Common Stock
(excluding treasury shares and shares held by shareholders who perfect their
dissenters' rights) shall cease to be outstanding and shall be converted into
and exchanged for the right to receive one share (as may be adjusted under
certain circumstances, the "Exchange Ratio") of common stock, no par value per
share, of PAB (the "PAB Common Stock"). The last sales price of PAB Common
Stock as reported on the American Stock Exchange on September 23, 1998 was
$18.75 per share, and on June 30, 1998, the last trading day preceding public
announcement of the execution of the Merger Agreement, was $22.63 per share. See
"THE MERGER- Merger Consideration" and "- Adjustments to the Merger
Consideration." The Merger Agreement also provides for the conversion upon
consummation of the Merger of all Eagle Options outstanding under the Eagle
Stock Plan (as defined herein) into options to acquire shares of PAB Common
Stock under the PAB Stock Plan (as defined herein). It is currently anticipated
that the Merger will be consummated not later than December 31, 1998.
The Merger is intended to be a tax-free reorganization within the
meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the
"Code"). Generally, no gain or loss should be recognized for federal income tax
purposes by Eagle shareholders as a result of the Merger, except that gain or
loss should be recognized with respect to cash received by dissenting
shareholders or in lieu of fractional shares. See "THE MERGER - Certain Federal
Income Tax Consequences."
THE ABOVE MATTERS ARE DISCUSSED IN DETAIL IN THIS PROXY
STATEMENT/PROSPECTUS. THE PROPOSED MERGER IS A COMPLEX TRANSACTION.
SHAREHOLDERS ARE STRONGLY URGED TO READ AND CONSIDER CAREFULLY THIS PROXY
STATEMENT/PROSPECTUS IN ITS ENTIRETY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT/PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE SHARES OF PAB COMMON STOCK OFFERED HEREBY ARE NOT SAVINGS
ACCOUNTS, DEPOSITS OR OTHER OBLIGATIONS OF A BANK OR SAVINGS ASSOCIATION AND ARE
NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
GOVERNMENTAL AGENCY.
The date of this Proxy Statement/Prospectus is __________ __, 1998,
and it is being mailed or otherwise delivered to Eagle shareholders on or about
such date.
<PAGE>
AVAILABLE INFORMATION
PAB and Eagle are each subject to the reporting and informational
requirements of the Securities Exchange Act of 1934, as amended, and the rules
and regulations thereunder (the "Exchange Act"), and, in accordance therewith,
file reports and proxy statements and other information with the Securities and
Exchange Commission (the "Commission"). Such reports, proxy statements and
other information filed by PAB and Eagle with the Commission may be inspected
and copied at the principal office of the Commission at Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, at the Commission's
Regional Offices at 7 World Trade Center, Suite 1300, New York, New York 10048,
and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661. Copies of such materials may also be obtained from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. Further information regarding the operation of the Public
Reference Section may be obtained by calling the Commission at 1-800-SEC-0330.
The Commission maintains an Internet web site that contains reports, proxy and
information statements and other information regarding issuers who file
electronically with the Commission. The address of that site is
http://www.sec.gov. The PAB Common Stock is traded on the American Stock
Exchange, and reports, proxy statements and other information concerning PAB are
available for inspection and copying at the offices of the American Stock
Exchange, 86 Trinity Place, New York, New York 10006 or 1730 M Street, N.W.,
Washington, D.C. 20036.
This Proxy Statement/Prospectus does not contain all of the information set
forth in the Registration Statement on Form S-4, of which this Proxy
Statement/Prospectus is a part, and exhibits thereto (together with any
amendments thereto, the "Registration Statement"), which has been filed by PAB
with the Commission under the Securities Act of 1933, as amended, and the rules
and regulations thereunder (the "Securities Act"), certain portions of which
have been omitted pursuant to the rules and regulations of the Commission and to
which portions reference is hereby made for further information. Statements
contained in this Proxy Statement/Prospectus concerning the provisions of
certain documents filed as exhibits to the Registration Statement are
necessarily brief descriptions thereof containing an explanation of each
material feature and are not necessarily complete, and each such statement is
qualified in its entirety by reference to the full text of such document.
Certain financial and other information relating to PAB and Eagle is
contained in the documents indicated below under "Incorporation of Certain
Information by Reference." All information contained herein with respect to PAB
and its subsidiaries has been supplied by PAB, and all information with respect
to Eagle and its subsidiary has been supplied by Eagle.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION SHOULD NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY PAB OR EAGLE. NEITHER THE DELIVERY OF THIS
PROXY STATEMENT/PROSPECTUS NOR ANY DISTRIBUTION OF THE SECURITIES TO WHICH THIS
PROXY STATEMENT/PROSPECTUS RELATES SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF PAB OR ANY OF ITS
SUBSIDIARIES OR EAGLE OR ITS SUBSIDIARY SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
THIS PROXY STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO PURCHASE, ANY SECURITIES OTHER THAN THE SECURITIES
TO WHICH IT RELATES OR AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
PURCHASE THE SECURITIES OFFERED BY THIS PROXY STATEMENT/PROSPECTUS IN ANY
JURISDICTION IN WHICH SUCH AN OFFER OR SOLICITATION IS NOT LAWFUL.
ii
<PAGE>
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents previously filed by PAB with the Commission (PAB
File No. 0-25422) under Section 13(a) or 15(d) of the Exchange Act are hereby
incorporated by reference in this Proxy Statement/Prospectus:
(i) PAB's Annual Report on Form 10-KSB for the year ended December
31, 1997, as filed on March 31, 1998 and amended on April 21, 1998;
(ii) PAB's Quarterly Reports on Form 10-Q for the quarter ended March
31, 1998, as filed on May 15, 1998, and for the quarter ended June 30, 1998, as
filed on August 14, 1998;
(iii) PAB's Current Reports on Form 8-K filed January 16, 1998, May
21, 1998 and July 2, 1998, as amended on August 21, 1998; and
(iv) the description of PAB Common Stock contained in its
Registration Statement on Form 8-A/A, as filed on July 3, 1996.
The following documents previously filed by Eagle with the Commission
(Eagle File No. 0-19228) under Section 13(a) or 15(d) of the Exchange Act are
hereby incorporated by reference in this Proxy Statement/Prospectus:
(i) Eagle's Annual Report on Form 10-KSB for the year ended December
31, 1997, as filed on April 1, 1998;
(ii) Eagle's Quarterly Reports on Form 10-QSB for the quarter ended
March 31, 1998, as filed on May 18, 1998 and for the quarter ended June 30,
1998, as filed on August 17, 1998; and
(iii) Eagle's Current Report on Form 8-K filed January 16, 1998, as
amended on February 10, 1998.
All documents filed by PAB and Eagle pursuant to Sections 13(a), 13(c), 14
or 15(d) of the Exchange Act subsequent to the date of this Proxy
Statement/Prospectus and prior to the date of the Special Meeting are hereby
incorporated by reference in this Proxy Statement/Prospectus and shall be deemed
a part hereof from the date of filing of such document.
Any statement contained herein, in any supplement hereto or in a document
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of the Registration Statement and this
Proxy Statement/Prospectus to the extent that a statement contained herein, in
any supplement hereto or in any other subsequently filed document which also is
or is deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of the Registration
Statement, this Proxy Statement/Prospectus or any supplement hereto.
THIS PROXY STATEMENT/PROSPECTUS INCORPORATES BY REFERENCE CERTAIN DOCUMENTS
THAT ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. SUCH DOCUMENTS ARE
AVAILABLE WITHOUT CHARGE UPON REQUEST FROM: PAB BANKSHARES, INC., 3102 NORTH
OAK STREET EXTENSION, VALDOSTA, GEORGIA 31602, ATTENTION: CORPORATE SECRETARY,
DENISE MCKENZIE, AS TO PAB DOCUMENTS, AND FROM EAGLE BANCORP, INC., 335 SOUTH
MAIN STREET, STATESBORO, GEORGIA 30458, ATTENTION: CORPORATE SECRETARY, W. DALE
PARKER, AS TO EAGLE DOCUMENTS. IN ORDER TO ENSURE TIMELY DELIVERY OF THE
DOCUMENTS, ANY REQUESTS SHOULD BE MADE BY _______ ___, 1998.
iii
<PAGE>
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Proxy Statement/Prospectus (including information incorporated by
reference herein) and information included in, or incorporated by reference
from, future filings by PAB or Eagle with the Commission contain, or may
contain, certain "forward-looking statements," including statements concerning
plans, objectives and future events or performance, and other statements which
are other than statements of historical fact. Forward-looking statements also
include information concerning possible or assumed future results of operations
of PAB and Eagle set forth under "THE MERGER - Reasons for the Merger" and
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS OF EAGLE" and those preceded by, followed by or that include the
words "believes," "expects," "anticipates" or similar expressions. For those
statements, PAB and Eagle claim the protection of the safe harbor provisions for
forward-looking statements contained in the Private Securities Litigation Reform
Act of 1995. It should be understood that the following important factors, in
addition to those discussed elsewhere in this document and in the documents
incorporated by reference, could affect the future results of PAB and Eagle and
could cause those results to differ materially from those expressed in such
forward-looking statements. Factors that may cause actual results to differ
materially from those contemplated by such forward-looking statements include,
but are not limited to, the following: (i) failure to fully realize or to
realize within the expected time frame expected cost savings from the Merger,
(ii) lower than expected income or revenues following the Merger or higher than
expected operating costs, (iii) a significant increase in competitive pressure
in the banking and financial services industry, (iv) business disruption related
to the Merger (both before and after completion), (v) greater than expected
costs or difficulties related to the integration of the management of PAB and
Eagle, (vi) litigation costs and delays caused by litigation, (vii) higher than
anticipated costs in completing the Merger, (viii) unanticipated regulatory
delays or constraints or changes in the proposed transaction required by
regulatory authorities, (ix) reduction in interest margins due to changes in the
interest rate environment, (x) poorer than expected general economic conditions,
including acquisition and growth opportunities, either nationally or in the
states in which the combined company will be doing business, (xi) legislation or
regulatory changes which adversely affect the businesses in which the combined
company would be engaged, and (xii) other unanticipated occurrences which may
delay the consummation of the Merger, increase the costs related to the Merger
or decrease the expected financial benefits of the Merger.
iv
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
AVAILABLE INFORMATION.............................................................................
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE.................................................
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS.................................................
SUMMARY...........................................................................................
Parties to the Merger..........................................................................
Special Meeting; Record Date...................................................................
The Merger.....................................................................................
Market Prices and Dividends....................................................................
Comparison of Certain Per Share Data...........................................................
Selected Financial Data........................................................................
RISK FACTORS......................................................................................
GENERAL INFORMATION...............................................................................
SPECIAL MEETING...................................................................................
Time, Date, Place and Purpose..................................................................
Record Date, Solicitation and Revocability of Proxies..........................................
Vote Required; Security Ownership of Management................................................
Recommendation of Eagle's Board of Directors...................................................
Dissenters' Rights.............................................................................
THE MERGER........................................................................................
General........................................................................................
Background of the Merger.......................................................................
Reasons for the Merger.........................................................................
Merger Consideration...........................................................................
Additional Adjustments to the Merger Consideration.............................................
Fractional Shares..............................................................................
Opinion of Eagle's Financial Advisor...........................................................
Effective Time.................................................................................
Distribution of PAB Certificates...............................................................
Certain Federal Income Tax Consequences........................................................
Management and Operations after the Merger.....................................................
Interests of Certain Persons in the Merger.....................................................
Conditions to Consummation.....................................................................
Regulatory Approvals...........................................................................
Amendment, Waiver and Termination..............................................................
Conduct of Business Pending the Merger.........................................................
Expenses and Fees..............................................................................
Accounting Treatment...........................................................................
Resales of PAB Common Stock....................................................................
Dissenters' Rights.............................................................................
PRO FORMA FINANCIAL INFORMATION...................................................................
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS OF EAGLE.................................................................
Overview.......................................................................................
Financial Condition............................................................................
Liquidity and Interest Rate Sensitivity........................................................
Capital Resources..............................................................................
Inflation......................................................................................
Results of Operations - Year Ended December 31, 1997, Compared to Year Ended December 31,
1996.......................................................................................
Net Interest Income............................................................................
Allowance for Possible Loan Losses.............................................................
</TABLE>
v
<PAGE>
<TABLE>
<S> <C>
Nonperforming Loans, Nonperforming Assets and Underperforming Loans............................
Noninterest Income.............................................................................
Noninterest Expense............................................................................
Income Taxes...................................................................................
Net Income.....................................................................................
Loan Portfolio.................................................................................
Investment Securities..........................................................................
Deposits.......................................................................................
Results of Operation - Six Months Ended June 30, 1998, Compared to Six Months Ended June 30,
1997.......................................................................................
Net Interest Income............................................................................
Provision for Possible Loan Losses.............................................................
Noninterest Income.............................................................................
Noninterest Expense............................................................................
Income Taxes...................................................................................
Net Income.....................................................................................
Recent Accounting Pronouncements...............................................................
Year 2000......................................................................................
DESCRIPTION OF EAGLE..............................................................................
General........................................................................................
Competition....................................................................................
Employees......................................................................................
Properties.....................................................................................
Legal Proceedings..............................................................................
Ownership of Eagle Common Stock................................................................
Executive Officers.............................................................................
DESCRIPTION OF PAB COMMON STOCK...................................................................
General........................................................................................
Voting and Other Rights........................................................................
Distributions..................................................................................
PAB Preferred Stock............................................................................
CERTAIN DIFFERENCES IN THE RIGHTS OF SHAREHOLDERS OF PAB AND EAGLE................................
Authorized Capital Stock.......................................................................
Directors......................................................................................
Special Meeting of Shareholders................................................................
Voting Requirements Generally..................................................................
Amendment of Articles of Incorporation and Bylaws..............................................
Restrictions on Certain Business Combinations..................................................
Advance Notice Requirements for Director Nominations...........................................
CERTAIN REGULATORY CONSIDERATIONS.................................................................
Holding Company Regulation Generally...........................................................
Payment of Dividends...........................................................................
Monetary Policy................................................................................
Capital Adequacy...............................................................................
Recent Legislative and Regulatory Action.......................................................
FDIC Insurance Assessments for the Banks.......................................................
EXPERTS...........................................................................................
LEGAL MATTERS.....................................................................................
OTHER MATTERS.....................................................................................
INDEX TO FINANCIAL STATEMENTS..................................................................... F-1
Eagle Financial Statements..................................................................... F-2
</TABLE>
vi
<PAGE>
Appendix A - Agreement and Plan of Merger, dated as of June 30, 1998 and Waiver
and Amendment No. 1, dated as of September 29, 1998, by and between
PAB and Eagle.
Appendix B - Opinion of Elaine H. Demarest, C.P.A., P.C.
Appendix C - Copy of Title 14, Chapter 2, Article 13 of the Official Code of
Georgia relating to rights of dissenting shareholders.
vii
<PAGE>
SUMMARY
The following is a summary of certain information contained elsewhere in
this Proxy Statement/Prospectus or incorporated herein. This summary is not
intended to be a complete description of the matters covered in this Proxy
Statement/Prospectus and is subject to and qualified in its entirety by
reference to the more detailed information contained elsewhere in this Proxy
Statement/Prospectus, including the Appendices hereto, and in the documents
incorporated by reference in this Proxy Statement/Prospectus. A copy of the
Merger Agreement is set forth as Appendix A to this Proxy Statement/Prospectus,
and reference is made thereto for a complete description of the terms of the
Merger. Shareholders are urged to read carefully the entire Proxy
Statement/Prospectus, including the Appendices. As used in this Proxy
Statement/Prospectus, the terms "PAB" and "Eagle" refer to such corporations,
respectively, and where the context requires, PAB and its subsidiaries or Eagle
and its subsidiary.
PARTIES TO THE MERGER
PAB. PAB is a Georgia corporation and a bank holding company registered
under the Bank Holding Act of 1956, as amended (the "BHC Act"). PAB has three
state-chartered commercial bank subsidiaries (the "PAB Banks") which
collectively operate seven full service banking offices and five automated
teller machines ("ATMs") in four counties in Georgia. A former national bank
subsidiary, Bainbridge National Bank ("BNB"), was acquired upon consummation of
the merger of Investors Financial Corporation with and into PAB on June 19, 1998
and was merged into First Community Bank of Southwest Georgia, a wholly-owned
subsidiary of PAB, on August 31, 1998.
As of June 30, 1998, PAB reported six months' net income of approximately
$3.0 million, total consolidated assets of approximately $425.1 million and
consolidated shareholders' equity of approximately $41.6 million.
PAB is continually evaluating acquisition opportunities and frequently
conducts due diligence activities in connection with possible acquisitions. As
a result, acquisition discussions and, in some cases, negotiations frequently
take place, and future acquisitions involving cash, debt or equity securities
can be expected. Acquisitions typically involve the payment of a premium over
book and market value, and therefore some dilution of PAB's book value and/or
net income per common share may occur in connection with any such future
acquisitions. See "PRO FORMA FINANCIAL INFORMATION."
PAB's principal executive offices are located at 3102 North Oak Street
Extension, Valdosta, Georgia 31602, and its telephone number is 912/241-2775.
Certain financial and other information relating to PAB and its business,
including information relating to PAB's directors and executive officers, is set
forth under "SUMMARY - Selected Financial Data of PAB" and in PAB's 1997 Annual
Report on Form 10-KSB (including the portions of PAB's 1998 Proxy Statement
incorporated by reference in Part III thereof), PAB's 1998 First and Second
Quarter Reports on Form 10-Q and 1998 Current Reports on Form 8-K, each of which
documents is incorporated by reference herein. See "AVAILABLE INFORMATION" and
"INCORPORATION OF CERTAIN INFORMATION BY REFERENCE."
Eagle. Eagle is a Georgia corporation and a bank holding company
registered under the BHC Act. Through its banking subsidiary, Eagle Bank and
Trust ("EBT"), Eagle provides a wide range of commercial and retail banking
services. EBT operates two full service banking offices and two ATMs in Bulloch
County, Georgia. Pursuant to the Merger Agreement, Eagle will merge with and
into PAB, with PAB resulting as the surviving entity. EBT will then continue to
operate as a wholly-owned subsidiary of PAB.
As of and for the six months ended June 30, 1998, Eagle reported six
months' net income of approximately $369,000, total consolidated assets of
approximately $68.5 million and consolidated shareholders' equity of
approximately $7.0 million.
Eagle's principal executive offices are located at 335 South Main Street,
Statesboro, Georgia 30458, and its telephone number is 912/764-8900. For
additional information regarding Eagle and its business, see "AVAILABLE
INFORMATION," "SUMMARY - Selected Financial Data," "DESCRIPTION OF EAGLE,"
"MANAGEMENT'S
1
<PAGE>
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF
EAGLE" and "CERTAIN REGULATORY CONSIDERATIONS."
SPECIAL MEETING; RECORD DATE
The Special Meeting will be held at ____ p.m., Statesboro time on ________
__, 1998, at the main office of Eagle, located at 335 South Main Street,
Statesboro, Georgia. At the Special Meeting, Eagle's shareholders will consider
and vote upon approval of the Merger Agreement and the consummation of the
transactions contemplated therein. Eagle's Board of Directors has fixed the
close of business on _______ __, 1998 as the record date for determining the
Eagle shareholders entitled to receive notice of and to vote at the Special
Meeting (the "Record Date"). As of the Record Date, there were __________
shares of Eagle Common Stock issued and outstanding and entitled to be voted at
the Special Meeting. See "SPECIAL MEETING."
THE MERGER
General. The Merger Agreement provides that Eagle shall merge with and
into PAB, which shall be the surviving corporation of the Merger. Thereafter,
Eagle shall cease to exist, and EBT will become a wholly-owned subsidiary of
PAB. At the time the Merger becomes effective, the outstanding shares of Eagle
Common Stock (excluding treasury shares and shares held by shareholders who
perfect their dissenters' rights) shall cease to be outstanding and shall be
converted into and exchanged for the right to receive shares of PAB Common
Stock. If the Merger Agreement is approved at the Special Meeting, all required
governmental and other consents and approvals are obtained and all of the other
conditions to the obligations of the parties to consummate the Merger are either
satisfied or waived (as permitted), the Merger will be consummated. A copy of
the Merger Agreement is set forth as Appendix A to this Proxy
Statement/Prospectus. See "THE MERGER."
Merger Consideration. The Merger Agreement provides that at the Effective
Time (as defined below) of the Merger, each outstanding share of Eagle Common
Stock (excluding treasury shares and shares held by shareholders who perfect
their dissenters' rights) will be converted into and exchanged for one share of
PAB Common Stock (as may be adjusted under certain circumstances), and all
outstanding Eagle Options shall be assumed by PAB and converted into options to
receive shares of PAB Common Stock (the "Merger Consideration"). No fractional
shares of PAB Common Stock will be issued. Rather, cash (without interest) will
be paid in lieu of any fractional share interest to which any Eagle shareholder
would be entitled upon consummation of the Merger. See "THE MERGER - Merger
Consideration."
Votes Required. The Eagle Articles of Incorporation require a two-thirds
vote of the shareholders to approve a merger unless the Eagle Board of Directors
approves the merger agreement and waives the two-thirds vote requirement in
writing. At the meeting of the Eagle Board on June 29, 1998, the Eagle Board
approved the Merger, and two-thirds of the directors waived the two-thirds vote
requirement; therefore, approval of the Merger Agreement and the consummation of
the transactions contemplated therein requires the affirmative votes of the
holders of a majority of the outstanding shares of Eagle Common Stock entitled
to vote at the Special Meeting. As of September 20, 1998, Eagle's directors and
executive officers and their affiliates beneficially owned approximately 33.9%
of the outstanding shares of Eagle Common Stock entitled to vote at the Special
Meeting, and such persons intend to vote their shares of Eagle Common Stock for
approval of the Merger Agreement and the consummation of the transactions
contemplated therein. As of September 20, 1998, PAB, its directors and
executive officers and their affiliates did not own any shares of Eagle Common
Stock. See "SPECIAL MEETING - Vote Required" and "THE MERGER - Interests of
Certain Persons in the Merger."
EAGLE SHAREHOLDERS HAVE THE RIGHT TO DISSENT FROM APPROVAL OF THE MERGER
AGREEMENT AND OBTAIN PAYMENT FOR THE FAIR VALUE OF THEIR SHARES OF EAGLE COMMON
STOCK BY FOLLOWING THE PROCEDURES DESCRIBED IN TITLE 14, CHAPTER 2, ARTICLE 13
("ARTICLE 13") OF THE GEORGIA BUSINESS CORPORATION CODE (THE "GBCC"). SEE
APPENDIX C ATTACHED HERETO, "SPECIAL MEETING - DISSENTERS' RIGHTS" AND "THE
MERGER - DISSENTERS' RIGHTS."
2
<PAGE>
Recommendation of the Eagle Board of Directors. The Board of Directors of
Eagle believes that the Merger is in the best interests of Eagle and its
shareholders and has unanimously approved the Merger Agreement and the
consummation of the transactions contemplated therein. Eagle's Board of
Directors unanimously recommends that the Eagle shareholders vote FOR approval
of the Merger Agreement and the consummation of the transactions contemplated
therein. In deciding to approve the Merger Agreement and the consummation of
the transactions contemplated therein, Eagle's Board of Directors considered a
number of factors, including, among other factors, the financial terms of the
Merger, the compatibility of the operations of Eagle and PAB, increased
liquidity for shareholders of Eagle, a comparison of the terms with comparable
transactions, alternatives to the Merger and the financial condition, results of
operations and future prospects of Eagle and PAB on a combined basis. See "THE
MERGER - Reasons for the Merger."
Opinion of Eagle's Financial Advisor. Elaine H. Demarest, CPA, P.C.
("EHD") has delivered a written opinion, dated August 18, 1998, to the Eagle
Board of Directors that, as of the date of such opinion and based upon and
subject to certain matters stated therein, the Merger is fair, from a financial
point of view, to the Eagle shareholders. The full text of the written opinion
of EHD, which sets forth the assumptions made, matters considered and
limitations on the review undertaken, is attached as Appendix B to this Proxy
Statement/Prospectus and should be read carefully in its entirety. See "THE
MERGER - Opinion of Eagle's Financial Advisor."
Effective Time. If the Merger is approved by the requisite vote of Eagle's
shareholders, all required governmental and other consents and approvals are
obtained and the other conditions to the obligations of the parties to
consummate the Merger are either satisfied or waived (as permitted), the Merger
will be consummated and will become effective on the date (the "Effective Date")
and at the time that a Certificate of Merger reflecting the Merger is filed with
the Secretary of State of the State of Georgia (the "Effective Time"). Assuming
satisfaction of all conditions to consummation, the Merger is expected to be
made effective during the fourth quarter of 1998. PAB and Eagle each has the
right, acting unilaterally, to terminate the Merger Agreement should the Merger
not be consummated by December 31, 1998, but only if the failure to consummate
the Merger on or before such date is not caused by any breach of the Merger
Agreement by the party electing to terminate. See "THE MERGER - Effective Time,
- - Amendment, Waiver and Termination."
Delivery of Eagle Certificates. Within 20 days after the Effective Time,
each record holder of shares of Eagle Common Stock outstanding at the Effective
Time will be mailed a transmittal letter (with instructions) to use in effecting
the surrender and cancellation of those certificates in exchange for PAB Common
Stock. PAB shall not be obligated to deliver the consideration to which any
former holder of Eagle Common Stock is entitled until such holder surrenders the
certificate representing such holder's shares for exchange. The certificate or
certificates so surrendered shall be duly endorsed as PAB may require. See "THE
MERGER - Distribution of PAB Certificates."
Certain Federal Income Tax Consequences. The Merger is intended to be a
tax-free reorganization within the meaning of Section 368(a) of the Internal
Revenue Code of 1986, as amended (the "Code"). Generally, no gain or loss
should be recognized for federal income tax purposes by Eagle shareholders as a
result of the Merger, except that gain or loss will be recognized with respect
to cash received by dissenting shareholders or in lieu of fractional shares. A
condition to consummation of the Merger is the receipt by each of PAB and Eagle
of an opinion of Troutman Sanders LLP, counsel to PAB, as to the qualification
of the Merger as a tax-free reorganization and certain other federal income tax
consequences of the Merger. The opinion has been executed by Troutman Sanders
LLP and will be delivered to the parties upon closing of the Merger in the form
which has been included as an exhibit to the Registration Statement relating to
this Proxy Statement/Prospectus. However, in the event that the tax opinion of
Troutman Sanders LLP is not deliverable at the closing of the Merger or if the
federal income tax consequences in the opinion differ materially from those set
forth herein, the parties may undertake to resolicit the approval of Eagle's
shareholders to the Merger. See "THE MERGER - Certain Federal Income Tax
Consequences."
BECAUSE CERTAIN TAX CONSEQUENCES OF THE MERGER MAY VARY DEPENDING UPON THE
PARTICULAR CIRCUMSTANCES OF EACH EAGLE SHAREHOLDER AND OTHER FACTORS, EACH
HOLDER OF EAGLE COMMON STOCK IS URGED TO CONSULT SUCH HOLDER'S OWN TAX ADVISER
TO DETERMINE THE PARTICULAR TAX CONSEQUENCES TO
3
<PAGE>
SUCH HOLDER OF THE MERGER (INCLUDING THE APPLICATION AND EFFECT OF STATE, LOCAL
AND FOREIGN INCOME AND OTHER TAX LAWS).
Interests of Certain Persons in the Merger. Certain members of Eagle's
management and the Board of Directors have interests in the Merger in addition
to their interests as shareholders of Eagle generally. Two directors of Eagle
will be appointed to the Board of Directors of PAB. Additionally, it is
anticipated that most of the EBT directors will remain on the Board of Directors
of EBT for at least two years after the consummation of the Merger. As of
September 20, 1998, the directors and officers of Eagle owned 200 shares of PAB
Common Stock, and the directors and officers of PAB did not own any shares of
Eagle Common Stock. It is anticipated that most of the executive officers of
EBT will remain as executive officers of EBT after the Merger. On September 29,
1998, Gary L. Johnson and EBT entered into an employment agreement, effective
October 31, 1998, which provides for severance payments under certain
circumstances. See "THE MERGER - Management and Operations After the Merger, -
Interests of Certain Persons in the Merger." For information regarding the
number of shares and percentage ownership of PAB Common Stock that will be
acquired by each of the directors and executive officers of Eagle, see
"DESCRIPTION OF EAGLE - Ownership of Eagle Common Stock."
Conditions to Consummation. Consummation of the Merger is subject to
various conditions, including, among other matters, the following material
conditions: (i) approval of the Merger Agreement by the shareholders of Eagle,
(ii) receipt of all governmental and other consents and approvals necessary to
permit consummation of the Merger, including those of the Board of Governors of
the Federal Reserve System (the "Federal Reserve") and the Department of
Banking and Finance of the State of Georgia (the "DBF"), (iii) the transaction
being accounted for as a pooling of interests, including the receipt of a letter
from Stewart, Fowler & Stalvey, P.C. to the effect that the Merger will qualify
for pooling-of-interests accounting treatment, and (iv) satisfaction of certain
other usual conditions, including the receipt of the tax opinion discussed
above. See "THE MERGER - Conditions to Consummation, - Amendment, Waiver and
Termination."
Regulatory Approvals. The Merger is subject to the prior approval of the
Federal Reserve and the DBF. On September __, 1998, PAB filed an application
with the DBF to acquire Eagle subject to requisite approval by the shareholders
of Eagle and the maintenance of EBT's capital adequacy by PAB after consummation
of the Merger. On September __, 1998, PAB filed an application with the Federal
Reserve to acquire Eagle pursuant to the Merger. See "THE MERGER - Regulatory
Approvals."
Conduct of Business Pending the Merger. PAB and Eagle have agreed in the
Merger Agreement to, among other things, operate their respective businesses and
the business of their respective subsidiaries only in the ordinary course and to
take no action that would adversely affect their respective abilities to perform
their respective covenants and agreements under the Merger Agreement. In
addition, Eagle and EBT have agreed not to take certain actions relating to
their respective operations pending consummation of the Merger without the prior
written consent of PAB, except as otherwise permitted by the Merger Agreement,
including, among other things: (i) becoming responsible for any obligation for
borrowed money in excess of an aggregate of $50,000, except in accordance with
past practices, (ii) paying a quarterly dividend exceeding $0.08 per share;
provided, however that Eagle was permitted to pay a cash dividend of $0.16 per
share on July 15, 1998, (iii) otherwise acquiring or exchanging any shares of
its capital stock, or issuing any additional shares of its capital stock or
giving any person the right to acquire any such shares or issuing any long-term
debt, (iv) subject to certain exceptions, granting any increase in compensation
or benefits, or paying any bonus, to any of its directors, officers or
employees, or (v) modifying or adopting any employee benefit plans, including
any employment contract. See "THE MERGER - Conduct of Business Pending the
Merger."
Termination. The Merger Agreement may be terminated, and the Merger
abandoned, at any time prior to the Effective Time by mutual consent of the
Boards of Directors of Eagle and PAB. In addition, the Merger Agreement may be
terminated, and the Merger abandoned, prior to the Effective Time by (i) either
PAB or Eagle if (a) the other party breaches and does not timely cure any
representation, warranty, covenant or other agreement contained in the Merger
Agreement, and such breach, individually or in the aggregate, has a Material
Adverse Effect (as defined in the Merger Agreement) on the non-breaching party,
(b) any consent or approval of certain regulatory authorities is denied by final
nonappealable action of such authority, or (c) the Merger has not been
4
<PAGE>
consummated by December 31, 1998, or (ii) PAB, in the event that the Board of
Directors of Eagle shall have failed to reaffirm, following a written request by
PAB for such reaffirmation after Eagle shall have received any inquiry or
proposal with respect to an "Acquisition Proposal" (as defined herein), its
approval of the Merger and the transactions contemplated therein (to the
exclusion of any other Acquisition Proposal) or shall have resolved not to
reaffirm the Merger. The Merger Agreement may also be terminated, and the
Merger abandoned, at any time prior to the Effective Time by the Board of
Directors of either party if the Deemed Market Value (as defined herein) of the
PAB Common Stock is less than $18.00 per share, upon delivery of written notice
at least three days prior to the Effective Date to the other party. See "THE
MERGER - Amendment, Waiver and Termination."
Accounting Treatment. It is anticipated that the Merger will qualify as a
"pooling of interests" for financial reporting purposes. See "THE MERGER -
Accounting Treatment."
Resale of PAB Common Stock. The PAB Common Stock issued in connection with
the Merger will be freely transferable by the holders of such shares, except for
those holders who may be deemed to be "affiliates" (generally including
directors, certain executive officers and 10% or more shareholders) of Eagle or
PAB under applicable federal securities laws. See "THE MERGER - Resale of PAB
Common Stock."
Dissenters' Rights. Each holder of Eagle Common Stock who dissents from
the Merger is entitled to the rights and remedies of a dissenting shareholder
set forth in Article 13 of the GBCC, subject to compliance with the procedures
set forth therein. Among other things, a dissenting shareholder is entitled to
receive an amount in cash equal to the "fair value" of such holder's shares. A
copy of Article 13 is set forth as Appendix C to this Proxy
Statement/Prospectus, and a summary thereof is included under "THE MERGER -
Dissenters' Rights." TO PERFECT DISSENTERS' RIGHTS, A SHAREHOLDER MUST COMPLY
WITH ARTICLE 13 WHICH REQUIRES, AMONG OTHER THINGS, THAT THE SHAREHOLDER GIVE
EAGLE NOTICE OF SUCH HOLDER'S INTENTION TO DISSENT FROM THE MERGER AGREEMENT
PRIOR TO THE VOTE OF THE EAGLE SHAREHOLDERS AT THE SPECIAL MEETING AND THAT SUCH
SHAREHOLDER NOT VOTE SUCH HOLDER'S SHARES IN FAVOR OF THE MERGER AGREEMENT. ANY
EAGLE SHAREHOLDER WHO RETURNS A SIGNED PROXY BUT FAILS TO PROVIDE INSTRUCTIONS
AS TO THE MANNER IN WHICH SUCH HOLDER'S SHARES ARE TO BE VOTED WILL BE DEEMED TO
HAVE VOTED IN FAVOR OF THE MERGER AGREEMENT AND THUS WILL NOT BE ENTITLED TO
ASSERT DISSENTERS' RIGHTS. SEE "SPECIAL MEETING" AND "THE MERGER - DISSENTERS'
RIGHTS."
Certain Differences in the Rights of Shareholders of PAB and Eagle. At the
Effective Time, holders of Eagle Common Stock, whose rights are governed by
Eagle's Articles of Incorporation and Bylaws and by the GBCC, will automatically
become PAB shareholders, and their rights as PAB shareholders will be determined
by PAB's Articles of Incorporation and Bylaws and by the GBCC. The rights of
PAB shareholders differ from the rights of Eagle shareholders in certain
important respects. See "CERTAIN DIFFERENCES IN THE RIGHTS OF SHAREHOLDERS OF
PAB AND EAGLE."
MARKET PRICES AND DIVIDENDS
PAB Common Stock is quoted and traded on the American Stock Exchange under
the symbol "PAB." As of September 20, 1998, there were 7,372,635 shares of PAB
Common Stock outstanding and approximately 1,403 record holders of such shares.
Prior to July 9, 1996, there was no established trading market for PAB Common
Stock. PAB Common Stock began trading on the American Stock Exchange on July 9,
1996. Trade prices prior to such date are to the best knowledge of PAB.
Eagle Common Stock is not traded on an established market. As of September
20, 1998, there were 873,875 shares of the Eagle Common Stock outstanding and
approximately 913 record holders of such shares. Management of Eagle is not
aware of any trades of Eagle Common Stock occurring between May 27, 1998 and
July 24, 1998. The last reported sales price of Eagle Common Stock known to
management of Eagle was $15.00 per share on May 26, 1998.
The following table sets forth the high and low sales prices per share of
PAB Common Stock on the American Stock Exchange with respect to each quarterly
period since January 1, 1996, and the high and low sales
5
<PAGE>
prices per share of Eagle Common Stock known to Eagle management with respect to
each quarterly period since January 1, 1996.
<TABLE>
<CAPTION>
SALES PRICES PER SALES PRICES PER
SHARE OF PAB SHARE OF EAGLE
COMMON STOCK COMMON STOCK
---------------------------- ----------------------------------
HIGH LOW HIGH LOW
---------------------------- ----------------------------------
<S> <C> <C> <C> <C>
1996
First Quarter $ 7.00 $ 6.25 N/A N/A
Second Quarter 7.50 7.00 $13.50 $12.74
Third Quarter 10.50 7.50 13.50 13.50
Fourth Quarter 10.94 10.44 13.50 13.50
1997
First Quarter 10.69 9.44 15.00 14.00
Second Quarter 11.00 10.13 15.00 13.00
Third Quarter 11.38 10.50 14.00 14.00
Fourth Quarter 12.06 10.56 14.50 14.00
1998
First Quarter 27.38 8.75 15.00 15.00
Second Quarter 23.75 20.00 15.00 15.00
Third Quarter (through 23.50 18.13 N/A* N/A*
September 23, 1998)
</TABLE>
____________
* Eagle has no record of any trades occurring during the third quarter of 1998
(through September 23, 1998).
PAB has declared and paid cash dividends on the PAB Common Stock since 1983
(its first full year of operations). PAB paid cash dividends of $.135 per share
($749,082 in the aggregate) in fiscal year 1996, and $.175 per share ($988,423
in the aggregate) in fiscal year 1997. Per share amounts have been adjusted to
reflect a two-for-one stock split paid March 10, 1998 to PAB shareholders of
record on February 17, 1998. PAB declared and paid cash dividends of $.125 per
share ($818,953 in the aggregate) during the six months ended June 30, 1998.
Eagle has paid dividends on the Eagle Common Stock since 1995. In December
1995, Eagle declared a dividend of $.25 per share ($215,689 in the aggregate)
payable January 15, 1996. In December 1996, Eagle declared an annual dividend
of $.30 per share and a one time special dividend of $.20 per share, for a total
of $.50 per share ($431,423 in the aggregate) payable January 15, 1997. In
December 1997, Eagle declared an annual dividend of $.32 per share ($279,640 in
the aggregate) payable January 15, 1998 and declared a quarterly dividend in
June 1998 of $.16 per share (($139,820 in the aggregate) payable June 15, 1998.
On April 28, 1998, the last trading day prior to public announcement that
PAB and Eagle had entered into a non-binding letter of intent to merge, the last
reported sales price per share of PAB Common Stock on the American Stock
Exchange was $23.00, an equivalent pro forma per share of Eagle Common Stock
pursuant to the Merger Agreement of $23.00. On June 30, 1998, the last trading
day prior to the day on which PAB and Eagle executed the Merger Agreement, the
last reported sales price per share of PAB Common Stock on the American Stock
Exchange was $22.63. Management of Eagle is not aware of any trades of the
Eagle Common Stock since May 26, 1998. On September 23, 1998, the last reported
sales price per share of PAB Common Stock on the American Stock Exchange was
$18.75.
THE ACTUAL MARKET PRICE PER SHARE OF PAB COMMON STOCK ON THE EFFECTIVE DATE
OR ON THE DATE ON WHICH CERTIFICATES REPRESENTING SUCH SHARES ARE RECEIVED BY
FORMER HOLDERS OF EAGLE COMMON STOCK MAY BE
6
<PAGE>
MORE OR LESS THAN THE LAST SALES PRICE PER SHARE OF PAB COMMON STOCK ON
SEPTEMBER 23, 1998 (ON WHICH THE EQUIVALENT PRO FORMA AMOUNTS WERE DETERMINED)
OR ON THE DATE OF THE SPECIAL MEETING. EAGLE SHAREHOLDERS ARE URGED TO OBTAIN
CURRENT MARKET QUOTATIONS FOR SHARES OF PAB COMMON STOCK.
7
<PAGE>
COMPARISON OF CERTAIN PER SHARE DATA
The following summary presents selected comparative per share data for PAB
and Eagle on a historical basis and on a pro forma combined and equivalent pro
forma per share of Eagle Common Stock basis assuming the Merger had been
effective at the dates or during the periods presented. The Merger is reflected
under the pooling-of-interests method of accounting, and pro forma data is
derived accordingly. The information shown below should be read in conjunction
with the historical financial statements of PAB and Eagle, including the
respective notes thereto, included herein or incorporated by reference herein,
and with the unaudited pro forma financial information, including the notes
thereto, appearing elsewhere herein. The pro forma data is presented for
information purposes only and is not necessarily indicative of the results of
operations or combined financial position that would have resulted had the
Merger been consummated at the dates or during the periods indicated, nor are
they necessarily indicative of future results of operations or combined
financial position. See "AVAILABLE INFORMATION," "INCORPORATION OF CERTAIN
INFORMATION BY REFERENCE," "PRO FORMA COMBINED FINANCIAL DATA," "THE MERGER -
Accounting Treatment," "DESCRIPTION OF EAGLE," "MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF EAGLE" and "EAGLE
FINANCIAL STATEMENTS."
<TABLE>
<CAPTION>
AT OR FOR THE SIX MONTHS AT OR FOR THE
MONTHS ENDED JUNE 30, YEARS ENDED DECEMBER 31,
--------------------- ------------------------
1998 1997 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
PAB Common Stock
Net income per common share:
Historical - basic(1) $ .41 $ .72 $ .60 $ .52
Historical - diluted(1) .41 .72 .59 .52
Pro forma PAB and Eagle combined - basic(1)(2) .41 .73 .59 .53
Pro forma PAB and Eagle combined - diluted(1)(2) .41 .72 .59 .53
Dividends per common share:
Historical(1) .125 .175 .135 .103
Pro forma PAB and Eagle combined(1)(2) .125 .175 .135 .103
Book Value per common share:
Historical(1) 5.64 5.34
Pro forma PAB and Eagle combined(1)(2)(3) 5.89 5.59
EAGLE COMMON STOCK
Net income per common share:
Historical - basic $ .42 $ .78 $ .58 $ .58
Historical - diluted .40 .76 .57 .57
Equivalent pro forma PAB and Eagle combined - basic(4)(1) .41 .73 .59 .53
Equivalent pro forma PAB and Eagle combined - diluted(4)(1)
.41 .72 .59 .53
Dividends per common share:
Historical .16 .32 .50 .25
Equivalent pro forma combined(4)(1) .125 .175 .135 .103
Book Value per common share:
Historical 7.98 7.73
Equivalent pro forma PAB and Eagle combined(4)(1) 5.89 5.59
</TABLE>
___________________________
/(1)/ PAB and pro forma per share information has been adjusted to reflect a
two-for-one stock split in 1993 and 1996 and a two-for-one stock split
paid March 10, 1998.
/(2)/ Represents the pro forma combined information of PAB and Eagle as if the
Merger was consummated on January 1 of the respective periods and was
accounted for under the pooling-of-interests method of accounting.
8
<PAGE>
/(3)/ Determined by dividing pro forma combined shareholders' equity by pro
forma shares outstanding as follows:
DATE EQUITY SHARES
---- ------ ------
06/30/98 $48,563,158 8,246,510
12/31/97 $46,064,960 8,237,050
/(4)/ Determined by multiplying the applicable pro forma PAB and Eagle combined
amount by the assumed ratio of one-to-one (based on an assumed PAB Common Stock
price of $18.75, which was the last sales price of PAB Common Stock on
September 23, 1998 as reported on the American Stock Exchange).
/(5)/ The Eagle pro forma equivalent data presented above will change if the
actual Eagle Common Stock Exchange Ratio is different from the Exchange Ratio
assumed in the table above. This data is presented for illustration purposes
only, and no inferences are intended or may be drawn concerning the actual
Merger Consideration which may occur or the resulting Exchange Ratio.
/(6)/ The historical data of PAB has been restated to reflect the merger of
Investors Financial Corporation into PAB effective June 19, 1998, which was
accounted for as a pooling of interests.
9
<PAGE>
SELECTED FINANCIAL DATA
Set forth as follows are certain historical consolidated selected financial
data relating to PAB and Eagle. This financial data should be read in
conjunction with the historical financial statements of PAB and Eagle, including
the respective notes thereto, appearing elsewhere or incorporated by reference
in this Proxy Statement/Prospectus. See "AVAILABLE INFORMATION," "INCORPORATION
OF CERTAIN INFORMATION BY REFERENCE," "DESCRIPTION OF EAGLE," "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF
EAGLE" and "EAGLE FINANCIAL STATEMENTS."
PAB BANKSHARES, INC. AND SUBSIDIARIES
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
AS OF OR FOR THE
SIX MONTHS
ENDED JUNE 30 AS OF OR FOR THE YEARS ENDED DECEMBER 31,
---------------- ---------------------------------------------------
1998 1997 1996 1995 1994 1993
---- ---- ---- ---- ---- ----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS:
Net interest income $ 8,738 $ 16,412 $ 14,232 $ 13,176 $ 9,843 $ 8,385
Provision for possible loan losses 434 677 525 518 450 380
Net income $ 3,036 $ 5,329 $ 4,317 $ 3,806 $ 2,602 $ 2,072
PER SHARE DATA:
Net income - basic(1) $ .41 $ .72 $ .60 $ .52 $ .41 $ .36
Net income - diluted(1) .41 .72 .59 .52 .41 .36
Cash dividends declared(1) .125 .175 .135 .103 .088 .088
Book value(1) 5.64 5.34 4.73 4.24 3.44 3.17
Tangible book value(1) 5.25 4.92 4.26 3.71 3.11 2.73
BALANCE SHEET SUMMARY:
Investments $ 69,444 $ 72,300 $ 77,992 $ 84,368 $ 50,605 $ 47,557
Loans, net 289,530 268,493 240,486 209,917 155,329 142,143
Deposits 333,660 330,976 315,064 294,041 207,969 205,100
Assets 425,144 405,587 372,774 340,769 243,175 232,037
Long-term debt and other borrowings(2)
Federal Home Loan Bank advances 40,081 29,168 17,096 8,941 5,629 4,432
Other long-term debt 2,048 2,184 3,384 5,157 4,730 2,810
Other borrowings 1,773 1,005 -0- -0- -0- -0-
Average shareholders' equity 40,450 37,102 32,278 28,670 21,212 17,503
Average total assets 415,366 377,983 355,322 320,159 237,890 218,699
FINANCIAL RATIOS:
Net income to average assets 1.46% 1.41% 1.21% 1.19% 1.09% .95%
Overhead ratio(3) 1.79% 2.00% 2.02% 2.18% 2.34% 2.26%
Net income to average shareholders' equity 15.01% 14.36% 13.37% 13.28% 12.27% 11.84%
Dividend payout ratio(4) 30.49% 24.31% 22.50% 19.81% 21.46% 24.44%
Average shareholders' equity to average total assets 9.74% 9.82% 9.08% 8.95% 8.92% 8.00%
</TABLE>
____________
/(1)/ All per share information has been adjusted to reflect a two-for-one stock
split in 1993 and 1996 and a two-for-one stock split paid March 10, 1998.
/(2)/ Does not include Federal Funds purchased for each of the respective
periods.
/(3)/ Represents noninterest expense less noninterest income divided by average
assets.
/(4)/ Represents dividends declared divided by net income, including pooled
subsidiaries.
/(5)/ The historical data of PAB has been restated to reflect the merger of
Investors Financial Corporation into PAB effective June 19, 1998, which was
accounted for as a pooling of interests.
10
<PAGE>
EAGLE BANCORP, INC. AND SUBSIDIARY
Selected Financial Data
<TABLE>
<CAPTION>
AS OF OR FOR THE
SIX MONTHS ENDED
JUNE 30, AS OF OR FOR THE YEARS ENDED DECEMBER 31,
----------------- ---------------------------------------------
1998 1997 1996 1995 1994 1993
---- ---- ---- ---- ---- ----
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS:
Interest income $ 2,708 $ 5,238 $ 4,657 $ 4,236 $ 3,495 $ 2,924
Interest expenses 1,337 2,538 2,269 1,987 1,418 1,281
------- ------- ------- ------- ------- -------
Net interest income 1,371 2,700 2,388 2,249 2,077 1,643
------- ------- ------- ------- ------- -------
Provision for possible loan 32 116 108 76 88 152
losses
Other income 442 747 642 490 395 317
Other expenses 1,241 2,350 2,171 1,953 1,816 1,513
------- ------- ------- ------- ------- -------
Income before tax 540 981 751 710 568 295
Income tax expense 171 307 250 210 140 (17)
------- ------- ------- ------- ------- -------
Net income $ 369 $ 674 $ 501 $ 500 $ 428 $ 312
======= ======= ======= ======= ======= =======
PER SHARE DATA:
Net income:
Basic $ 0.42 $ 0.78 $ 0.58 $ 0.58 $ 0.50 $ 0.42
Diluted 0.40 0.76 0.57 0.57 0.47 0.40
Cash dividends declared 0.16 0.32 0.50 0.25 - -
Book value 7.98 7.73 7.25 7.19 6.75 6.31
Tangible book value 7.98 7.73 7.25 7.19 6.75 6.31
BALANCE SHEET SUMMARY:
Investment Securities $12,035 $11,139 $10,689 $ 9,033 $ 8,736 $ 8,182
Loans, net 50,106 48,768 41,999 36,872 32,954 27,924
Deposits 56,215 55,667 52,465 44,883 40,703 38,601
Assets 68,546 66,335 60,730 52,774 47,058 43,528
Shareholders' equity 6,975 6,752 6,259 6,199 5,822 4,638
Long-term debt and other
borrowings:
Federal Home Loan Bank advances 3,796 2,644 548 - - -
Other long-term debt - - - - - -
Other borrowings 650 - 200 - - -
Average shareholders' equity 6,974 6,534 6,336 6,122 5,659 4,482
Average total assets 66,793 63,694 56,045 49,974 46,224 39,715
LIQUIDITY RATIOS:
Loans to total deposits 89.13% 87.61% 80.05% 82.15% 80.96% 72.34%
Loans to average earning assets 79.09% 76.57% 74.94% 73.78% 71.29% 70.34%
Noninterest-bearing deposits to
total 10.99% 11.09% 9.88% 9.48% 9.52% 8.45%
deposits
FINANCIAL RATIOS:
Net income to average total assets 1.10% 1.06% 0.90% 1.00% 0.93% 0.79%
Overhead ratio(1) 2.40% 2.52% 2.73% 2.93% 3.07% 3.01%
Net income to average 10.58% 10.31% 7.92% 8.17% 7.56% 6.96%
shareholders' equity
Dividend payout ratio 37.94% 44.21% 85.97% 43.12% 0.00% 0.00%
Average shareholders' equity to
average 10.44% 10.26% 11.31% 12.25% 12.24% 11.29%
total assets
</TABLE>
____________
/(1)/ Represents noninterest expense less noninterest income divided by average
assets.
/(2)/ Does not include Federal funds purchased for each of the respective
periods.
11
<PAGE>
PAB BANKSHARES, INC. AND SUBSIDIARIES
AND EAGLE BANCORP, INC. AND SUBSIDIARY
PRO FORMA SELECTED FINANCIAL DATA
(UNAUDITED)
The following unaudited pro forma selected financial data reflects the
combined historical results of PAB and Eagle giving effect to the Merger as if
the Merger had occurred as of or at the beginning of each of the periods
presented. This unaudited pro forma selected financial data should be read in
conjunction with the pro forma financial information included elsewhere herein.
The unaudited pro forma selected financial data is presented for informational
purposes only and is not necessarily indicative of the combined financial
position or results of operations which actually would have occurred if the
transactions had been consummated at the date and for the period indicated or
which may be obtained in the future.
<TABLE>
<CAPTION>
AS OF OR FOR THE
SIX MONTHS
ENDED JUNE 30, AS OF OR FOR THE YEARS ENDED DECEMBER 31,
---------------- ---------------------------------------------------
1998 1997 1996 1995 1994 1993
---- ---- ---- ---- ---- ----
(Amounts in thousands, except per share and ratio data and percentages)
<S> <C> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS:
Net interest income $ 10,109 $ 19,112 $ 16,620 $ 15,425 $ 11,920 $ 10,028
Provision for possible loan losses 466 793 633 594 538 532
Net income $ 3,405 $ 6,003 4,818 4,306 3,030 $ 2,384
PER SHARE DATA:
Net income - basic(1) $ .41 $ .73 $ .59 $ .53 $ .42 $ .36
Net income - diluted(1) .41 .72 .59 .53 .42 .36
Cash dividends declared(1) .125 .175 .135 .103 .088 .088
Book value(1) 5.89 5.59 4.99 4.56 3.83 3.45
Tangible book value(1) 5.54 5.22 4.57 4.08 3.54 3.07
BALANCE SHEET SUMMARY:
Investments $ 81,479 $ 83,439 $ 88,681 $ 93,401 $ 59,341 $ 55,739
Loans, net 339,636 317,261 282,485 246,789 188,283 170,067
Deposits 389,875 386,643 367,529 338,924 248,672 243,701
Assets 493,690 471,922 433,504 393,543 290,233 275,565
Long-term debt and other borrowings(2)
Federal Home Loan Bank advances 43,877 31,812 17,644 8,941 5,629 4,432
Other long-term debt 2,048 2,184 3,384 5,157 4,730 2,810
Other borrowings 2,423 1,005 200 -0- -0- -0-
Average shareholders' equity 47,424 43,636 38,614 34,792 26,871 21,985
Average total assets 482,159 441,677 411,367 370,133 284,114 258,414
FINANCIAL RATIOS:
Net income to average assets 1.41% 1.36% 1.17% 1.16% 1.07% .92%
Overhead ratio(3) 1.87% 2.07% 2.12% 2.28% 2.46% 2.38%
Net income to average shareholders' equity 14.36% 13.76% 12.48% 12.38% 11.28% 10.84%
Dividend payout ratio(4) 30.49% 23.97% 22.88% 19.43% 20.95% 24.44%
Average shareholders' equity to average total 9.84% 9.88% 9.39% 9.40% 9.46% 8.51%
assets
</TABLE>
____________
/(1)/ All per share information has been adjusted to reflect a two-for-one stock
split in 1993 and 1996 and a two-for-one stock split paid March 10, 1998.
/(2)/ Does not include federal funds purchased for each of the respective
periods.
/(3)/ Represents noninterest expense less noninterest income divided by average
assets
/(4)/ Represents dividends divided by net income, including pooled subsidiaries.
12
<PAGE>
RISK FACTORS
In addition to the other information included in or incorporated by
reference into this Proxy Statement/Prospectus and the Appendices hereto, the
following factors should be considered carefully in evaluating the Merger.
UNCERTAINTIES IN INTEGRATING BUSINESS OPERATIONS
In determining that the Merger is advisable and in the best interest of its
shareholders, each of the PAB Board and the Eagle Board considered certain
benefits expected to result from the consummation thereof. See "THE MERGER -
Reasons for the Merger." There can be no assurance that any or all of such
benefits will be realized as rapidly as expected or at all.
COMPETITION
PAB's banking subsidiaries compete with other banking institutions on the
basis of service, convenience and, to some extent, price. Due in part to both
regulatory changes and consumer demands, banks have experienced increased
competition from other financial entities offering similar products. Competition
from both bank and non-bank organizations is expected to continue.
RISK FROM GENERAL ECONOMIC CONDITIONS
In addition, general economic conditions impact the banking industry. The
credit quality of PAB's loan portfolio necessarily reflects, among other
matters, the general economic conditions in the areas in which it conducts its
business. The continued financial success of PAB and its subsidiaries depends
somewhat on factors which are beyond PAB's control, including national and local
economic conditions, the supply and demand for investable funds, interest rates
and federal, state and local laws affecting these matters. Any substantial
deterioration in any of the foregoing conditions could have a material adverse
effect on PAB's financial condition and results of operations, which, in all
likelihood, would adversely affect the market price of PAB Common Stock. See
"Summary - Market Prices and Dividends."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of the Merger by the Eagle Board,
shareholders should be aware that certain directors and executive officers of
Eagle have certain interests that may present them with potential conflicts of
interest with respect to the Merger. See "THE MERGER - Interests of Certain
Persons in the Merger."
ANTI-TAKEOVER EFFECT OF CERTAIN CHARTER AND BYLAW PROVISIONS
Certain provisions of the Articles of Incorporation and Bylaws of PAB could
delay or frustrate the removal of incumbent directors and could make more
difficult a merger, tender offer or proxy contest involving PAB, even if such
events could be beneficial to shareholders. For example, pursuant to the PAB
Articles and Bylaws, shares of preferred stock may be issued in the future
without further shareholder approval and upon such terms and conditions, and
having such rights, privileges and preferences, as the PAB Board may determine.
The ability to issue preferred stock provides desirable flexibility in
connection with acquisitions and other corporate transactions. However, the
rights of the holders of PAB Common Stock will be subject to, and may be
adversely affected by, any preferred stock that may be issued in the future, and
the issuance of preferred stock could have the effect of making it more
difficult for a third party to acquire, or discouraging a third party from
acquiring, a majority of the outstanding voting stock of PAB. PAB has no
present plans to issue any shares of preferred stock. See "THE MERGER -
Description of Capital Stock of PAB."
POSSIBLE VOLATILITY OF STOCK PRICE
The trading markets for equity securities, such as PAB Common Stock, have
recently experienced a period of volatility. The Dow Jones Industrial Average,
a widely followed measure of the stock market's performance (the
13
<PAGE>
"DJIA"), fell from a high of 9,337.97, its close on July 17, 1998, to 8,020.78,
its close on September 8, 1998, a decline of 14.11%. Furthermore, the DJIA
experienced its second largest one-day decline, a loss of 512.61 on August 31,
1998, and its largest one-day increase, a gain of 380.53 on September 8, 1998.
Other market indicators have experienced similar volatility. Since July 17,
1998, the closing price of a share of PAB Common Stock has exhibited similar
volatility, ranging from a high of $23.125 per share to a low of $18.125 per
share. Market analysts have attributed the volatility to a number of factors,
including economic conditions in Russia, Asia and Latin America. PAB has
negligible exposure to financial losses from turmoil in such foreign economies.
However, PAB cautions Eagle shareholders that such factors, as well as others
that PAB cannot predict, may cause an adverse impact on the trading markets for
equity securities, including shares of PAB Common Stock.
14
<PAGE>
GENERAL INFORMATION
This Proxy Statement/Prospectus is being furnished to Eagle shareholders in
connection with the solicitation of proxies by the Board of Directors of Eagle
from holders of the outstanding shares of Eagle Common Stock for approval of the
Merger Agreement.
This Proxy Statement/Prospectus also constitutes the Prospectus of PAB with
respect to the shares of PAB Common Stock to be issued in the Merger.
Information in this Proxy Statement/Prospectus with respect to PAB has been
supplied by PAB. Information with respect to Eagle has been supplied by Eagle.
SPECIAL MEETING
TIME, DATE, PLACE AND PURPOSE
The Special Meeting will be held at the main office of Eagle, located at
335 South Main Street, Statesboro, Georgia, at ____ p.m., Statesboro time, on
__________, 1998 and at any adjournments thereof, to consider and vote upon a
proposal to approve the Merger Agreement and the consummation of the
transactions contemplated therein and to transact such other business as may
properly come before the Special Meeting.
RECORD DATE, SOLICITATION AND REVOCABILITY OF PROXIES
The Eagle Board of Directors has fixed the close of business on _______ __,
1998 as the Record Date for determining the Eagle shareholders entitled to
receive notice of and to vote at the Special Meeting. Only holders of record of
Eagle Common Stock as of the Record Date are entitled to notice of and to vote
at the Special Meeting. As of the Record Date, _________ shares of Eagle Common
Stock were issued and outstanding and held by approximately _____ record
holders. Holders of Eagle Common Stock are entitled to one vote on each matter
considered and voted on at the Special Meeting for each share of Eagle Common
Stock held of record at the close of business on the Record Date. The presence,
in person or by properly executed proxy, of the holders of a majority of the
outstanding shares of Eagle Common Stock entitled to vote at the Special Meeting
is necessary to constitute a quorum at the Special Meeting. For purposes of
determining the presence of a quorum, abstentions will be counted as shares
present, but "broker non-votes" (i.e., shares held by brokers or nominees which
are represented at a meeting but with respect to which the broker or nominee is
not empowered to vote on a particular proposal) will not be counted as shares
present. Neither abstentions nor broker non-votes will be counted as votes cast
for purposes of determining whether a proposal has received sufficient votes for
approval, thus having the effect of a vote against the Merger.
A form of proxy for the Special Meeting is enclosed with the copies of this
Proxy Statement/Prospectus being sent to Eagle shareholders. Shares of Eagle
Common Stock represented by properly executed proxies will, if such proxies are
received in time and are not revoked, be voted in accordance with the
instructions indicated on such proxies. If no instructions are indicated, such
shares will be voted FOR approval of the Merger Agreement and the consummation
of the transactions contemplated therein, and, in the discretion of the
individuals named as proxies, as to any other matter which may properly come
before the Special Meeting or any adjournment thereof. Any holder of Eagle
Common Stock who returns a signed proxy but fails to provide instructions as to
the manner in which such holder's shares are to be voted will be deemed to have
voted in favor of approval of the Merger Agreement and the consummation of the
transactions contemplated therein. The Eagle Board is not aware of any other
matters which may be presented for action at the Special Meeting, but if other
matters do properly come before the Special Meeting, it is intended that shares
represented by proxies in the accompanying form will be voted by the persons
named in the proxy in accordance with their best judgment.
An Eagle shareholder who has given a proxy may revoke it at any time prior
to its exercise at the Special Meeting by (i) giving written notice of
revocation to the Secretary of Eagle, (ii) electing to vote in person at the
Special Meeting, or (iii) properly submitting to Eagle a duly executed proxy
bearing a later date. All written notices
15
<PAGE>
of revocation and other communications with respect to revocation of proxies
should be addressed to Eagle as follows: Eagle Bancorp, Inc., 335 South Main
Street, Statesboro, Georgia 30458, Attention: Corporate Secretary.
The expense of soliciting proxies for the Special Meeting will be paid for
by Eagle. In addition to the solicitation of shareholders of record by mail,
telephone or personal contact, Eagle will be contacting brokers, dealers, banks
or voting trustees or their nominees who can be identified as record holders of
Eagle Common Stock; such holders, after inquiry by Eagle, will provide
information concerning the quantity of proxy and other materials needed to
supply such materials to beneficial owners, and Eagle will reimburse them for
the expense of mailing the proxy materials to such persons.
VOTE REQUIRED; SECURITY OWNERSHIP OF MANAGEMENT
The Eagle Articles of Incorporation require a two-thirds vote of the
shareholders to approve a merger unless the Eagle Board of Directors approves
the merger agreement and waives the two-thirds vote requirement in writing. At
the meeting of the Eagle Board on June 29, 1998, the Eagle Board approved the
Merger, and two-thirds of the directors waived the two-thirds vote requirement;
therefore, approval of the Merger Agreement and the consummation of the
transactions contemplated therein requires the affirmative vote of a majority of
the outstanding shares of Eagle Common Stock entitled to vote on the Merger at
the Special Meeting.
As of September 20, 1998, Eagle's directors and executive officers and
their affiliates held approximately 33.9% of the outstanding shares of Eagle
Common Stock entitled to vote at the Special Meeting and such persons intend to
vote their shares of Eagle Common Stock for approval of the Merger Agreement and
the consummation of the transactions contemplated therein. As of September 20,
1998, PAB, its directors and executive officers and their affiliates held no
shares of Eagle Common Stock.
RECOMMENDATION OF EAGLE'S BOARD OF DIRECTORS
For the reasons described below, the Board of Directors of Eagle has
unanimously adopted the Merger Agreement, believes that the Merger is in the
best interests of Eagle and its shareholders and unanimously recommends that
shareholders of Eagle vote FOR approval of the Merger Agreement and the
consummation of the transactions contemplated therein. See "THE MERGER -
Background of the Merger, - Reasons for the Merger."
DISSENTERS' RIGHTS
Under the GBCC, Eagle shareholders who comply with certain procedural
requirements of the GBCC are entitled to assert dissenters' rights with respect
to their shares of Eagle Common Stock upon consummation of the Merger. Each
record holder of shares of Eagle Common Stock who wishes to assert dissenters'
rights (i) must deliver to Eagle, before the Eagle Merger is voted upon at the
Special Meeting, written notice of his intent to demand payment for his
dissenters' rights and (ii) must not vote in favor of the Merger. See "THE
MERGER - Dissenters' Rights."
16
<PAGE>
THE MERGER
The following information describes certain material information pertaining
to the Merger. This description does not purport to be complete and is qualified
in its entirety by reference to the Merger Agreement, a copy of which is set
forth as Appendix A to this Proxy Statement/Prospectus and is incorporated
herein by reference. All shareholders are urged to read the Merger Agreement in
its entirety.
GENERAL
The Merger Agreement provides that Eagle shall merge with and into PAB. PAB
will be the surviving corporation of the Merger and will continue to be governed
by the laws of the State of Georgia. At the time the Merger becomes effective,
each issued and outstanding share of Eagle Common Stock (excluding treasury
shares and shares held by shareholders who perfect their dissenters' rights)
shall cease to be outstanding and shall be converted into and exchanged for the
right to receive shares of PAB Common Stock. If the Merger Agreement is
approved at the Special Meeting, all required governmental and other consents
and approvals are obtained and all other conditions to the obligations of the
parties to consummate the Merger are either satisfied or waived (as permitted),
the Merger will be consummated. A copy of the Merger Agreement is set forth as
Appendix A to this Proxy Statement/Prospectus. See " - Merger Consideration."
BACKGROUND OF THE MERGER
The Eagle Board of Directors held a strategic planning session on February
7, 8 and 9, 1997. Among the relevant planning topics discussed at the session
were current trends in mergers and acquisitions in the Southeastern banking
industry, changes in Georgia branching laws, Eagle's financial performance
relative to the industry and local competitors and methods to provide stock
liquidity for Eagle shareholders. The Eagle Board agreed to remain open to
attractive opportunities to add shareholder value, including the consideration
of accepting a merger proposal from a larger company, seeking a strategic
"merger of equals" partner or expanding the existing Eagle franchise by de novo
branching into nearby counties and adding delivery systems in Bulloch County.
It was subsequently decided by the Eagle Board and management that de novo
branching was not economically feasible until Eagle could grow its Bulloch
County market share to gain size efficiencies at its two current banking
offices.
Over the course of the next 12 months, executive management and board
members of Eagle held informal talks with two potential strategic merger
candidates. From June 1997 through September 1997, Eagle held discussions with
the executive management of a small one bank holding company in the Atlanta area
about a potential merger of the two companies. After careful evaluation, the
Eagle Board decided to end these talks after determining that the proposed
relative exchange multiples for the merger would not provide Eagle shareholders
with an adequate percentage of ownership in the combined entity on a fully
diluted basis and that stock ownership in the combined entity would not
significantly improve liquidity for Eagle shareholders.
In January 1998, executive management and board members of Eagle held
informal talks with the executive management of a small one bank holding company
nearby concerning a strategic merger of equals. These two Southeast Georgia
companies were of similar size and structure. These talks were suspended when
the prospective merger partner entered into merger talks with and eventually
signed a merger agreement with a larger Southeast Georgia holding company.
In February 1998, EHD was engaged as financial advisor to assist Eagle in
the review and selection of potential merger candidates for Eagle, conduct a
limited bidding process with interested buyers and assist in the negotiation of
the terms of a potential merger. During a period from February 1998 through June
1998, this process was carried out. On February 17, 1998, the Eagle Board met
with EHD to review its strategic options and the current merger environment in
Georgia. The Eagle Board discussed the positive and negative points of merging
with a larger company versus remaining independent. After careful consideration,
the Eagle Board determined that it would consider stock swap merger offers which
qualified for pooling-of-interests accounting treatment and a tax-free exchange
of shares. The Eagle Board also specified that it would give preference to
offers of liquid stocks
17
<PAGE>
traded on an organized stock exchange. The Eagle Board also appointed a
Strategic Planning Committee (the "Committee") to solicit selective merger
offers and make a recommendation to the full Eagle Board.
On February 23, 1998, the Committee met with EHD to study and select
potential acquirors. During March and April 1998, EHD and Eagle executive
management compiled a comprehensive package of bid materials, made contacts and
distributed packages to bidders selected by the Committee which expressed an
interest. The Committee met on March 12, 1998 and on April 3, 1998 to direct
the process. From a field of eight potential acquirors contacted, Eagle received
four bids.
During the month of April 1998, various members of the Committee, Eagle
executive management and EHD met with representatives of the interested
acquiring companies at the offices of the potential acquirors, at Eagle's main
office or telephonically to discuss the form and amount of consideration offered
in each case, the financial performance and liquidity of the acquirors' stocks
and their respective long range strategic plans and corporate philosophies.
On April 21, 1998, the Committee and the full Eagle Board met with EHD in
informational meetings to study all proposals received, compare the relative
merits of each offer, compare the offers to similar recent transactions for
other banking company mergers and discuss the financial fairness of the
consideration using various analytical methods. The Committee met on April 24,
1998 to reach a consensus on its recommendation and unanimously voted to
recommend PAB's offer to the full Eagle Board. The aggregate consideration
offered by PAB represented the highest dollar value of all offers received.
Committee members were also favorably impressed by PAB's recent stock
performance, the strategic philosophy of PAB's management and Board of Directors
and PAB's commitment to community banking and community service.
On April 27, 1998, the Eagle Board met to hear the Committee's
recommendation and presentations by its financial and legal advisors. After
lengthy discussions, the Eagle Board voted to accept the PAB offer, subject to
due diligence by both parties and the negotiation of a satisfactory definitive
agreement. PAB and Eagle issued joint press releases on April 29, 1998
announcing that they had entered into a non-binding letter of intent to merge.
During the period from April 29, 1998 through June 29, 1998, Eagle and PAB
conducted their respective due diligence investigations including, but not
limited to, on site loan portfolio and loan loss reserve adequacy reviews by
independent consultants, reciprocal reviews of CPA firm work papers and
financial reports, governing corporate documents, bond portfolios and fixed
assets. The findings of Eagle's external loan reviewer were studied in detail,
with questions directed to PAB management on any areas of concern. Also, Eagle
studied the financial condition of PAB on a historical and prospective basis.
Various Eagle senior officers investigated PAB's technology support
capabilities, its business practices, employee benefits and general accounting
and operational procedures. The Eagle due diligence team concluded that PAB's
financial statements were accurate in all material respects, PAB was in good
regulatory standing and had the ability to complete the proposed Merger and
could serve as a source of strength to Eagle after the Merger.
PAB senior officers performed operational due diligence in addition to the
work of its external loan reviewer and CPA firm. The operations and financial
functions of Eagle were reviewed to determine accuracy of financial data and the
general level of operational efficiency of Eagle. The PAB due diligence team
concluded that the financial condition of Eagle, its operational organization
and efficiency were satisfactory and were accurately presented in its current
status.
After the completion of due diligence procedures by both parties and the
drafting of a definitive Merger Agreement, the Eagle Board met on June 29, 1998
to review and discuss the Merger Agreement and receive the recommendations of
Eagle management and Eagle's financial and legal advisors. After careful
consideration and discussion, the Eagle Board voted unanimously to approve the
execution of the Merger Agreement with PAB. The PAB Board met on May 18, 1998
and voted unanimously to approve the Merger Agreement.
On September 10, 1998, Andrew M. Williams, III, resigned as President,
Chief Executive Officer and director of Eagle and EBT effective October 30,
1998. On September 29, 1998, EBT entered into an agreement with Gary L.
18
<PAGE>
Johnson pursuant to which Mr. Johnson agreed to serve as President and
Chief Executive Officer of EBT, effective October 31, 1998. See "Interests of
Certain Persons in the Merger." As a result of these developments, on September
29, 1998, PAB and Eagle executed a Waiver and Amendment No. 1 (the "Waiver and
Amendment No. 1") to the Merger Agreement whereby, among other things, (i) PAB
waived any defaults under the Merger Agreement arising solely out of the
resignation of Mr. Williams and the negotiation of a new employment contract for
Mr. Johnson and (ii) the parties amended the Merger Agreement to reflect the
change in Eagle management.
REASONS FOR THE MERGER
Eagle. The Eagle Board of Directors, after consideration of relevant
business, financial, legal and market factors, approved the Merger Agreement.
Eagle's Board of Directors, with the assistance of outside financial and legal
advisors, considered all material factors although it did not assign any
relative or specific weight to them. The material factors considered were as
follows:
(i) the financial terms of the proposed Merger, including the anticipated
treatment of the Merger as a tax-free exchange of Eagle Common Stock for PAB
Common Stock;
(ii) a comparison of Eagle's continuing as an independent entity to
combining with PAB, particularly as to shareholder value. The Eagle Board
considered the benefits that could reasonably be expected to accrue to Eagle
shareholders from the Merger, including the premium offered over Eagle's then-
current stock price or stock price unaffected by acquisition speculation and the
likelihood that the Merger Consideration represented a higher value for Eagle
Common Stock than would be achieved by Eagle operating on an independent basis
unaffected by acquisition speculation. Alternatives to the Merger were also
analyzed, including remaining independent and growing internally or combining
with other potential merger partners in light of the economic conditions and
prospects of the Southeast Georgia banking market and the competitive
environment within the banking sector;
(iii) the increased liquidity of PAB Common Stock, a common stock with an
actively traded market on the American Stock Exchange, over Eagle Common Stock;
(iv) certain financial and other information concerning PAB, including,
but not limited to, information with respect to the business, operations,
condition and future prospects of PAB, particularly its capital position and
asset quality, including its ability to pay dividends;
(v) the anticipated synergies, efficiencies and economies of scale that
could be achieved by combining Eagle with PAB;
(vi) the Eagle Board's review, based upon its due diligence investigation
of PAB, of the business, operations, earnings and financial condition of PAB on
an historical and prospective basis, and the enhanced opportunities for growth
and expanded operations which, while no assurances can be given, will likely be
made possible through coordinated efforts with other PAB subsidiaries, such as
increased aggregate lending limits of the collective institutions;
(vii) a comparison of the terms of the proposed Merger with comparable
transactions in the Southeast;
(viii) a comparison of the terms of the proposed Merger with other
proposals received in a limited bid process;
(ix) competitive factors and trends toward consolidation in the banking
industry;
(x) the review by the Eagle Board with its strategic planning committee,
its management, its legal counsel and the advice rendered by EHD as to the
fairness, from a financial point of view, of the Exchange Ratio to the holders
of Eagle Common Stock, as reflected by the written fairness opinion set forth as
Appendix B to this Proxy Statement/Prospectus;
19
<PAGE>
(xi) the benefits of merging with PAB as compared with the dilution in
voting power which Eagle shareholders will experience upon consummation of the
Merger as a result of owning a smaller portion of the total shares of PAB Common
Stock outstanding;
(xii) the non-financial terms and structure of the Merger;
(xiii) the likelihood of the Merger being approved by the appropriate
regulatory authorities; and
(xiv) the impact generally of the Merger on the various constituencies
served by Eagle.
While each member of the Eagle Board of Directors individually considered
the foregoing and other factors, the Eagle Board did not collectively assign any
specific or relative weights to the factors considered and did not make any
determination with respect to any individual factor. The Eagle Board
collectively made its determination with respect to the Merger based upon the
unanimous conclusion reached by its members, in light of the factors that each
of them considered appropriate, that the Merger is in the best interests of the
holders of Eagle Common Stock. The foregoing discussion of the information and
factors considered is not intended to be exhaustive, but is believed to include
all material factors considered by the Eagle Board.
THE BOARD OF DIRECTORS OF EAGLE UNANIMOUSLY RECOMMENDS THAT EAGLE
SHAREHOLDERS VOTE FOR APPROVAL OF THE MERGER AGREEMENT AND THE CONSUMMATION OF
THE TRANSACTIONS CONTEMPLATED THEREIN.
PAB. The PAB Board of Directors believes that the Merger is in the best
interests of PAB and the PAB shareholders. The PAB Board of Directors, after
consideration of relevant business, financial, legal and market factors,
approved the Merger Agreement. PAB, in considering the Merger, took into account
its stated strategic long-term goal of continuing to expand PAB throughout
Georgia, as well as adjoining states, so as to become one of the leading
independent bank holding companies in the Southeast. The consent of PAB
shareholders is not required in order for the Merger to be consummated.
MERGER CONSIDERATION
The Merger Agreement provides that, at the Effective Time, PAB will issue
and exchange one share of PAB Common Stock (subject to adjustment in certain
circumstances as described herein) for each of the issued and outstanding shares
of Eagle Common Stock (excluding treasury shares and shares held by shareholders
who perfect their dissenters' rights) and will assume all options to purchase
Eagle Common Stock, all upon the terms as set forth below.
Eagle Common Stock. The Merger Agreement provides that each share of Eagle
Common Stock issued and outstanding at the Effective Time (excluding treasury
shares and shares held by shareholders who perfect their dissenters' rights)
shall cease to be outstanding and shall be converted into and exchanged for the
right to receive one share of PAB Common Stock; provided, however, that if (i)
the Deemed Market Value (as defined below) of the PAB Common Stock is less than
$18.00 per share, then either party may terminate the Merger Agreement in its
sole discretion by delivery of written notice to the other party within three
calendar days prior to the Effective Time, or (ii) the Deemed Market Value of
the PAB Common Stock is greater than $28.50, then the Merger Consideration shall
be reduced by an amount equal to the product of (a) the Merger Consideration
multiplied by (b) the ratio formed by the Deemed Market Value less $28.50,
divided by the Deemed Market Value. "Deemed Market Value" means the arithmetic
average of the closing price for PAB Common Stock as reported on the American
Stock Exchange for the 20 consecutive trading days immediately preceding the
date which is five calendar days prior to the Effective Time.
Eagle Stock Options. The Merger Agreement provides that each Eagle Option
which is outstanding at the Effective Time, whether vested or unvested, will be
converted into an option to acquire shares of PAB Common Stock, on the same
terms and conditions as were applicable under the Eagle 1990 Employee Stock
Option Plan (the "Eagle Option Plan"). From and after the Effective Time, (i)
each Eagle Option assumed by PAB may be exercised
20
<PAGE>
solely for shares of PAB Common Stock, (ii) the number of shares of PAB Common
Stock subject to such Eagle Option shall be equal to the product of the number
of shares of Eagle Common Stock subject to such Eagle Option immediately prior
to the Effective Time multiplied by the Exchange Ratio, and (iii) the per share
exercise price under each such Eagle Option shall be adjusted by dividing the
per share exercise price under each such Eagle Option by the Exchange Ratio and
rounding down to the nearest cent.
ADDITIONAL ADJUSTMENTS TO THE MERGER CONSIDERATION
The Merger Agreement provides that the Merger Consideration to be received
for all of the shares of Eagle Common Stock shall be reduced, if and as
necessary, by all amounts in excess of $150,000 paid or to be paid by Eagle or
EBT or both for the fees and expenses of EHD, consultants, attorneys and
accountants for Eagle or EBT and the due diligence conducted by Eagle or EBT in
connection with the Merger. In the event of an adjustment, the Merger
Consideration shall be reduced by that number of whole shares of PAB Common
Stock equal to the dollar amount of such adjustment divided by $21.00, and such
resulting number of shares of PAB Common Stock shall be substituted for 873,875
in the Merger Consideration calculations in the Merger Agreement. As of
September 23, 1998, the total amount of expenses was approximately $71,000.
In the event that prior to the Effective Time holders of Eagle Options
exercise such options, then in accordance with the Exchange Ratio formula
described above, PAB will issue a certain number of additional shares in order
to take into account the additional capital contributed upon exercise.
FRACTIONAL SHARES
Pursuant to the terms of the Merger Agreement, each holder of shares of
Eagle Common Stock exchanged pursuant to the Merger who would otherwise have
been entitled to receive a fraction of a share of PAB Common Stock shall
receive, in lieu thereof, cash (without interest) in an amount equal to such
fractional part of a share of PAB Common Stock multiplied by the market value of
one share of PAB Common Stock at the Effective Time. The market value of one
share of PAB Common Stock at the Effective Time shall be the last sales price of
the PAB Common Stock on the American Stock Exchange on the last business day
preceding the Effective Time. No such holder will be entitled to dividends,
voting rights or any other rights as a shareholder in respect of any fractional
shares.
OPINION OF EAGLE'S FINANCIAL ADVISOR
Eagle retained EHD to act as its financial advisor in connection with the
Merger process described above and to render an opinion to Eagle's Board of
Directors as to the fairness of the consideration to be received by Eagle's
shareholders pursuant to the Merger, from a financial point of view.
EHD, as part of its practice in providing management advisory services to
financial institutions, has been regularly engaged since 1984 as a financial
advisor to either buyer or seller in connection with mergers and acquisitions,
competitive biddings and valuations for various purposes. EHD was selected to
advise Eagle's Board of Directors based upon its knowledge of Eagle, PAB, the
community banking industry in Georgia and its extensive background in the
general banking industry. EHD will be compensated for its services. Neither
EHD nor any of its officers or affiliates has a material financial interest in
Eagle or PAB.
THE FULL TEXT OF THE WRITTEN OPINION OF EHD, WHICH SETS FORTH THE
ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITATIONS ON THE REVIEW UNDERTAKEN,
IS ATTACHED HERETO AS APPENDIX B AND IS INCORPORATED HEREIN BY REFERENCE. EAGLE
SHAREHOLDERS ARE URGED TO READ THIS OPINION CAREFULLY IN ITS ENTIRETY. EHD'S
OPINION IS DIRECTED ONLY TO THE FAIRNESS TO THE EAGLE SHAREHOLDERS, FROM A
FINANCIAL POINT OF VIEW, OF THE CONSIDERATION TO BE RECEIVED AND DOES NOT
ADDRESS ANY OTHER ASPECT OF THE MERGER OR RELATED TRANSACTIONS AND DOES NOT
CONSTITUTE A RECOMMENDATION TO ANY SHAREHOLDER AS TO HOW SUCH SHAREHOLDER SHOULD
VOTE AT THE SPECIAL MEETING. THE SUMMARY OF THE OPINION OF EHD SET FORTH IN
THIS PROXY STATEMENT/PROSPECTUS IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE
FULL TEXT OF SUCH OPINION.
21
<PAGE>
The consideration to be received by Eagle shareholders in the Merger was
determined by Eagle and PAB in their negotiations. No limitations were imposed
by the Board of Directors or management of Eagle upon EHD with respect to the
investigations made or the procedures followed by EHD in rendering its opinion.
In arriving at its opinion, EHD reviewed the Merger Agreement and held
discussions with certain senior officers, directors and other representatives
and advisors of Eagle and certain senior officers and other representatives and
advisors of PAB concerning the businesses, operations and prospects of Eagle and
PAB. EHD examined certain publicly available business and financial information
relating to Eagle and PAB as well as certain financial forecasts and other data
for Eagle and PAB, which were provided to EHD by or otherwise discussed with the
respective management teams of Eagle and PAB, including information relating to
certain strategic implications and operational benefits anticipated from the
Merger. EHD reviewed the financial terms of the Merger as set forth in the
Merger Agreement in relation to, among other things: current and historical
market prices and trading volumes of Eagle Common Stock and PAB Common Stock;
the historical and projected earnings and operating data of Eagle and PAB; and
the capitalization and financial condition of Eagle and PAB. EHD considered, to
the extent publicly available, the financial terms of certain other similar
transactions recently effected which EHD considered relevant in evaluating the
Merger and analyzed certain financial, stock market and other publicly available
information relating to the businesses of other companies whose businesses EHD
considered relevant in evaluating those of Eagle and PAB. EHD also considered
the relative contributions of Eagle and PAB to the combined company. In addition
to the foregoing, EHD conducted such other analyses and examinations and
considered such other financial, economic and market criteria as EHD deemed
appropriate to arrive at its opinion. EHD noted that its opinion was necessarily
based upon information available, and financial, stock market and other
conditions and circumstances existing and disclosed, to EHD as of the date of
its opinion.
In conducting its review and analysis and in arriving at its opinion, EHD
assumed and relied upon, without independent verification, the accuracy and
completeness of all of the financial and other information provided to EHD or
publicly available and assumed and relied upon the representations and
warranties of Eagle and PAB contained in the Merger Agreement. EHD also relied
upon the managements of Eagle and PAB as to the reasonableness and achievability
of the financial and operating projections and the assumptions and bases
therefore provided to EHD and assumed that such projections reflect the best
currently available estimates and judgments of such respective managements of
Eagle and PAB and that such projections and forecasts will be realized in the
amounts and time periods currently estimated by the managements of Eagle and
PAB. EHD assumed, with the consent of the Board of Directors of Eagle, that the
Merger will be accounted for as a pooling of interests in accordance with
generally accepted accounting principles and as a tax-free reorganization for
federal income tax purposes.
EHD conducted no physical inspection or appraisal of any of the assets,
properties or facilities of either Eagle or PAB, nor was it furnished with any
such evaluation or appraisal. EHD also assumed that the conditions to the Merger
would be consummated on a timely basis in the manner contemplated in the Merger
Agreement. EHD was not asked to consider, and its opinion does not address, the
relative merits of the Merger as compared to any alternative business strategies
that might exist for Eagle or the effect of any other transaction in which Eagle
might engage. The opinion rendered by EHD was based upon analyses of the
foregoing factors in light of its assessment of general economic, financial and
market conditions as they exist and could be evaluated by EHD as of the date of
the opinion. No opinion was rendered as to the price or trading range at which
shares of PAB Common Stock will trade following the date of the opinion or the
price or trading range at which shares of PAB Common Stock will trade upon
completion of the Merger.
In connection with rendering its opinion, EHD performed a variety of
financial analyses. The preparation of a fairness opinion of this nature
involves various determinations as to the most appropriate and relevant methods
of financial analysis and the application of those methods to the particular
circumstances and, therefore, is not readily susceptible to partial analysis or
summary description. EHD believes that its analyses must be considered together
as a whole and that selecting portions of such analyses and the facts considered
therein, without considering all other factors and analyses, could create an
incomplete view of the analyses and the process underlying EHD's opinion. In its
analyses, EHD made numerous assumptions with respect to industry performance,
business and economic conditions and other matters, many of which are beyond the
control of Eagle and PAB and
22
<PAGE>
which may not be realized. Any estimates contained in EHD's analyses are not
necessarily predictive of future results or values, which may be significantly
more or less favorable than such estimates. Estimates of values of companies do
not purport to be appraisals or necessarily reflect the prices at which such
companies or their securities may actually be sold.
Valuation Methodologies. The following is a summary of the principal
analyses performed by EHD in connection with its opinion.
Summary Transaction Analysis. EHD reviewed the terms of the proposed
transaction, including the Exchange Ratio and the aggregate transaction value.
EHD reviewed the implied value of the consideration offered based upon the
$23.00 per share closing price of PAB Common Stock on April 28, 1998, one day
prior to the announcement of the proposed Merger, which indicates an implied
value after a one-for-one stock exchange of $23.00 per share of Eagle Common
Stock. Since the Eagle Common Stock is not traded on any organized exchange and
has no established market, a comparison can be made only to the limited trading
activity known to Eagle's management. The sales price per share of Eagle Common
Stock traded during 1997 has ranged from $13.00 to $15.00, or a weighted average
of $14.09, according to limited information available to Eagle's management. The
implied value of $23.00 per share represents a 63% premium over average Eagle
Common Stock trades during 1997. Assuming 873,875 total outstanding Eagle
shares, this indicates an aggregate transaction value of approximately $20.1
million. EHD calculated that, as of June 30, 1998, this aggregate transaction
value represented 29.3% of the total assets of Eagle, 2.88 times Eagle's stated
book value and 26.33 times Eagle's earnings for the trailing twelve months ended
June 30, 1998.
A similar transaction analysis of the proposed Merger based upon a $21.50
per share of PAB Common Stock closing price on August 18, 1998 indicates an
implied per share value of $21.50 for each share of Eagle Common Stock, and
approximately $18.8 million in aggregate consideration. When compared to Eagle's
financial statements as of June 30, 1998, this aggregate transaction value
represented 27.4% of Eagle assets, 2.69 times Eagle's stated book value and
24.61 times Eagle's trailing twelve month earnings.
Contribution Analysis. EHD reviewed certain historical financial and
operating information for Eagle, PAB and the pro forma combined entity resulting
from the Merger based on financial data reported by Eagle and PAB. Financial
data provided to EHD as of June 30, 1998 was unaudited. EHD analyzed the
relative balance sheet contribution of Eagle and PAB for certain data to the
combined company on a pro forma basis as of June 30, 1998. This analysis
indicated that Eagle would have contributed 13.9% to combined total assets,
14.8% to combined loans (net of allowances for losses), 14.4% to combined
deposits and 14.4% to combined stockholders' equity. EHD also analyzed the
relative income statement contributions of Eagle and PAB for certain data to the
combined company on a pro forma basis. This analysis indicated that, for the
latest trailing twelve months ended June 30, 1998, Eagle would have contributed
13.9% to combined net interest income and 11.9% to combined net income. At the
Exchange Ratio of one share of Eagle Common Stock for one share of PAB Common
Stock, the holders of outstanding Eagle Common Stock would own approximately
10.6% of PAB's post-merger shares outstanding.
Comparable Company Analysis for Eagle. EHD reviewed and compared certain
financial information for Eagle to corresponding financial information for
similar companies in Georgia. Peers were determined to be profitable one-bank
holding companies in Georgia, not publicly traded, with consolidated assets
between $50 million and $100 million as of December 31, 1997, with the bank
subsidiary at least five years old, with investments in the subsidiary bank
between $5 million and $8 million and with no nonbank subsidiaries. These
parameters produced a peer sample of 43 other bank holding companies. The peer
companies had a mean asset size of $74 million and a median asset size of $72
million, compared to Eagle's $66 million in assets at December 31, 1997. Eagle
had a return on average assets ("ROA") of 1.06% for the year ended December 31,
1997, compared to a mean ROA of 1.30% and a median ROA of 1.32% for the peer
companies. Eagle had a return on average equity ("ROE") of 10.31%, compared to a
13.13% mean ROE and a 12.43% median ROE for the peer group. This indicates that
Eagle's financial performance was below the averages of similar companies.
Discussions with Eagle's management indicate that Eagle's rates of return are
expected to improve somewhat in the future as Eagle grows to control a larger
market share in Bulloch County and Eagle's branch reaches a more efficient size
to cover fixed costs.
23
<PAGE>
A similar peer group was determined for EBT, the wholly-owned subsidiary of
Eagle. EBT's peers were determined to be Georgia banks with total assets between
$50 million and $100 million with no more than one branch and between five and
ten years old. Non-traditional or special purpose banks were excluded. Of the 16
peer banks in the sample, total assets indicated a mean of $75 million and a
median of $72 million, compared to $66 million for EBT. EBT's ROA was 1.17% for
1997 versus a 1.21% mean and a 1.19 % median for the peers. EBT's ROE was 11.85%
versus a 12.43% mean and 12.64% median for the peers. EBT's net interest rate
margin averaged 4.69% during 1997, compared to a 5.11% mean and a 5.12% median
for the peers. EBT's nonperforming assets to total assets were 0.09% at December
31, 1997, versus a 0.85% mean and a 0.36% median for the peers. EBT's
performance ratios were reasonable when compared to the peer group. Although
profits and operating efficiencies scored somewhat less than peers, EBT's credit
quality indicators outperformed peers.
Comparable Company Analysis for PAB. EHD compared selected balance sheet
data, asset quality, capitalization and profitability measures using financial
data for the 12 months ended December 31, 1997 and market data as of August 18,
1998 for PAB to a group of selected Georgia bank holding companies which EHD
deemed to be relevant.
The group of Georgia banking companies selected for financial comparisons
to PAB consisted of 20 companies with total assets between $250 million and $750
million at December 31, 1997. Financial information for PAB is shown before its
retroactive restatement for the June 19, 1998 pooling-of-interests merger
transaction with Investors Financial Corporation in Bainbridge, Georgia. The
total assets for the group at December 31, 1997 amount to $397 million at the
mean and $358 million at the median, compared to $329 million for PAB at that
time. The analysis indicated that PAB's ROA for the year 1997 was 1.35%,
compared to 1.27% mean ROA and a 1.39% median ROA for the peer group. PAB's ROE
was 14.33% versus a 13.36% mean ROE and a 13.24% median ROE for the group. PAB's
net interest rate margin for 1997 was 4.76%, compared to a 5.10% mean and a
5.12% median for the group. PAB's 1997 dividend payout ratio was 23.84% versus a
53.88% median payout and a 30.94% median payout for the group. These comparisons
indicate that PAB's financial performance was reasonable for the period. Ratios
for profitability were slightly better than the peer group, as were most
indicators of asset quality and operating efficiencies. PAB's dividend payout
ratio was lower than that of the peers, but management indicates that its 1998
policy shows an upward trend.
Stock Trading Analysis. Since the Eagle Common Stock is not liquidly
traded, no stock trading comparisons were attempted to other banking companies
with a more established trading market, and EHD placed no weight on the market
price of Eagle Common Stock.
The group of Georgia banking companies selected for market data comparisons
to PAB included ABC Bancorp, Inc., Moultrie; Century South Banks, Inc.,
Dahlonega; First Liberty Financial Corp., Macon; Habersham Bancorp, Cornelia;
SNB Bancshares, Inc., Macon; The Savannah Bancorp, Inc., Savannah; Southwest
Georgia Financial Corp., Moultrie; First Sterling Banks, Inc., Kennesaw; First
Banking Co of SE GA, Statesboro; and Merit Holding Corporation, Tucker.
EHD reviewed and analyzed the price performance and the historical trading
value for the PAB Common Stock for the period from September 1997 to August
1998. A comparison of the PAB Common Stock performance for the last 12 months
versus the S&P 500 Index indicates that PAB has generally outperformed the S&P
for the period. EHD also compared the recent price performance of the PAB Common
Stock to the ten selected peer companies. The ratio of closing stock prices at
August 18, 1998 to trailing 12 months earnings per share for the peer banks
ranged from multiples of 16.5 to 33.2, compared to 27.9 for PAB. These stock
prices as a multiple of book value range from 1.5 to 3.1, compared to 3.8 for
PAB. EHD deemed the trading value of PAB Common Stock to be generally light,
averaging slightly more than 1,200 traded shares per day over the most recent
quarter measured, versus 3,900 daily average shares for the peer group. However,
EHD concluded that PAB's listing on the American Stock Exchange provides a more
liquid and orderly trading market than is currently available to Eagle
shareholders.
Comparable Transaction Analysis. EHD performed an analysis of premiums paid
in acquisitions of banking organizations with comparable characteristics to the
Merger. Two sets of comparable transactions were analyzed as follows. The first
set of comparable transactions reflects a comparison of the Merger to 100%
24
<PAGE>
acquisitions occurring in 1997 in the State of Georgia. During 1997, EHD noted
thirteen 100% acquisition transactions of banks and S&L companies in Georgia,
which yielded mean premiums of 2.16 times the sellers' book value, and 19.83
times the sellers' last 12 months trailing earnings. This compares to pending
multiples for the Merger of 2.69 times book value and 24.61 times trailing
earnings if measured based on Eagle financial data through June 30, 1998 and
PAB's closing stock price at August 18, 1998.
EHD also compared the Merger to certain financial information relating to
seven selected pending or recently completed Georgia bank mergers. The
comparable transactions were (acquiror/acquiree): The Savannah Bancorp,
Inc./Bryan Bancorp of Georgia, Inc.; First Liberty Financial Corp./Southland
Bank Corp.; Regions Financial Corporation/First Community Banking Services; SNB
Bancshares, Inc./Crossroads Bancshares, Inc.; Premier BancShares, Inc./Lanier
Bank & Trust; Premier BancShares, Inc./The Bank Holding Company; and Flag
Financial/Middle Georgia Bankshares, Inc. EHD considered, among other factors,
the earnings, capital, asset size and quality of assets of the acquired
companies. EHD compared the transaction prices to stated book values, earnings,
assets and deposits. The seven recent comparable transactions had an average
price to tangible book value of 2.75 times, a price to earnings multiple of
20.03 times, a price to total assets multiple of 24.31 and a price to total
deposits multiple of 27.91. The consideration to be paid to Eagle, based on
PAB's closing stock price of $21.50 as of August 18, 1998, would result in a
price to book value of 2.69 times, a price to earnings multiple of 24.61 times,
a price to assets multiple of 27.41 and a price to total deposits multiple of
33.42. The Merger compares favorably to the multiples of these recent
transactions.
No company or transaction used in EHD's analyses is identical to Eagle or
the Merger. Accordingly, an analysis of the results of the foregoing necessarily
involves complex considerations and judgments concerning differences in
financial and operating characteristics of Eagle and other factors that could
affect the public trading value of the companies to which they are being
compared. Mathematical analysis (such as determining the mean or median) is not
in itself a meaningful method of using comparable transaction data or comparable
company data.
Discounted Cash Flow Analysis. EHD calculated the present value of Eagle
assuming that Eagle remained an independent bank. For purposes of this analysis,
EHD utilized certain projections of Eagle's future earnings and dividends. EHD
assumed that the Eagle Common Stock would be sold at the end of five years at
250% of projected book value. This value was then discounted to present value
using discount rates from 12% to 18%. These rates were selected as an estimate
of probable rates that investors in securities such as Eagle Common Stock would
expect in view of the potential appreciation and risks in the stock. Based on
these assumptions, EHD calculated that the present value of Eagle as an
independent bank ranges from $12.2 million to $15.7 million. Based on PAB's
closing stock price and assuming a one-for-one exchange, the aggregate
consideration of the Merger would provide a value of $18.8 million, which is
above the high end of this present value range. The present value analysis was
included because it is a widely used valuation method, but EHD noted that the
results of this method are dependent on the numerous assumptions that must be
made, including earnings assumptions, dividend payout policies, terminal values
and appropriate discount rates.
Pursuant to an engagement letter dated August 18, 1998 between Eagle and
EHD, Eagle agreed to the payment of a fee for EHD's services for the fairness
opinion and to indemnify and hold harmless EHD and its officers and employees
against certain liabilities in connection with its services, except for
liabilities resulting from the negligence of EHD. Total fees paid to EHD for its
role as financial advisor to Eagle and for its fairness opinion approximate
$40,000.
EFFECTIVE TIME
If the Merger Agreement is approved by the requisite votes of the Eagle
shareholders, all other required governmental and other consents and approvals
are received and the other conditions to the obligations of the parties to
consummate the Merger are either satisfied or waived (as permitted), the Merger
will be consummated and effected on the date and at the time a Certificate of
Merger reflecting the Merger is filed with the Secretary of State of the State
of Georgia. Unless otherwise mutually agreed upon in writing by the chief
executive officers of PAB and Eagle, PAB and Eagle have agreed to use their
reasonable efforts to cause the Effective Time to occur on the last business day
of the month in which occurs the last to occur of (i) the effective date
(including expiration of
25
<PAGE>
any applicable waiting period) of the last required consent of any regulatory
authority having authority over and approving or exempting the Merger, (ii) the
date on which the shareholders of Eagle approve the Merger Agreement or (iii)
such later date as may be mutually agreed upon in writing by the chief executive
officers of PAB and Eagle. Assuming satisfaction of all conditions to the
consummation of the Merger, the Merger is expected to be made effective during
the fourth quarter of 1998. Either PAB or Eagle may terminate the Merger
Agreement if the Merger has not been consummated by December 31, 1998, subject
to certain limitations. See "- Conditions to Consummation, - Amendment, Waiver
and Termination."
DISTRIBUTION OF PAB CERTIFICATES
Promptly after the Effective Time, PAB shall mail appropriate transmittal
materials to each record holder of Eagle Common Stock for use in effecting the
surrender and cancellation of those certificates in exchange for PAB Common
Stock (which shall contain an affidavit for lost or stolen stock certificates
and which shall specify that delivery shall be effected, and risk of loss and
title to the certificates theretofore representing shares of Eagle Common Stock
shall pass, only upon proper delivery of such certificates to PAB by the former
shareholders of Eagle). EAGLE SHAREHOLDERS SHOULD NOT SURRENDER THEIR
CERTIFICATES FOR EXCHANGE UNTIL THEY RECEIVE SUCH LETTER OF TRANSMITTAL AND
INSTRUCTIONS. After the Effective Time, each holder of shares of Eagle Common
Stock issued and outstanding at the Effective Time shall surrender the
certificate or certificates representing such shares to PAB, and the
certificates thus surrendered will be canceled. Unless otherwise designated by
an Eagle shareholder on the transmittal letter, certificates representing shares
of PAB Common Stock issued to Eagle shareholders in connection with the Merger
will be issued and delivered to the tendering Eagle shareholder at the address
on record with the Eagle transfer agent. PAB shall not be obligated to deliver
the consideration to which any former holder of Eagle Common Stock is entitled
until such holder surrenders such holder's certificate or certificates
representing such holder's shares for exchange. The certificate or certificates
so surrendered shall be duly endorsed as PAB may require. No party shall be
liable to a holder of Eagle Common Stock for any property delivered in good
faith to a public official pursuant to any applicable abandoned property law.
After the Effective Time, holders of certificates will have no rights with
respect to the shares of Eagle Common Stock represented thereby other than the
right to surrender such certificates and receive in exchange therefor the shares
of PAB Common Stock to which such holders are entitled, as described above. In
addition, no dividend or other distribution payable to holders of record of PAB
Common Stock will be paid to the holder of any Eagle certificates until such
holder surrenders such certificates for exchange as instructed. Subject to
applicable law, upon surrender of the certificates, such holder will receive the
certificates representing the shares of PAB Common Stock issuable with respect
to such shares of Eagle Common Stock, all withheld dividends or other
distributions (without interest) and any withheld cash payments (without
interest) to which such shareholder is entitled.
If any certificate for PAB Common Stock is to be issued in a name other
than that in which the Eagle certificate surrendered for exchange is issued, the
Eagle 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 certificates surrendered, shall
provide funds for their purchase or shall establish to the exchange agent's
satisfaction that such taxes are not payable.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
THE FOLLOWING IS A SUMMARY DISCUSSION OF CERTAIN FEDERAL INCOME TAX
CONSEQUENCES OF THE MERGER. THE DISCUSSION IS INCLUDED FOR GENERAL INFORMATION
PURPOSES ONLY AND MAY NOT APPLY TO A PARTICULAR SHAREHOLDER IN LIGHT OF SUCH
SHAREHOLDER'S PARTICULAR CIRCUMSTANCES. SHAREHOLDERS SHOULD CONSULT THEIR OWN
TAX ADVISORS AS TO THE PARTICULAR TAX CONSEQUENCES TO THEM OF THE MERGER,
INCLUDING THE APPLICATION OF STATE, LOCAL AND FOREIGN TAX LAWS AND POSSIBLE
FUTURE CHANGES IN FEDERAL INCOME TAX LAWS AND THE INTERPRETATION THEREOF, WHICH
CAN HAVE RETROACTIVE EFFECT.
26
<PAGE>
Troutman Sanders LLP, counsel to PAB, is of the opinion that, for federal
income tax purposes, the Merger will be treated as a reorganization within the
meaning of Section 368(a) of the Code. Accordingly, (i) Eagle will recognize no
gain or loss upon the transfer of its assets to PAB in the Merger; (ii) PAB will
recognize no gain or loss on receipt of the assets of Eagle in exchange for PAB
Common Stock in the Merger; (iii) the tax basis of the assets of Eagle in the
hands of PAB will, in each case, be the same as the basis of those assets in the
hands of Eagle immediately prior to the Merger; (iv) the holding period of the
assets of Eagle in the hands of PAB will, in each case, include the period
during which such assets were held by Eagle; (v) the Eagle shareholders will
recognize no gain or loss upon the exchange of their Eagle Common Stock for
shares of PAB Common Stock in the Merger; (vi) the basis of the PAB Common Stock
received by the Eagle shareholders in the Merger will, in each case, be the same
as the basis of the Eagle Common Stock surrendered in exchange therefor; (vii)
the holding period of the PAB Common Stock received by the Eagle shareholders
will, in each case, include the period during which the Eagle Common Stock
surrendered in exchange therefor was held by the exchanging Eagle shareholders,
provided that the Eagle Common Stock was held as a capital asset in the hands of
the exchanging Eagle shareholders on the date of the exchange; and (viii) the
payment of cash to Eagle shareholders in lieu of fractional share interests in
PAB Common Stock will be treated as if the fraction shares were distributed as
part of the exchange and then redeemed by PAB. These cash payments will be
treated as having been received as distributions in full payment in exchange for
the stock redeemed as provided in Section 302(a) of the Code. Generally, any
gain or loss recognized upon such exchange will be capital gain or loss,
provided the fractional shares would constitute a capital asset in the hands of
the exchanging shareholders. When solely cash is received by an Eagle
shareholder in exchange for Eagle Common Stock pursuant to the exercise of
dissenters' rights, such cash will be treated as having been received in
redemption of such shareholder's Eagle Common Stock, subject to the provisions
and limitations of Section 302 of the Code.
A condition to consummation of the Merger is the receipt by each of PAB and
Eagle of an opinion of Troutman Sanders LLP as to the qualification of the
Merger as a tax-free reorganization and certain other federal income tax
consequences of the Merger. No ruling has been or will be requested from the
Internal Revenue Service with respect to the federal income tax consequences of
the Merger. Troutman Sanders LLP has executed the opinion in the form which has
been included as an Exhibit to the Registration Statement regarding this Proxy
Statement/Prospectus, and such opinion will be delivered to the parties upon
closing of the Merger. The opinion is based in part on the truth and accuracy of
certain representations and statements of fact and assumptions of fact, upon
which, with the consent of PAB and Eagle, Troutman Sanders LLP may rely.
The foregoing discussion of the federal income tax consequences of the
Merger is included for general information only. The discussion is based on the
currently existing provisions of the Code, existing and proposed Treasury
Regulations thereunder and current administrative rulings and court decisions.
All of the foregoing are subject to change, possibly retroactively, and any such
change could affect the validity of this discussion. The discussion relates only
to shareholders of Eagle Common Stock who hold such stock as capital assets and
who are citizens or residents of the United States. The discussion does not
address tax consequences of the Merger to holders of Eagle options nor to any
other categories of holders of Eagle Common Stock who may be entitled to special
treatment under the Code (including, without limitation, foreign persons, tax-
exempt organizations, dealers in stocks and securities and persons who acquired
their Eagle Common Stock or Eagle Options as compensation). The discussion does
not address the state, local or foreign tax aspects of the Merger.
Because certain tax consequences of the Merger may vary depending upon the
particular circumstances of each holder, holders should consult their own tax
advisors with regard to the specific tax consequences of the Merger to them.
Management and Operations After the Merger
PAB Directors. At the Effective Time, Eagle will be merged into PAB, and
EBT will become a wholly-owned subsidiary of PAB. PAB will continue to operate
in accordance with its Articles of Incorporation and Bylaws as in effect on the
date of the Merger Agreement until otherwise amended or repealed after the
Effective Time. Following the consummation of the Merger, PAB shall appoint two
current directors of Eagle to the PAB Board of Directors. Such two directors
shall be nominated by the Eagle Board of Directors subject to approval by PAB,
which such approval shall not be unreasonably withheld. At the first annual
meeting of PAB shareholders
27
<PAGE>
following the Effective Date, PAB will nominate one such Eagle nominee to serve
for a two-year term and one such Eagle nominee to serve for a three-year term
and will recommend that PAB shareholders vote in favor of their respective
elections. Each newly-elected Eagle nominee will serve provided he or she
refrains from conduct that would constitute "cause" for removal under PAB's
Articles of Incorporation or Bylaws. The directors of PAB in office immediately
prior to the Effective Time, together with such additional directors selected
from the Eagle Board and such additional persons as may thereafter be elected,
will serve as the directors of PAB from and after the Effective Time in
accordance with PAB's Articles of Incorporation and Bylaws.
EBT Directors. At the Effective Time, all EBT directors, except Andrew M.
Williams III, anticipate continuing to serve as directors of EBT. PAB will elect
such directors to serve on the Board of Directors of EBT for at least two years
after the Effective Date.
PAB Executive Officers. The executive officers of PAB in office immediately
prior to the Effective Time shall serve as the executive officers of PAB from
and after the Effective Time in accordance with the Bylaws of PAB.
EBT Executive Officers. Upon the consummation of the Merger, all of the
executive officers of EBT in office immediately prior to the Effective Date
anticipate continuing to serve as the executive officers of EBT, with the
exception of Andrew M. Williams III.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain members of Eagle's management and Board of Directors have interests
in the Merger in addition to their interests as shareholders of Eagle generally.
In each case, the Board of Directors of Eagle either was aware of these factors
or, with respect to interests that arose subsequent to the Merger Agreement, was
aware of their potential and considered them, among other matters, in approving
the Merger Agreement and the transactions contemplated therein. As of September
20, 1998, the directors and executive officers of Eagle owned 200 shares of PAB
Common Stock. Other than as described herein, no director or executive officer
of PAB or Eagle, and no associate of any such person, has any substantial
interest, direct or indirect, in the Merger, other than an interest arising from
the ownership of Eagle Common Stock or Eagle Options in which case the director
or officer receives no extra or special benefit not shared on a pro rata basis
by all other holders of Eagle Common Stock or Eagle Options.
Eagle Board of Directors. As described herein, the Merger Agreement
provides that PAB agrees to cause two members of the Eagle Board to be elected
or appointed as directors of PAB at the Effective Time.
Stock Option Plans. As described herein, the Merger Agreement provides that
all options to acquire Eagle Common Stock outstanding at the Effective Time
under the Eagle Option Plan, including those held by management, will be assumed
by PAB. Each Eagle Option will thereafter constitute an option to acquire shares
of PAB Common Stock.
Employment Agreements. On September 29, 1998, Gary L. Johnson and EBT
entered into an employment agreement pursuant to which, effective October 31,
1998 (and contingent upon the consummation of the Merger), Mr. Johnson agreed to
serve as President and Chief Executive Officer of EBT (the "Employment
Agreement"). The Employment Agreement runs for two years from the Effective
Date. The Employment Agreement provides for an annual base salary equal to Mr.
Johnson's compensation paid by EBT as of the date of the Merger Agreement and an
additional $37,500 payable 10 days after the Effective Date of the Merger,
provided that Mr. Johnson remains employed by EBT for a period of 12 months
after the Effective Date. During the term of the Employment Agreement, PAB will
provide Mr. Johnson benefits and perquisites no less favorable than those
provided to peer executives of PAB and its affiliates.
In the event that Mr. Johnson's employment is terminated during the term of
his Employment Agreement by PAB other than for "cause," Mr. Johnson voluntarily
terminates employment for "good reason" or PAB breaches his Employment
Agreement, he will be entitled to receive the compensation and benefits
remaining under his
28
<PAGE>
Employment Agreement, in the amount for the fiscal year during the term of the
Employment Agreement for which such compensation was highest. Pursuant to the
Employment Agreement, Mr. Johnson will receive such compensation and benefits
for a term equal to the greater of (i) the remaining term of the Employment
Agreement or (ii) 12 months. In the event of a change in control such as the
acquisition, merger or consolidation of PAB and if EBT terminates Mr. Johnson
without cause, he shall receive severance benefits which include a lump sum
equal to twice his annual compensation from EBT, including salary, bonuses, all
perquisites and all other forms of compensation paid to him for his benefit or
the benefit of his family for the fiscal year during the term of the employment
agreement for which such compensation was highest. Such severance payments,
based upon Mr. Johnson's total compensation for 1997, would total approximately
$169,790.
The Employment Agreement restricts Mr. Johnson from (i) disclosing EBT's
trade secrets, (ii) competing with EBT for a period of 12 months following
termination within a 25 mile radius of EBT's main office, and (iii) employing
any EBT employee for 12 months following termination. The Employment Agreement
sets forth compensation, benefits, duties and severance arrangements which the
parties believe are typical for transactions of this magnitude. W. Earl Green,
an executive officer of EBT, has also been offered an executive officer position
at EBT contingent upon consummation of the Merger. In addition, PAB has agreed
to provide directors' and officers' insurance coverage covering Mr. Green for
three years from the Effective Date.
Employee Benefits. The Merger Agreement provides that, after the Effective
Time, PAB will provide generally to officers and employees of Eagle, who at or
after the Effective Time become employees of PAB or its subsidiaries, employee
benefits under employee benefit plans on terms and conditions which, when taken
as a whole, are substantially similar to those currently provided by PAB and its
subsidiaries to their similarly situated officers and employees; provided that,
for a period of 12 months after the Effective Time, PAB shall provide generally
to officers and employees of Eagle and EBT severance benefits in accordance with
the policies of either Eagle or PAB, whichever will provide the greater benefit
to the officer or employee. For purposes of participation, vesting and benefit
accrual under all qualified benefit plans, service with Eagle or EBT prior to
the Effective Time will be treated as service with PAB or its subsidiaries
participating in all qualified benefit plans. The Merger Agreement also provides
that PAB will honor all employment, severance, consulting and other compensation
contracts previously disclosed to PAB between Eagle or EBT and any current or
former director, officer or employee thereof and all provisions for vested
benefits or other amounts earned or accrued through the Effective Time under
Eagle's benefit plans.
Insurance. PAB has generally agreed to provide directors' and officers'
insurance coverage for Eagle's directors and officers either, at PAB's election,
(i) by purchasing continuation coverage under Eagle's current policy for
directors and officers for a period not less than three years after the
Effective Time or (ii) by obtaining coverage under PAB's current directors' and
officers' policy to provide coverage for Eagle's directors and officers on a
prior acts basis for a period not less than three years prior to the Effective
Time.
Conditions to Consummation
The obligations of Eagle and PAB to consummate the Merger are subject to
the satisfaction or waiver (to the extent permitted) of the following
conditions: (i) the Merger, the Merger Agreement and all other documents and
instruments to be delivered in connection therewith shall have been approved by
the shareholders of Eagle; (ii) the required regulatory approvals described
under "Regulatory Approvals" shall have been received without any conditions or
requirements which would, in the reasonable judgment of the Board of Directors
of PAB, materially adversely affect the economic or business benefits of the
transactions contemplated by the Merger Agreement so as to render inadvisable
the consummation of the Merger; (iii) each party shall have received any
required consents of third parties without any conditions or requirements which
would, in the reasonable judgment of the Board of Directors of PAB, materially
adversely affect the economic or business benefits of the transactions
contemplated by the Merger Agreement so as to render inadvisable the
consummation of the Merger; (iv) no court or governmental or regulatory
authority shall have taken any action prohibiting the consummation of the
transactions contemplated by the Merger Agreement; (v) the Registration
Statement of which this Proxy Statement/Prospectus is a part shall have been
declared effective by the Commission and shall not be subject to a stop order or
any threatened stop order, and the shares of PAB Common Stock issuable in
connection with the Merger shall have been qualified,
29
<PAGE>
registered or otherwise approved for exchange under the securities laws of the
various states in which such qualification, registration or approval is
required; (vi) PAB and Eagle shall have received an opinion of Troutman Sanders
LLP as to certain tax matters; (vii) the other party's representations and
warranties shall remain accurate generally in all material respects, and each
party shall have performed generally in all material respects all of the
agreements, covenants, acts and undertakings to be performed by it pursuant to
the Merger Agreement, and shall have delivered certificates confirming
satisfaction of the foregoing requirements; (viii) each party shall have
received an opinion of the other party's counsel, dated the closing date, as to
certain matters; (ix) PAB and Eagle shall have received a letter from Stewart,
Fowler & Stalvey, P.C. to the effect that the Merger will qualify for pooling-
of-interests accounting treatment; (x) PAB shall have received a letter from
each affiliate of Eagle to the extent necessary to assure PAB that the share
exchange and subsequent holding period and compliance with Rule 145 of the
Securities Act contemplated in the Merger Agreement will qualify for pooling-of-
interests accounting treatment; (xi) PAB shall have received from Stewart,
Fowler & Stalvey, P.C., letters with respect to certain financial information
regarding Eagle and EBT; (xii) PAB shall have received a support agreement from
all of the executive officers and directors of Eagle except Leonard A. Deal,
Jr.; (xiii) the shares of PAB Common Stock issued pursuant to the Merger shall
have been approved for listing on the American Stock Exchange; and (xiv) Mr.
Johnson shall have been offered an employment agreement in substantially the
form attached to the Merger Agreement, and the existing employment agreement
between EBT and W. Earl Green shall remain in effect. The tax opinion will be
delivered by Troutman Sanders LLP upon closing of the Merger in the form which
has been included as an Exhibit to the Registration Statement regarding this
Proxy Statement/Prospectus.
Due to the resignation of Andrew M. Williams, III as President and Chief
Executive Officer of EBT effective October 30, 1998, PAB and Eagle executed the
Waiver and Amendment No. 1 whereby, among other things, PAB waived any defaults
under the Merger Agreement arising solely out of the resignation of Mr. Williams
and the negotiation of a new employment contract for Gary L. Johnson, his
successor as President and Chief Executive Officer of EBT effective October 31,
1998. No assurances can be provided as to when or if all of the conditions
precedent to the Merger can or will be satisfied or waived by the appropriate
party. As of the date of this Proxy Statement/Prospectus, the parties know of no
reason to believe that any of the conditions set forth above will not be
satisfied.
The conditions to consummation of the Merger may generally be waived, in
whole or in part, to the extent permissible under applicable law, by the party
for whose benefit the condition has been imposed, without the approval of the
Eagle shareholders. Nevertheless, in the event that the tax opinion of Troutman
Sanders LLP is not deliverable at the closing of the Merger or if the federal
income tax consequences in the opinion differ materially from those set forth
herein, the parties may undertake to resolicit the approvals of Eagle's
shareholders to the Merger. See "- Amendment, Waiver and Termination."
Regulatory Approvals
The Merger is subject to approval by the Federal Reserve under the BHC Act.
The BHC Act provides that the Federal Reserve will not approve a transaction (i)
which would result in a monopoly, or which would be in furtherance of any
combination or conspiracy to monopolize or to attempt to monopolize the business
of banking in any part of the United States or (ii) the effect of which in any
section of the country may be substantially to lessen competition, or to tend to
create a monopoly, or which in any other manner would be in restraint of trade,
unless the Federal Reserve finds that the anticompetitive effects of the
proposed transaction are clearly outweighed in the public interest by the
probable effect of the transaction in meeting the convenience and needs of the
community to be served. In conducting its review of any application for
approval, the Federal Reserve is required to consider the financial and
managerial resources and future prospects of the company or companies and the
banks concerned, and the convenience and needs of the community to be served.
The BHC Act also requires the Federal Reserve to notify the Attorney General of
the United States of the approval of any transaction. Any action brought under
the antitrust laws by the Attorney General (acting through the Department of
Justice) arising out of any transaction must be commenced by the Department of
Justice prior to the earliest date the transaction could be consummated, which,
with certain limited exceptions, is 30 days after the Federal Reserve approval.
The BHC Act further requires that consummation of approved acquisitions or
mergers be delayed for a period of not less than 30 days following the date of
Federal Reserve approval during which time complaining parties may obtain a
review of the Federal
30
<PAGE>
Reserve's order by filing a petition requesting that the order be set aside in
the United States Court of Appeals for the District of Columbia Circuit or in
the United States Court of Appeals for the circuit in which the complaining
party has its principal place of business. If no action based on the antitrust
laws is commenced before the termination of the 30-day period, the acquisition
or merger may not be attacked thereafter in any judicial proceeding on the
ground that it alone and of itself constituted a violation of any antitrust laws
other than Section 2 of the Sherman Antitrust Act.
The Merger is also subject to approval by the DBF. The procedure in Georgia
is the same to obtain permission to merge with a bank holding company and to
acquire control of a banking subsidiary. The DBF will respond within 60 days
after receipt of a completed application. A completed application consists of
the following five items: (i) a copy of any form or documents regarding the
Merger filed with the Federal Reserve; (ii) a letter from legal counsel to the
applicant as to whether any securities to be issued in the merger are subject to
registration under either state or federal securities laws and that the
applicant is taking the necessary action to comply with any such applicable
laws; (iii) a draft copy of any proposed proxy statements or offering circulars
or letters prepared in connection with the Merger; (iv) a copy of the most
recent independent audit, if any and if not already on file with the DBF, of the
applicant's books and records, performed by independent public accountants; and
(v) proof of publication of a notice containing a brief description of the
Merger and notice of a 30 day opportunity for comment, required by the DBF not
more than 30 days prior to filing the application. The DBF, in approving an
application, will consider factors deemed relevant by the Federal Reserve,
including, but not limited to, capitalization, competence of management, the
convenience and needs of the applicable community, resulting market share of the
surviving entity and competitive factors.
The BHC Act discussed above provides for the publication of notices and the
administrative hearings relating to the federal or state filings noted above and
permits interested parties to intervene in the proceedings. If interested
parties intervene, administrative and judicial proceedings relating to both
federal and state filings could substantially delay the regulatory approvals
required for consummation of the Merger.
On September __, 1998, PAB filed an application with the DBF to acquire
Eagle subject to requisite approval by the shareholders of Eagle and the
maintenance of EBT's capital adequacy by PAB after consummation of the Merger.
On September __, 1998, PAB filed an application with the Federal Reserve to
acquire Eagle pursuant to Merger. The management of PAB does not believe that
the consummation of the Merger will violate any antitrust or applicable state
laws, but there can be no assurance that the Federal Reserve, the Department of
Justice or other regulatory authorities will concur in this assessment.
AMENDMENT, WAIVER AND TERMINATION
To the extent permitted by law, Eagle and PAB, with the approval of their
respective Boards of Directors, may amend the Merger Agreement by written
agreement at any time without the approval of the shareholders of Eagle;
provided that after the approval of the Merger by Eagle's shareholders, no
amendment may decrease the consideration to be received by Eagle shareholders
without the requisite approval of Eagle shareholders.
Prior to or at the Effective Time, PAB, acting through its Board of
Directors, chief executive officer or other authorized officer, or Eagle, acting
through its Board of Directors, may waive any default in the performance of any
term of the Merger Agreement by the other party, may waive or extend the time
for the fulfillment by the other party of any of its obligations under the
Merger Agreement and may waive any of the conditions precedent to the
obligations of such party under the Merger Agreement, except any condition
which, if not satisfied, would result in the violation of an applicable law or
governmental regulation.
The Merger Agreement may be terminated, and the Merger abandoned, at any
time prior to the Effective Time by mutual consent of the Boards of Directors of
PAB and Eagle. In addition, the Merger Agreement may be terminated, and the
Merger abandoned, prior to the Effective Time by either PAB or Eagle if (i) the
other party breaches and does not timely cure any representation, warranty,
covenant or other agreement contained in the Merger Agreement and generally such
breach, individually or in the aggregate, has a "Material Adverse Effect" (as
defined in the Merger Agreement) on the non-breaching party, (ii) any consent or
approval of certain regulatory
31
<PAGE>
authorities is denied by final nonappealable action of such authority or any
action taken by such authority is not appealed within the time limit for appeal,
(iii) the Eagle shareholders fail to approve the Merger Agreement, (iv) the
Merger has not been consummated by December 31, 1998, but only if the failure to
consummate the Merger on or before such date is not caused by any breach of the
Merger Agreement by the party electing to terminate for this reason, (v) any of
the conditions precedent to the obligations of a party to consummate the Merger
cannot be satisfied or fulfilled by December 31, 1998, but only if the
terminating party is not then in material breach of any representation,
warranty, covenant or other agreement contained in the Merger Agreement, or (vi)
the Deemed Market Value of the PAB Common Stock is less than $18.00 per share,
upon delivery of written notice at least three days prior to the closing to the
other party. The Merger Agreement may also be terminated, and the Merger
abandoned, prior to the Effective Time by PAB in the event that the Board of
Directors of Eagle shall have failed to reaffirm, following a written request by
PAB for such reaffirmation after Eagle shall have received any inquiry or
proposal with respect to an "Acquisition Proposal" (as defined herein), its
approval of the Merger (to the exclusion of any other Acquisition Proposal), or
shall have resolved not to reaffirm the Merger. See "-Conduct of Business
Pending the Merger" and "- Expenses and Fees."
CONDUCT OF BUSINESS PENDING THE MERGER
Each party generally has agreed in the Merger Agreement, unless the prior
consent of the other party is obtained and except as otherwise contemplated by
the Merger Agreement, to operate their respective businesses only in the
ordinary course, to preserve their respective businesses and assets and to
maintain their respective rights and franchises and to take no action that would
adversely affect either the ability of either party to perform such party's
covenants and agreements under the Merger Agreement or the ability of either
party to obtain any consents or approvals pursuant to any contract, law, order
or permit that are required for the transactions contemplated by the Merger
Agreement. In addition, the Merger Agreement contains certain other restrictions
applicable to the conduct of the business of each party prior to consummation of
the Merger as described below.
Eagle. Eagle has agreed in the Merger Agreement that neither it nor EBT
will take certain actions relating to the operation of their respective
businesses pending consummation of the Merger without the prior approval of PAB,
which consent shall not be unreasonably withheld. Those actions generally
include, without limitation: (i) amending its Articles or Bylaws, (ii) becoming
responsible for any obligation for borrowed money in excess of an aggregate of
$50,000, except in the ordinary course of their respective businesses consistent
with past practices, (iii) acquiring or exchanging (other than exchanges in the
ordinary course under employee benefit plans) any shares of its capital stock of
Eagle or paying any dividend on Eagle Common Stock exceeding $0.08 per share,
and only if certain conditions are satisfied; provided, however, Eagle was
permitted to pay a cash dividend of $0.16 per share to shareholders of record on
June 30, 1998 payable on July 15, 1998, (iv) subject to certain exceptions,
issuing, selling or pledging additional shares of Eagle Common Stock, any rights
to acquire any such stock or any security convertible into such stock, (v)
adjusting or reclassifying any capital stock of Eagle or selling or otherwise
disposing of any asset having a book value in excess of $25,000, other than in
the ordinary course of business, (vi) acquiring control over any real property,
(vii) purchasing any securities or making any material investments, with certain
exceptions, in any person other than EBT or otherwise acquiring direct or
indirect control over any person, (viii) granting any increase in compensation
or benefits to its employees or officers exceeding 5% (except as previously
disclosed to PAB or as required by law), paying any bonus (except as previously
disclosed to PAB or in accordance with any existing program or plan), entering
into or amending any severance agreements with its officers or granting any
increase in compensation or other benefits to any of its directors (except as
previously disclosed to PAB), (ix) entering into or amending any employment
contract that Eagle or EBT do not have the unconditional right to terminate
without certain liability, (x) subject to certain exceptions, adopting any new
employee benefit plan or program or materially changing any existing plan or
program, (xi) making any significant changes in tax or accounting methods,
except for any change required by law, (xii) commencing any litigation other
than in accordance with past practice or settling any litigation for money
damages in excess of $25,000 or which place material restrictions on the
operations of Eagle, or (xiii) materially amending or terminating any material
contracts or waiving, releasing or assigning any material rights or claims.
In addition, Eagle has agreed that it shall not, and shall cause EBT and
EBT's officers, directors, agents, advisors and affiliates not to, solicit or
engage in negotiations concerning, or provide any confidential information
32
<PAGE>
to, or have any discussions with, any person relating to any tender or exchange
offer, proposal for a merger, acquisition of all of the stock or assets of or
other business combination involving Eagle or EBT or any proposal or offer to
acquire in any manner a substantial equity interest in, or a substantial portion
of the assets or deposits of, Eagle or EBT, other than the transactions
contemplated by the Merger Agreement (an "Acquisition Proposal"). Pursuant to
the Merger Agreement, except to the extent necessary to comply with the
fiduciary duties of the Eagle Board of Directors as determined by the Eagle
Board of Directors after consulting with and considering the advice of counsel,
neither Eagle nor any affiliate or representative thereof shall furnish any non-
public information that it is not legally obligated to furnish, negotiate with
respect to, or enter into any contract with respect to, any Acquisition
Proposal, but Eagle may communicate information about such an Acquisition
Proposal to its shareholders if and to the extent that it is required to do so
in order to comply with its legal obligations as advised by counsel. In the
Merger Agreement, Eagle agreed to cease and cause to be terminated any
activities, discussions or negotiations conducted prior to the date of the
Merger Agreement with any parties other than PAB with respect to any of the
foregoing and agreed to use its reasonable efforts to cause its representatives
not to engage in any of the foregoing. Eagle has agreed to promptly advise PAB
following the receipt of any Acquisition Proposal and the material details
thereof.
PAB. PAB has agreed in the Merger Agreement, unless the prior written
consent of Eagle shall have been obtained, that it shall (i) 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 PAB Common Stock and
the business prospects of PAB and its subsidiaries, (ii) to the extent
consistent therewith, use all reasonable efforts to preserve intact PAB's and
its subsidiaries' core businesses and goodwill with their respective employees
and the communities they serve, (iii) use its reasonable efforts to cause its
representations and warranties under the Merger Agreement to be correct at all
times, (iv) take no action which would (a) adversely affect the ability of any
party to obtain any consents required for the transaction contemplated by the
Merger Agreement without imposition of a condition or restriction, or (b)
adversely affect in any material respect the ability of either party to perform
its covenants and agreements under the Merger Agreement, and (v) not repurchase,
redeem or otherwise acquire or exchange (other than exchanges in the ordinary
course under employee benefit plans or purchases in the open market to fund its
dividend reinvestment plan), directly or indirectly, any shares or any
securities convertible into any shares, of the capital stock of PAB.
EXPENSES AND FEES
The Merger Agreement provides that each party shall be responsible for its
own costs and expenses incurred in connection with the negotiation and
consummation of the transactions contemplated by the Merger Agreement, except
that PAB shall bear and pay the filing fees payable in connection with the
Registration Statement and the Proxy Statement/Prospectus and one-half of the
printing costs incurred in connection with the printing of the Registration
Statement and the Proxy Statement/Prospectus. In addition, if prior to the
Effective Time the Merger Agreement is terminated by either party as a result of
the other party's breach of its representations, warranties or agreements set
forth in the Merger Agreement, such breaching party will be required to pay an
amount in cash equal to the non-breaching party's reasonable direct costs and
expenses relating to the Merger plus an additional sum equal to $50,000.
ACCOUNTING TREATMENT
The Merger is anticipated to be accounted for on a pooling-of-interests
accounting basis. Under this method of accounting, as of the Effective Time, the
historical basis of the assets and liabilities of Eagle would be added to those
of PAB at their recorded book values, and the shareholders' equity accounts of
PAB and Eagle would be combined on PAB's consolidated balance sheet. The
unaudited pro forma financial information contained in this Proxy
Statement/Prospectus has been prepared using the pooling-of-interests accounting
method to account for the Merger. See "SUMMARY" and "PRO FORMA COMBINED
FINANCIAL DATA."
33
<PAGE>
RESALES OF PAB COMMON STOCK
The shares of PAB Common Stock issued in connection with the Merger will be
freely transferable under the Securities Act, except for shares issued to any
shareholder who may be deemed to be an "affiliate" (generally including, without
limitation, directors, certain executive officers and beneficial owners of 10%
or more of any class of capital stock) of Eagle for purposes of Rule 145 under
the Securities Act as of the date of the Special Meeting or for purposes of
applicable interpretations regarding pooling-of-interests accounting treatment.
Such affiliates may not sell their shares of PAB Common Stock acquired in
connection with the Merger except pursuant to an effective registration
statement under the Securities Act or an applicable exemption from the
registration requirements of the Securities Act and until such time as financial
results covering at least 30 days of combined operations of PAB and Eagle after
the consummation of the Merger have been published. PAB will place restrictive
legends on certificates representing PAB Common Stock issued to all persons who
are deemed to be "affiliates" of Eagle under Rule 145. In addition, Eagle has
agreed to use its reasonable efforts to cause each person or entity who may be
deemed to be an "affiliate" to enter into a written agreement in substantially
the form attached to the Merger Agreement relating to such restrictions on sale
or other transfer. This Proxy Statement/Prospectus does not cover resales of
PAB Common Stock received by any person who may be deemed to be an affiliate of
Eagle.
DISSENTERS' RIGHTS
THE FOLLOWING DISCUSSION IS NOT A COMPLETE STATEMENT OF THE LAW PERTAINING
TO DISSENTERS' RIGHTS UNDER THE GBCC AND IS QUALIFIED IN ITS ENTIRETY BY THE
FULL TEXT OF ARTICLE 13 OF THE GBCC, WHICH IS ATTACHED TO THIS PROXY
STATEMENT/PROSPECTUS AS APPENDIX C. ALL REFERENCES IN ARTICLE 13 OF THE GBCC
AND IN THIS SUMMARY TO A "SHAREHOLDER" OR "HOLDER" ARE TO THE RECORD HOLDER OF
EAGLE COMMON STOCK AS TO WHICH DISSENTERS' RIGHTS ARE ASSERTED.
Holders of Eagle Common Stock will be entitled to assert dissenters' rights
with respect to the Merger under and in accordance with Article 13 of the GBCC.
This Proxy Statement/Prospectus constitutes notice to holders of Eagle Common
Stock of the applicable statutory provisions of Article 13 of the GBCC. Any
shareholder who wishes to assert such dissenters' rights or who wishes to
preserve the right to do so should review the following discussion and Appendix
C carefully because failure to comply timely and properly with the procedures
specified will result in the loss of dissenters' rights under Article 13 of the
GBCC.
A shareholder of Eagle is entitled to dissent, and obtain payment of the
Fair Value (as hereinafter defined) of shares of Eagle Common Stock (the
"Dissenting Shares") held by such shareholder, if the Merger is consummated.
For purposes of Article 13 of the GBCC, "Fair Value" means the value of the
Dissenting Shares immediately before the consummation of the Merger, excluding
any appreciation or depreciation in anticipation of the Merger. Each record
holder of Dissenting Shares who wishes to assert dissenters' rights (i) must
deliver to Eagle, before the Merger is voted upon at the Eagle Meeting, written
notice of his intent to demand payment for his Dissenting Shares if the Merger
is consummated (a "Notice of Intent") and (ii) must not vote his Dissenting
Shares in favor of the Merger (any such holder, a "Dissenting Eagle Holder"). A
shareholder of Eagle who does not satisfy such requirements is not entitled to
payment for his Dissenting Shares under Article 13 of the GBCC. All Notices of
Intent should be sent or delivered to Eagle at Eagle Bancorp, Inc., 335 South
Main Street, Statesboro, Georgia 30458, Attention: Corporate Secretary.
An Eagle shareholder entitled to dissent and obtain payment for shares of
Eagle Common Stock held by such shareholder under Article 13 of the GBCC may not
challenge the Merger unless the Merger fails to comply with certain procedural
requirements of the GBCC or the Eagle Articles or the Eagle Bylaws or the vote
required to obtain approval of the Merger was obtained by fraudulent and
deceptive means, regardless of whether such shareholder has exercised
dissenters' rights.
A shareholder of record of Eagle may assert dissenters' rights as to fewer
than all shares of Eagle Common Stock registered in such shareholder's name only
if such shareholder dissents with respect to all shares of Eagle Common Stock
beneficially owned by any one beneficial shareholder and notifies Eagle in
writing of the name and address of each person on whose behalf such shareholder
asserts dissenters' rights. The rights of such a partial
34
<PAGE>
dissenter are determined as if the shares of Eagle Common Stock as to which such
shareholder dissents and such shareholder's other shares of Eagle Common Stock
were registered in the names of different shareholders. A beneficial owner of
shares of Eagle Common Stock that are held of record in the name of another
person, such as a nominee, must act promptly to cause the record holder to
follow the steps summarized herein properly and in a timely manner to assert any
dissenters' rights on behalf of such beneficial owner.
If the Merger is authorized at the Eagle shareholders meeting, Eagle must
deliver a written dissenters' notice (the "Dissenters' Notice") to all
Dissenting Eagle Holders. The Dissenters' Notice must be sent no later than ten
days after consummation of the Merger and must (i) state where the payment
demand must be sent and where and when certificates for certified Dissenting
Shares must be deposited, (ii) set a date by which Eagle must receive the
payment demand, which date may not be fewer than 30 nor more than 60 days after
the date the Dissenters' Notice is delivered, and (iii) be accompanied by a copy
of Article 13 of the GBCC.
A Dissenting Eagle Holder to whom a Dissenters' Notice is sent must demand
payment and deposit his certificates representing Dissenting Shares in
accordance with the terms of the Dissenters' Notice. Upon consummation of the
Merger, the rights of a Dissenting Eagle Holder are limited to the right to
receive the Fair Value of his Dissenting Shares, assuming compliance with
Article 13 of the GBCC. A Dissenting Eagle Holder who does not demand payment
or deposit his certificates representing Dissenting Shares where required, each
by the date set forth in the Dissenters' Notice, will not be entitled to payment
for his Dissenting Shares under Article 13 of the GBCC and, thereafter, will no
longer be deemed a Dissenting Eagle Holder.
Except as described below, within ten days of the later of consummation of
the Merger or receipt of a payment demand, Eagle must by written notice (the
"Offer of Payment") offer to pay to each Dissenting Eagle Holder who complied
with the payment demand and deposit requirements specified in the Dissenters'
Notice the amount Eagle estimates to be the Fair Value of his Dissenting Shares,
plus accrued interest from the date of consummation of the Merger. The Offer of
Payment must be accompanied by certain recent Eagle financial statements and
certain other prescribed information. If such Dissenting Eagle Holder accepts
Eagle's Offer of Payment by written notice to Eagle within 30 days after Eagle's
Offer of Payment or is deemed to have accepted the Offer of a Payment by failure
to respond within such 30-day period, payment by Eagle for such Dissenting Eagle
Holder's Dissenting Shares must be made within 60 days after the later of the
making of the Offer of Payment or the consummation of the Merger.
If the Merger is not consummated within 60 days after the date set in the
Dissenters' Notice for demanding payment and depositing certificates
representing Dissenting Shares, Eagle must return the deposited certificates.
If, after such return, the Merger is consummated, Eagle must send a new
Dissenters' Notice and repeat the payment demand procedure described above.
A Dissenting Eagle Holder may notify Eagle in writing of his own estimate
of the Fair Value of his Dissenting Shares and amount of interest due, and
demand payment of such estimate (a "Dissenting Eagle Holder Demand"), if (i)
such Dissenting Eagle Holder believes that the amount offered by Eagle in the
Offer of Payment is less than the Fair Value of such shareholder's Dissenting
Shares or that the interest is incorrectly calculated or (ii) Eagle, having
failed to consummate the Merger, does not return the deposited certificates
within 60 days after the date set in the Dissenter's Notice for demanding
payment. A Dissenting Eagle Holder waives such shareholder's right to demand
payment pursuant to a Dissenting Eagle Holder Demand and is deemed to have
accepted Eagle's Offer of Payment for such shareholder's Dissenting Shares
unless such shareholder notifies Eagle of the demand in writing within 30 days
after Eagle's Offer of Payment for such shareholder's Dissenting Shares. If
Eagle does not make an Offer of Payment to any Dissenting Eagle Holder within
ten days of the later of the consummation of the Merger or receipt of a payment
demand, then (i) such Dissenting Eagle Holder may demand the financial
statements and other information required to accompany the Offer of Payment, and
Eagle must provide such information within ten days after receipt of written
demand for such information, and (ii) such Dissenting Eagle Holder may, at any
time within three years after the Merger is consummated, notify Eagle of his own
estimate of the Fair Value of his Dissenting Shares and the amount of interest
due and demand payment of such estimate.
35
<PAGE>
If a Dissenting Eagle Holder Demand remains unsettled, Eagle must commence
a nonjury equitable valuation proceeding (the "Appraisal Proceeding") within 60
days after receiving such Dissenting Eagle Holder Demand and must petition the
court to determine the Fair Value of the Dissenting Shares (and accrued interest
thereon) held by all Dissenting Eagle Shareholders whose demands remain
unsettled. The court may appoint one or more persons as appraisers to receive
evidence and recommend a decision on the Fair Value of the Dissenting Shares.
Each Dissenting Eagle Holder made a party to the Appraisal Proceeding will be
entitled to judgment for the amount that the court finds to be the Fair Value of
such holder's Dissenting Shares plus interest to the date of judgment. Under
existing Georgia case law, claims arising by virtue of a person's status as a
shareholder, including claims relating to breaches by directors of a Georgia
corporation of their fiduciary duties to shareholders, are generally not
maintainable following consummation of a transaction to which dissenters' rights
apply except as an element of the determination of the fair value of the
Dissenting Shares in an Appraisal Proceeding.
The court in the Appraisal Proceeding will determine all costs of the
Appraisal Proceeding, including the reasonable compensation and expenses of
appraisers appointed by the court, but not including fees and expenses of
attorneys and experts for the respective parties. The court will assess such
costs against Eagle, except that the court may assess the costs against all or
some of the Dissenting Eagle Holders, in amounts the court finds equitable, to
the extent the court finds they acted arbitrarily, vexatiously or not in good
faith in making a Dissenting Eagle Holder Demand. The court also may assess the
fees and expenses of attorneys and experts for the respective parties against
Eagle and in favor of all Dissenting Eagle Holders if the court finds that Eagle
did not substantially comply with the requirements of certain provisions of
Article 13 of the GBCC, or against either Eagle or a Dissenting Eagle Holder, in
favor of the other party, if the court finds that the party against whom such
fees and expenses are assessed acted arbitrarily, vexatiously, or not in good
faith with respect to the rights provided by Article 13 of the GBCC.
If the court finds that the services of attorneys for any Dissenting Eagle
Holder were of substantial benefit to other Dissenting Eagle Holders similarly
situated, and that the fees for those services should not be assessed against
Eagle, the court may award such attorneys reasonable fees to be paid out of the
amounts awarded the Dissenting Eagle Holders who were benefited. No action by
any Dissenting Eagle Holder to enforce dissenters' rights may be brought more
than three years after consummation of the Merger, regardless of whether notice
of the Merger and of the right to dissent was given by Eagle in accordance with
the relevant provisions of Article 13 of the GBCC. Any Dissenting Eagle Holder
who has duly asserted dissenters' rights in compliance with Article 13 of the
GBCC will not, after the consummation of the Merger, be entitled to vote the
Dissenting Shares subject to such demand for any purpose or be entitled to the
payment of dividends or other distributions on those Dissenting Shares (except
dividends or other distributions payable to holders of record of Dissenting
Shares as of a record date prior to the consummation of the Merger).
If any shareholder who properly asserts dissenters' rights under Article 13
of the GBCC fails to perfect such rights, or effectively withdraws such
assertion or loses such rights, as provided in Article 13 of the GBCC, the
Dissenting Shares of such shareholder will be converted into the right to
receive the consideration receivable with respect to such Dissenting Shares in
accordance with the Merger Agreement.
FAILURE TO FOLLOW THE STEPS REQUIRED BY ARTICLE 13 OF THE GBCC FOR
ASSERTING DISSENTERS' RIGHTS MAY RESULT IN THE LOSS OF SUCH RIGHTS. IN VIEW OF
THE COMPLEXITY OF THE PROVISIONS OF ARTICLE 13 OF THE GBCC, SHAREHOLDERS OF
EAGLE WHO ARE CONSIDERING DISSENTING TO THE MERGER SHOULD CONSULT THEIR OWN
LEGAL ADVISORS.
36
<PAGE>
PAB BANKSHARES, INC. AND SUBSIDIARIES AND
EAGLE BANCORP, INC. AND SUBSIDIARY
PRO FORMA FINANCIAL INFORMATION
PRO FORMA CONDENSED COMBINED BALANCE SHEET
JUNE 30, 1998
The following pro forma condensed combined balance sheet combines the
historical consolidated balance sheets of PAB and Eagle giving effect to the
Merger as if the Merger had been effective June 30, 1998. The Merger will be
accounted for using the pooling-of-interests method of accounting. The Merger
will involve the acquisition of 100% of the issued and outstanding shares of
Eagle Common Stock in exchange for shares of PAB Common Stock (see note (a)).
This pro forma condensed combined balance sheet assumes that as part of the
Merger, 873,875 shares of PAB Common Stock will be issued in exchange for all of
the shares of Eagle Common Stock outstanding at June 30, 1998. This pro forma
condensed combined balance sheet should be read in conjunction with the separate
financial statements and related notes of PAB and Eagle appearing elsewhere in
or incorporated by reference in this Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
PRO FORMA
PRO FORMA PAB AND
PAB EAGLE ADJUSTMENTS EAGLE COMBINED
------------------ ------- ------------ --------------
(Amounts in thousands)
<S> <C> <C> <C>
Assets:
Cash and due from banks $ 17,700 $ 2,737 $ -0- $ 20,437
Federal funds sold 22,786 -0- -0- 22,786
Interest-earning deposits in other banks 2,862 -0- -0- 2,862
Investment securities 69,445 12,035 -0- 81,480
Loans, net 289,530 50,106 -0- 339,636
Premises and equipment, net 9,856 2,398 -0- 12,254
Goodwill and intangibles 2,892 -0- -0- 2,892
Foreclosed assets 520 9 -0- 529
Other assets 9,553 1,261 -0- 10,814
-------- ------- ----- --------
Total assets $425,144 $68,546 $ -0- $493,690
======== ======= ===== ========
Liabilities:
Deposits:
Non-interest bearing $ 49,030 $ 6,176 $ -0- $ 55,206
Time deposits greater than $100,000 45,977 11,600 -0- 57,577
Other 238,653 38,439 -0- 277,092
-------- ------- ----- --------
Total deposits 333,660 56,215 -0- 389,875
Federal funds purchased 3,146 650 -0- 3,796
Federal Home Loan Bank advances 40,081 3,796 -0- 43,877
Long-term debt 2,048 -0- -0- 2,048
Other borrowings 1,773 -0- -0- 1,773
Other liabilities 2,848 910 -0- 3,758
-------- ------- ----- --------
Total liabilities 383,556 61,571 -0- 445,127
-------- ------- ----- --------
Shareholders' equity:
Common stock 1,217 874 (874) 1,217
Surplus 19,736 4,887 874 25,497
Retained earnings 20,535 1,210 -0- 21,745
Treasury stock -0- -0- -0- -0-
Accumulated other comprehensive income 100 4 -0- 104
-------- ------- ----- --------
Total shareholders' equity 41,588 6,975 -0- 48,563
-------- ------- ----- --------
Total liabilities and shareholders' equity $425,144 $68,546 -0- $493,690
======= ======== ===== ========
</TABLE>
37
<PAGE>
PAB BANKSHARES, INC. AND SUBSIDIARIES AND
EAGLE BANCORP, INC. AND SUBSIDIARY
PRO FORMA FINANCIAL INFORMATION
PRO FORMA CONDENSED COMBINED BALANCE SHEET
DECEMBER 31, 1997
The following pro forma condensed combined balance sheet combines the
historical consolidated balance sheets of PAB and Eagle giving effect to the
Merger as if the Merger had been effective December 31, 1997. The Merger will
be accounted for using the pooling-of-interests method of accounting. The
Merger will involve the acquisition of 100% of the issued and outstanding shares
of Eagle Common Stock in exchange for shares of PAB Common Stock (see note (a)).
This pro forma condensed combined balance sheet assumes that as part of the
Merger, 873,875 shares of PAB Common Stock will be issued in exchange for all of
the shares of Eagle Common Stock outstanding at December 31, 1997. This pro
forma condensed combined balance sheet should be read in conjunction with the
separate financial statements and related notes of PAB and Eagle appearing
elsewhere in or incorporated by reference in this Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
PRO FORMA
PRO FORMA PAB AND
PAB EAGLE ADJUSTMENTS EAGLE COMBINED
---- ----- ----------- --------------
(Amounts in thousands)
<S> <C> <C> <C> <C>
Assets:
Cash and due from banks $ 22,240 $ 1,678 $ -0- $ 23,918
Federal funds sold 14,568 1,280 -0- 15,848
Interest-earning deposits in other banks 6,645 -0- -0- 6,645
Investment securities 72,300 11,139 -0- 83,439
Loans, net 268,493 48,768 -0- 317,261
Premises and equipment, net 9,393 2,437 -0- 11,830
Goodwill and intangibles 3,070 -0- -0- 3,070
Foreclosed assets 419 9 -0- 428
Other assets 8,459 1,024 -0- 9,483
-------- ------- ----- --------
Total assets $405,587 $66,335 $ -0- $471,922
======== ======= ===== ========
Liabilities:
Deposits:
Non-interest bearing $ 60,218 $ 6,176 $ -0- $ 66,394
Time deposits greater than $100,000 52,167 11,818 -0- 63,985
Other 218,591 37,673 -0- 256,264
-------- ------- ----- --------
Total deposits 330,976 55,667 -0- 386,643
Federal Home Loan Bank advances 29,168 2,644 -0- 31,812
Long-term debt 2,184 -0- -0- 2,184
Other borrowings 1,005 -0- -0- 1,005
Other liabilities 2,942 1,272 -0- 4,214
-------- ------- ----- --------
Total liabilities 366,275 59,583 -0- 425,858
-------- ------- ----- --------
Shareholders' equity:
Common stock 1,264 874 (874) 1,264
Surplus 20,543 4,887 874 26,304
Retained earnings 18,383 981 -0- 19,364
Treasury stock (983) -0- -0- (983)
Accumulated other comprehensive income 105 10 -0- 115
-------- ------- ----- --------
Total shareholders' equity 39,312 6,752 -0- 46,064
-------- ------- ----- --------
Total liabilities and shareholders' equity $405,587 $66,335 $ -0- $471,922
======== ======= ===== ========
</TABLE>
38
<PAGE>
PAB BANKSHARES, INC. AND SUBSIDIARIES AND
EAGLE BANCORP, INC. AND SUBSIDIARY
PRO FORMA FINANCIAL INFORMATION
PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME
The following unaudited pro forma condensed combined consolidated
statements of income of PAB and Eagle have been prepared for the six months
ended June 30, 1998 and give effect to the proposed acquisition of all of the
issued and outstanding shares of Eagle Common Stock in exchange for shares of
PAB Common Stock, using the pooling-of-interests method of accounting giving
effect to the Merger as if the Merger had been effective as of the beginning of
the periods presented. The pro forma information assumes that 873,875 shares of
PAB Common Stock will be issued in exchange for all of the shares of Eagle
Common Stock outstanding at the Effective Date. The unaudited pro forma
condensed combined consolidated statements of income should be read in
conjunction with the separate historical financial statements and related notes
of PAB and Eagle appearing elsewhere in or incorporated by reference in this
Proxy Statement/Prospectus.
The pro forma combined statements of income are not necessarily indicative
of the results that actually would have occurred if the Merger had been
consummated at the dates indicated or which may be obtained in the future.
FOR THE SIX MONTHS ENDED JUNE 30, 1998
<TABLE>
<CAPTION>
PRO FORMA
PAB AND
PRO FORMA EAGLE
PAB EAGLE ADJUSTMENTS COMBINED
--- ----- ----------- ----------
(Amounts in thousands, except per share amounts)
<S> <C> <C> <C> <C>
Interest income $16,804 $ 2,708 $-0- $19,512
Interest expense (8,066) (1,337) -0- (9,403)
------- ------- ---- -------
Net interest income 8,738 1,371 -0- 10,109
Provision for loan losses (434) (32) -0- (466)
------- ---- -------
Net interest income after provision
for loan losses 8,304 1,339 -0- 9,643
Noninterest income 2,385 442 -0- 2,827
Noninterest expense (6,095) (1,241) -0- (7,336)
------- ------- ---- -------
Income before income taxes 4,594 540 -0- 5,134
Income taxes (1,558) (171) -0- (1,729)
---- -------
Net income $ 3,036 $ 369 $-0- $ 3,405
======= ======= ==== =======
Earnings per share (note d):
Basic $.41 $.42 $.41
======= ======= =======
Diluted .41 .40 .41
======= ======= =======
Weighted average shares and share equivalents
outstanding (note c and d):
Basic 7,371 874 8,245
======= ======= =======
Diluted 7,474 925 8,399
======= ======= =======
</TABLE>
39
<PAGE>
PAB BANKSHARES, INC. AND SUBSIDIARIES AND
EAGLE BANCORP, INC. AND SUBSIDIARY
PRO FORMA FINANCIAL INFORMATION
PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME
The following unaudited pro forma condensed combined consolidated
statements of income of PAB and Eagle have been prepared for each of the two
years in the period ended December 31, 1997, and give effect to the proposed
acquisition of all issued and outstanding shares of Eagle Common Stock in
exchange for shares of PAB Common Stock to be issued to Eagle shareholders,
using the pooling-of-interests method of accounting giving effect to the Merger
as if the Merger had been effective as of the beginning of the periods
presented. The pro forma information assumes that 873,875 shares of PAB Common
Stock will be issued in exchange for all the shares of Eagle Common Stock
outstanding at the Effective Date. The unaudited pro forma condensed combined
consolidated statements of income should be read in conjunction with the
separate historical financial statements and related notes of PAB and Eagle
appearing elsewhere in or incorporated by reference in this Proxy
Statement/Prospectus.
The pro forma combined statements of income are not necessarily indicative
of the results that actually would have occurred if the Merger had been
consummated at the dates indicated or which may be obtained in the future.
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
PRO FORMA
PAB AND
PRO FORMA EAGLE
PAB EAGLE ADJUSTMENTS COMBINED
---- ----- ----------- --------
(Amounts in thousands, except per share amounts)
<S> <C> <C> <C> <C>
Interest income $ 30,850 $ 5,238 $-0- $ 36,088
----
Interest expense (14,438) (2,538) -0- (16,976)
-------- ------- ---- --------
Net interest income 16,412 2,700 -0- 19,112
Provision for loan losses (677) (116) -0- (793)
-------- ------- ---- --------
Net interest income after provision
for loan losses 15,735 2,584 -0- 18,319
Noninterest income 3,545 747 -0- 4,292
Noninterest expense (11,096) (2,350) -0- (13,446)
-------- ------- ---- --------
Income before income taxes 8,184 981 -0- 9,165
Income taxes (2,855) (307) -0- (3,162)
-------- ------- ---- --------
Net income $ 5,329 $ 674 $-0- $ 6,003
======== ======= ==== ========
Earnings per share (note d):
Basic $.72 $.78 $.73
======== ======= ========
Diluted .72 .76 .72
======== ======= ========
Weighted average shares and share equivalents
outstanding (note c and d):
Basic 7,357 865 8,231
======== ======= ========
Diluted 7,422 882 8,347
======== ======= ========
</TABLE>
40
<PAGE>
PAB BANKSHARES, INC. AND SUBSIDIARIES AND
EAGLE BANCORP, INC. AND SUBSIDIARY
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
PRO FORMA
PRO FORMA PAB AND EAGLE
PAB EAGLE ADJUSTMENTS COMBINED
--- ----- ----------- --------------
(Amounts in thousands, except per share amounts)
<S> <C> <C> <C> <C>
Interest income $ 27,977 $ 4,657 $-0- $ 32,634
Interest expense (13,744) (2,269) -0- (16,013)
-------- ------- ---- --------
Net interest income 14,233 2,388 -0- 16,621
Provision for loan losses (525) (108) -0- (633)
-------- ------- ---- --------
Net interest income after provision
for loan losses 13,708 2,280 -0- 15,988
Noninterest income 3,168 642 -0- 3,810
Noninterest expense (10,359) (2,171) -0- (12,530)
-------- ------- ---- --------
Income before income taxes and 6,517 751 -0- 7,268
Income taxes (2,200) (250) -0- (2,450)
-------- ------- ---- --------
Net income $ 4,317 $ 501 $-0- $ 4,818
======== ======= ==== ========
Earnings per share (note d)
Basic $.60 $.58 $.59
======== ======= ========
Diluted .59 .57 .59
======== ======= ========
Weighted average shares and share equivalents
outstanding (note c and d)
Basic 7,235 863 8,109
======== ======= ========
Diluted 7,269 885 8,194
======== ======= ========
</TABLE>
41
<PAGE>
PAB BANKSHARES, INC. AND SUBSIDIARIES AND
EAGLE BANCORP, INC. AND SUBSIDIARY
NOTES TO PRO FORMA FINANCIAL STATEMENTS
The following notes describe the pro forma adjustments necessary to reflect
the proposed acquisition of Eagle as described in note (a).
(a) On June 30, 1998, PAB entered into the Merger Agreement whereby PAB
will acquire all outstanding shares of Eagle Common Stock in exchange
for 873,875 shares of PAB Common Stock, subject to certain adjustments.
(b) Reflects the assumed issuance of 873,875 shares of PAB Common Stock in
exchange for all of the outstanding shares of Eagle Common Stock.
(c) Pro forma weighted average number of common shares and share
equivalents includes the historical amounts for PAB increased by the
additional shares that would have been outstanding had the Merger taken
place as of the beginning of the respective periods.
(d) All PAB and pro forma per share information has been adjusted to
reflect a two-for-one stock split in 1993 and 1996 and a two-for-one
stock split paid March 10, 1998.
(e) The historical data of PAB has been restated to reflect the merger of
Investors Financial Corporation into PAB effective June 19, 1998, which
has been accounted for as a pooling of interests.
42
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF EAGLE
The following is a discussion of the financial condition of Eagle and its
subsidiary at June 30, 1998 and the results of operations for the years ended
December 31, 1997 and 1996 and the six months ended June 30, 1998 and 1997. The
following discussion and analysis should be read in conjunction with Eagle's
Consolidated Financial Statements and Related Notes thereto appearing elsewhere
in this Proxy Statement/Prospectus.
OVERVIEW
Eagle is a one-bank holding company providing a full range of banking
services to individual and corporate customers in Bulloch County and surrounding
areas through its wholly-owned bank subsidiary, EBT. EBT operates under a state
charter granted by the DBF and serves its customers from its two banking
facilities in Statesboro, Georgia.
FINANCIAL CONDITION
During the first six months of 1998, total assets increased $2,210,466, or
approximately 3.33% (6.66% per annum), as compared to amounts at December 31,
1997. This increase was a result of EBT's deposit base increasing by
approximately $547,800 and borrowings increase of $1,802,659. EBT's asset mix
changed primarily by an increase in loans of $1,360,537, or approximately 2.74%,
when compared to the December 31, 1997 levels. This increase in loans was
primarily funded by the increase in deposits and borrowings. The following is a
summary of Eagle's deposits by type at June 30, 1998 and December 31, 1997:
DEPOSITS
<TABLE>
<CAPTION>
JUNE 30, 1998 December 31, 1997
------------- -----------------
<S> <C> <C>
Noninterest-bearing demand deposits $ 6,176,452 $ 6,175,919
NOW accounts 7,620,719 6,867,141
Money market accounts 2,252,479 2,137,149
Savings accounts 2,975,894 2,824,983
Individual retirement accounts 3,625,712 3,476,101
Certificates of deposits of $100,000 or more 10,552,013 10,897,602
Certificates of deposits of less than $100,000 23,011,895 23,288,469
----------- -----------
Total deposits $56,215,164 $55,667,364
=========== ===========
</TABLE>
Eagle's rate of growth of approximately 3.3% (6.6% per annum) for the first
half of 1998 approximates half of the 6.1% (12.2% per annum) growth that Eagle
achieved for the first half of 1997. Factors expected to contribute to a
continuation of Eagle's growth rate include:
(i) the current loan and deposit rate environment in the local area and
Eagle's community involvement;
(ii) a relatively stable economy in the local area; and
(iii) management's emphasis on profitability.
Eagle believes it can achieve growth for 1998 in the 8% range.
43
<PAGE>
LIQUIDITY AND INTEREST RATE SENSITIVITY
Liquidity management involves the matching of cash flow requirements of
customers, those of depositors withdrawing or depositing funds and borrowers
needing loans and the ability of Eagle to meet those requirements. Management
monitors and maintains appropriate levels of assets and liabilities so
maturities of assets are such that adequate funds are provided to meet estimated
customer withdrawals and loan fundings.
Eagle's liquidity position depends primarily upon the liquidity of its
assets relative to its needs to respond to short-term demand for funds caused by
withdrawals from deposit accounts and loan funding commitments. Primary sources
of liquidity are scheduled payments on Eagle's loans and interest on and
maturities of its investments. Eagle may also utilize its cash and due from
banks, federal funds sold and investment securities available for sale to meet
liquidity requirements. At June 30, 1998, Eagle's cash and due from banks
equaled $2,736,848, and its investment securities available for sale equaled
$7,990,926. All of these assets could be converted to cash on short notice.
Subject to certain conditions, Eagle also has the ability, on a short-term
basis, to purchase federal funds from other financial institutions. Presently,
Eagle has made arrangements with certain banks for short-term unsecured
advances up to $2,000,000 and with the Federal Home Loan Bank, Atlanta, Georgia
for a secured credit line of $7,000,000. During the first six months of 1998,
Eagle had outstanding borrowings of $3,796,166 of a short and long-term basis
from the Federal Home Loan Bank to match loan funding rates and maturities with
loan borrowing rates and maturities. Securities sold under repurchase
agreements are treated as financing activities and are carried at the amounts at
which the securities will be subsequently reacquired as specified in the
agreements.
Eagle's liquidity position, calculated as cash and due from banks, federal
funds sold and investment securities not pledged divided by deposits, equaled
28.44% as of June 30, 1998 compared to 22.15% as of June 30, 1997. Eagle's
optimum liquidity ratio is 30% with a minimum acceptable ratio of 20%.
Management monitors liquidity daily and is striving to maintain its liquidity
ratio between 20% and 30%.
Eagle continues to monitor the percentage of certificates of deposit of
$100,000 and over (jumbo deposits) to total deposits. A substantial portion of
these jumbo deposits are with individuals who reside in Eagle's primary service
area who are either shareholders, organizers or directors of Eagle and whom it
has had consistent deposit relations since inception.
The relative interest rate sensitivity of Eagle's assets and liabilities
indicates the extent to which Eagle's net interest income may be affected by
interest rate movements. Eagle's ability to reprice assets and liabilities in
the same dollar amounts and at the same time minimizes interest rate risks. One
method of measuring the impact of interest rate changes on net income is to
measure, in a number of time frames, the interest sensitivity gap, by
subtracting interest-sensitive liabilities from interest-sensitive assets, as
reflected in the following table. Such interest sensitivity gap represents the
risk, or opportunity, in repricing. If more assets than liabilities are repriced
at a given time in a rising rate environment, net interest income improves; in a
declining rate environment, net interest income deteriorates. Conversely, if
more liabilities than assets are repriced while interest rates are rising, net
interest income deteriorates; if interest rates are falling, net interest income
improves. Eagle's strategy in minimizing interest rate risk is to minimize the
impact of short term interest rate movements on its net interest income while
managing its middle and long-term interest sensitivity gap in light of overall
economic trends in interest rates. The following table illustrates the relative
sensitivity of Eagle to changing interest rates as of June 30, 1998:
44
<PAGE>
<TABLE>
<CAPTION>
INTEREST RATE SENSITIVITY TABLE
0-90 days 91-365 days One to five years Over five years
---------- ------------ ----------------- ---------------
Current Current Cumulative Current Cumulative Current Cumulative
---------- ----------- ----------- --------- ------------ --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Interest-sensitive assets:
Loans $ 10,114 $16,779 $ 26,893 $21,266 $48,159 $2,684 $50,843
Investment securities 100 2,484 2,584 7,701 10,285 1,749 12,034
-------- ------- -------- ------- ------- -------
Total interest-sensitive assets 10,214 19,263 29,477 28,967 58,444 4,433 62,877
-------- ------- -------- ------- ------- ------ -------
Interest-sensitive liabilities:
NOW, money market and
savings accounts 12,849 - 12,849 - 12,849 - 12,849
Individual retirement accounts and
certificates of deposits 6,819 22,133 28,952 8,196 37,148 - 37,148
Borrowings 701 2,208 2,909 1,033 3,942 504 4,446
-------- ------- -------- ------- ------- ------ -------
Total interest-sensitive liabilities $ 20,369 $24,341 $ 44,710 $ 9,229 $53,939 $ 504 $54,443
-------- ------- -------- ------- ------- ------ -------
Interest-sensitivity gap $(10,155) $(5,078) $(15,233) $19,738 $ 4,505 $3,929 $ 8,434
======== ======= ======== ======= ======= ====== =======
Ratio to total interest
Sensitive assets -16.15% -8.08% -24.23% 31.39% 7.16% 6.25% 13.41%
======== ======= ======== ======= ======= ====== =======
</TABLE>
Since all interest rates and yields do not adjust at the same velocity, the
interest rate sensitivity gap is only an indicator of the potential effects of
interest rate changes on net interest income.
CAPITAL RESOURCES
Eagle continues to maintain a satisfactory level of capital as measured by
its total shareholders' equity to total assets ratio of 10.18% at June 30, 1998
and at December 31, 1997. Management anticipates the existing capital levels
will be adequate to sustain Eagle's anticipated growth for the foreseeable
future.
Eagle is not aware of any recommendations by regulatory authorities which,
if implemented would have a significant impact on its liquidity, capital
resources or operations except for the recent FDIC reduction in insurance
premiums on deposits which has had a favorable impact on Eagle's results of
operations.
The DBF requires that state chartered banks in Georgia maintain a ratio of
primary capital, as defined, to total assets of not less than 6.0%. Eagle
intends to maintain a satisfactory level of capital necessary to satisfy
regulatory requirements and to accommodate expected growth patterns.
45
<PAGE>
The following table compares Eagle's and EBT's capital ratios to the
minimum capital ratios required to be maintained under applicable regulatory
guidelines at June 30, 1998.
EAGLE BANCORP, INC. AND SUBSIDIARY
<TABLE>
<CAPTION>
REQUIRED
ACTUAL MINIMUM EXCESS
------------------------------- ------------------------------- -------------------------------
% AMOUNT % AMOUNT % AMOUNT
--------------- -------------- --------------- -------------- --------------- --------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
EAGLE BANCORP, INC.:
Risk Based Capital 13.76% $7,672 8.00% $4,461 5.76% $3,211
Tier 1 Capital 11.19 7,672 4.00 2,742 7.19 4,930
Leverage Capital Ratio 10.18 6,975 4.00 2,741 6.18 4,234
<CAPTION>
REQUIRED
ACTUAL MINIMUM EXCESS
------------------------------- ------------------------------- -------------------------------
% AMOUNT % AMOUNT % AMOUNT
-------------- -------------- -------------- -------------- -------------- --------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
EAGLE BANK AND TRUST:
Risk Based Capital 13.89% $7,747 8.00% $4,461 5.89% $3,286
Tier 1 Capital 11.31 7,747 4.00 $2,740 7.31% 5,007
Leverage Capital Ratio 10.29 7,050 4.00 $2,740 6.29% 4,310
</TABLE>
INFLATION
Inflation impacts the growth in total assets in the banking industry and
causes a need to increase equity capital at higher than normal rates in order to
meet regulatory capital requirements. Eagle copes with the effects of inflation
through effectively managing its interest rate sensitivity gap position and by
periodically reviewing and adjusting the pricing of services to consider current
costs.
Results of Operations Year Ended December 31, 1997, Compared to
Year Ended December 31, 1996
Eagle's net income and basic earnings per share for the year ended December
31, 1997 were $673,941, or $0.78 per share, compared to net income and basic
earnings per share for the year ended December 31, 1996 of $501,856, or $0.58
per share. Net income and basic earnings per share for the year ended December
31, 1995 were $500,180, or $.58 per share.
Increases in net interest income of approximately $312,000 in 1997,
$140,000 in 1996 and $171,000 in 1995, and increases in noninterest income of
approximately $104,000 in 1997, $152,000 in 1996 and $95,000 in 1995 are the
primary reasons Eagle increased its profitability during 1997, 1996 and 1995.
Eagle's total assets grew from approximately $60.7 million at December 31, 1996
to $66.3 million at December 31, 1997, or approximately 9.23%. Eagle's total
assets grew from approximately $52.8 million at December 31, 1995 to $60.7
million at December 31, 1996, or approximately 15%. The decrease in the growth
rate from approximately 15% in 1996 to approximately 9.23% in 1997 was the
result of the increased competition within the local market area and EBT's
emphasis on maintaining its net interest margin. Noninterest expense increased
approximately $179,000 in 1997 and $218,000 in 1996, primarily relating to
increased salary and occupancy expense.
46
<PAGE>
The following table summarizes the results of operations and certain financial
ratios of Eagle for each of the years in the three-year period ended December
31, 1997.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------
1997 1996 1995
---- ---- ----
(Amounts in thousands, except share and per share
information and financial ratios)
<S> <C> <C> <C>
Interest income $ 5,238 $ 4,657 $ 4,236
Interest expense (2,538) (2,269) (1,988)
------- ------- -------
Net interest income 2,700 2,388 2,248
Provision for possible loan losses (116) (108) (75)
Noninterest income 747 643 490
Noninterest expense (2,350) (2,171) (1,953)
Income tax expense (307) (250) (210)
------- ------- -------
Net Income $ 674 $ 502 $ 500
======= ======= =======
Basic Earnings Per Share $ 0.78 $ 0.58 0.58
======= ======= =======
Diluted Earnings Per Share $ 0.76 $ 0.57 0.57
======= ======= =======
Return on average assets 1.06% .90% 1.00%
======= ======= =======
Return on average shareholders' equity 10.31% 7.92% 8.17%
======= ======= =======
Dividend payout ratio 44.21% 85.97% 43.12%
======= ======= =======
Average loans to average deposits 86.07% 82.96% 82.32%
======= ======= =======
Loan to deposit ratio (period-end) 88.87% 81.27% 83.49%
======= ======= =======
Average shareholders' equity to average assets 10.26% 11.31% 12.25%
======= ======= =======
Shareholders' equity to assets (period-end) 10.18% 10.31% 11.74%
======= ======= =======
</TABLE>
Note: Per share data has been restated for all periods presented to reflect a
three-for-two stock split effected in May 1995.
NET INTEREST INCOME
Eagle's net interest income, the difference between interest income on
interest-earning assets and interest expense on interest-bearing liabilities, is
Eagle's principal source of income. Interest-earning assets for Eagle include
loans, federal funds sold, investment securities, and interest-earning deposits
in financial institutions. Eagle's interest-bearing liabilities include its
interest-bearing deposit liabilities, federal funds purchased and advances from
the Federal Home Loan Bank.
In 1997, net interest income was $2,700,000, representing an increase of
$312,000, or 13.05%, when compared to 1996 of $2,388,000. Net interest income
for 1996 was approximately 6.23% higher than 1995 net interest income of
$2,248,000. The average yield earned on interest earning assets was 9.00% in
1997, 9.19% in 1996 and 9.31% in 1995. The average rate paid on interest-bearing
liabilities was 5.00% in 1997, 5.13% in 1996 and 5.07% in 1995. Eagle's net
interest margin (net interest income divided by average interest-earning assets)
equaled 4.64% in 1997, 4.72% in 1996 and 4.94% in 1995. The decline in net
interest margin is attributable to the intensely competitive market for quality
loans in Eagle's market area. Eagle's average loan to deposit ratio in 1997 was
86.1% and in 1996 was 83.0% as compared to 82.3% for 1995. Eagle's loan to
deposit ratio at December 31, 1997 was 88.8%, at December 31, 1996 was 81.27%
and was 83.49% at December 31, 1995.
47
<PAGE>
The following table presents average balance sheets, yields, and interest
earned on interest-earning assets and rates and interest paid on interest-
bearing liabilities of Eagle for the years ended December 31, 1997 and 1996.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
1997 1996
---------------------------- ---------------------------
AVERAGE YIELDS/ AVERAGE YIELDS/
BALANCES INTEREST RATES BALANCES INTEREST RATES
--------- --------- ------ -------- --------- ------
(Amounts in thousands, except percentages and ratios)
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Interest-earning assets:
Interest-earning deposits in financial
institutions $ 0 0 0% $ 32 1 3.13%
Federal funds sold 1,190 65 5.38 1,084 59 5.44
Investment securities 11,160 660 5.91 10,222 580 5.67
Loans, net (1)(2) 45,874 4,513 9,84 39,403 4,024 10.21
------- ------ ---- ------- ------ -----
Total interest-earning assets $58,224 5,238 9.00% 50,741 4,664 9.19%
======= ====== ==== ======= ====== =====
NONINTEREST-EARNING ASSETS:
Cash and due from banks 2,008 1,990
Premises and equipment, net 2,482 2,509
Other assets 980 805
------- -------
Total noninterest-earning assets 5,470 5,304
======= =======
TOTAL ASSETS $63,694 $56,045
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
INTEREST-BEARING LIABILITIES:
Interest-bearing demand deposits $ 6,967 179 2.57% $ 6,706 175 2.61%
Money market & savings accounts 5,509 168 3.05 4,741 145 3.06
Certificates of deposit 32,909 1,878 5.71 29,268 1,733 5.92
Individual retirement accounts 3,239 194 5.99 2,823 179 6.34
Other Borrowed Funds 2,132 119 5.58 623 37 5.84
------- ------ ---- ------- ------ -----
Total interest-bearing liabilities 50,756 2,538 5.00% 44,161 2.269 5.13%
======= ====== ==== ======= ====== =====
NONINTEREST-BEARING LIABILITIES AND
SHAREHOLDERS' EQUITY:
Noninterest-bearing demand deposits $ 5,459 $ 4,681
Other liabilities 944 867
Shareholders' equity 6,535 6,336
------- -------
Total noninterest-bearing liabilities and
shareholders' equity 12,938 11,884
======= =======
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $63,694 $56,045
======= =======
INTEREST RATE DIFFERENTIAL (3) 4.00% 4.06%
==== =====
NET INTEREST INCOME $2,700 $2,395
====== ======
NET INTEREST MARGIN (4) 4.64% 4.72%
==== =====
AVERAGE INTEREST-EARNING ASSETS TO AVERAGE
TOTAL ASSETS 91.41% 90.54%
====== ======
AVERAGE LOANS TO AVERAGE DEPOSITS 86.07% 82.96%
====== ======
</TABLE>
48
<PAGE>
(1) Average loans are shown net of unearned income/deferred loan cost and
the allowance for possible loan losses. Nonperforming loans are
included.
(2) Interest income includes loan fees as follows (amounts in thousands):
1997 - $90, 1996 - $173
(3) Interest rate differential is the average yield earned on interest-
earning assets less the average rate paid on interest-bearing
liabilities.
(4) Net interest margin is net interest income divided by average
interest-earning assets.
The following table presents the changes in Eagle's net interest income as a
result of changes in the volume (changes in volume multiplied by prior rate) and
rate (changes in rate multiplied by prior volume) of its interest-earning assets
and interest-bearing liabilities from 1996 to 1997 and from 1995 to 1996.
<TABLE>
<CAPTION>
1997 VS. 1996 1996 VS. 1995
---------------------------------------------------------------------
NET NET
---- ----
VOLUME (1) RATE (1) CHANGE VOLUME (1) RATE (1) CHANGE
--------- ------- ------ --------- -------- ------
<S> <C> <C> <C> <C> <C> <C>
INTEREST INCOME:
Interest-earning deposits in
financial institutions $ (0) (0) (0) $ (3) (2) (5)
Federal funds sold 6 (1) 5 (24) (6) (30)
Investment securities 53 28 81 103 24 127
Loans, including fees 634 (146) 488 402 (66) 336
---- ---- --- ---- --- ---
Total interest income 693 (119) 574 478 (50) 428
==== ==== === ==== === ===
INTEREST EXPENSE:
Individual retirement accounts 25 (10) 15 32 10 42
Money Market and Savings Deposits 23 (0) 23 (3) (15) (18)
Certificates of deposits 206 (61) 145 222 20 242
Interest-bearing demand deposits 7 (3) 4 3 (25) (22)
Other borrowed funds 84 (2) 82 37 0 37
---- ---- --- ---- --- ---
Total interest expense 345 (76) 269 291 (10) 281
==== ==== === ==== === ===
Net interest income $348 (43) 305 $187 (40) 147
==== ==== === ==== === ===
</TABLE>
(1) The change in interest due to both rate and volume has been allocated to
the volume and rate components in proportion to the relationship of the
dollar amounts of the change in each.
ALLOWANCE FOR POSSIBLE LOAN LOSSES
Eagle provides for possible loan losses based upon information available at
the end of each period. By evaluating the adequacy of the allowance for
possible loan losses at the end of each period, management maintains the
allowance for possible loan losses at a level adequate to provide for losses
that can reasonably be anticipated. The level of the allowance for possible
loan losses is based on management's periodic loan-by-loan evaluation of its
loan portfolio, as well as its assessment of prevailing and anticipated economic
conditions in Southeast Georgia.
A substantial portion of Eagle's loans are secured by real estate,
including real estate and other collateral in Bulloch County and surrounding
counties. Accordingly, the ultimate collectibility of a substantial portion of
Eagle's loan portfolio is susceptible to changes in economic conditions in these
market areas.
The allowance for possible loan losses approximated 1.43% of outstanding
loans at December 31, 1997 and 1.50% of outstanding loans at December 31, 1996.
The allowance increased to $706,237 at December 31, 1997 from $639,500 at
December 31, 1996. This increase in allowance for possible loan losses reflects
management's evaluation as discussed above, the growth in loans and Eagle's goal
of maintaining an allowance for possible loan losses to outstanding loans at a
target level of 1.40%.
Eagle experienced net charge-offs in 1997 of approximately $50,000 as
compared to net charge-offs of approximately $38,000 in 1996. As Eagle continues
to grow and as Eagle's loan portfolio continues to mature, management believes
that net charge-offs could possibly increase in 1998 and future years. While
management
49
<PAGE>
uses available information to recognize losses on loans, future additions to the
allowance may be necessary based on changes in economic conditions. In addition,
regulatory agencies, as an integral part of their examination process,
periodically review Eagle's allowance for possible loan losses. Such agencies
may require Eagle to recognize additions to the allowance based on their
judgments about information available to them at the time of their examination.
The following table summarizes the changes in the allowance for possible loan
losses arising from loans charged off and recoveries on loans previously charged
off during 1997, 1996 and 1995:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------------
1997 1996 1995
---- ---- ----
(Amounts in thousands, except ratios)
<S> <C> <C> <C>
Average loans outstanding, net of unearned income, deferred
costs and allowance for possible loan losses $45,874 $39,403 $35,542
======= ======= =======
Allowance for possible loan losses at beginning of year $ 640 $ 570 $ 528
------- ------- -------
Loans - Consumer installment (charged off) (71) (59) (35)
Recoveries of loans - Consumer installment previously charged off
21 21 2
------- ------- -------
Net loans (charged off) recovered (50) (38) (33)
------- ------- -------
Additions to allowance for possible loan losses charged to income 116 108 75
------- ------- -------
Allowance for possible loan losses at end of year $ 706 $ 640 $ 570
======= ======= =======
Ratio of net loans charged off to average loans outstanding, net
of unearned income 0.11% 0.10% 0.09%
======= ======= =======
Allowance for possible loan losses to loans, net of unearned
income 1.43% 1.50% 1.52%
======= ======= =======
</TABLE>
NONPERFORMING LOANS, NONPERFORMING ASSETS AND UNDERPERFORMING LOANS
Nonperforming loans include loans placed on nonaccrual status and restructured
loans. Nonperforming assets include nonperforming loans, real estate acquired
through foreclosure and repossessed assets. Underperforming loans consist of
loans which are past due with respect to principal or interest more than 90 days
which are not classified as nonaccrual loans.
Interest on loans is recognized using the simple interest method based on the
principal balance outstanding. Interest accruals including accruals of interest
on impaired loans are discontinued when either principal or interest becomes 90
days past due, or when in management's opinion, after considering economic and
business conditions and collection efforts, the borrower's financial condition
is such that it is not reasonable to expect such interest will be collected.
Interest income is subsequently recognized only to the extent cash payments are
received.
Management is not aware of any loans classified for regulatory purposes as
loss, doubtful, substandard or special mention that have not been disclosed
which (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 abilities of such borrower to comply with the loan repayment terms.
Potential problem loans are loans 60 to 89 days past due.
Nonperforming loans were $48,000 at December 31, 1997 and $123,000 at December
31, 1966. Nonperforming loans represented 0.09% of outstanding loans at
December 31, 1997, as compared to 0.29% of outstanding loans at December 31,
1996. Eagle has continued to emphasize asset quality during 1997. Eagle
restructured one loan in the amount of $571,980 in 1995 which was adequately
secured by real estate, which if not
50
<PAGE>
included in the ratios would result in a nonperforming loan ratio of 0.15% at
December 31, 1995. Eagle received payment of all unpaid principal and interest
related to this loan in March 1996.
The table below provides information concerning nonperforming and
underperforming loans and certain asset quality ratios at December 31, 1997,
1996 and 1995:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------------------------------
1997 1996 1995
---- ---- ----
(Amounts in thousands, except ratios)
<S> <C> <C> <C>
Nonperforming loans $ 48 $ 123 $ 629
Underperforming loans $ 2 $ 0 $ 0
Potential problem loans $ 399 $ 611 $ 291
Asset quality ratios:
Nonperforming loans to total loans, net of unearned income 0.09% 0.29% 1.68%
Underperforming loans to total loans, net of unearned income 0.00% 0.00% 0.00%
Potential problem loans to total loans, net of unearned income 0.81% 1.43% 0.78%
Nonperforming, underperforming and potential problem loans to
total loans, net of unearned income 0.91% 1.72% 2.46%
Allowance for possible loan losses to nonperforming loans 14.71x 5.20x 0.910x
Allowance for possible loan losses to nonperforming,
underperforming, and potential problem loans 1.57x 0.87x 0.62x
</TABLE>
Eagle has allocated the allowance for possible loan losses according to the
amount deemed to be reasonably necessary to provide for the possibility of
losses being incurred within the categories of loans set forth in the table
below. This allocation is based on management's evaluation of the loan
portfolio under current economic conditions, adequacy and nature of collateral,
and such factors which, in the judgment of management, deserve recognition in
estimating loan losses. Because the allocation is based on estimates and
subjective judgment, it is not necessarily indicative of specific amounts or
loan categories in which charge-offs may occur.
The amount of such components of the allowance for possible loan losses and
the ratio of each loan category to loans outstanding are presented below:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------------------------------------
1997 1996 1995
-------------------- ------------------ -------------------
ALLOWANCE %(1) ALLOWANCE %(1) ALLOWANCE %(1)
--------- ---- --------- ---- --------- ----
<S> <C> <C> <C> <C> <C> <C>
Real estate $402 56 $378 61 $380 62
Real estate-construction 85 12 45 7 46 8
Commercial and agricultural 148 22 147 22 63 19
Consumer 71 10 70 10 79 11
---- --- ---- --- ---- ---
$706 100 $640 100 $570 100
==== === ==== === ==== ===
</TABLE>
____________
(1) Loan amount in each category expressed as a percentage of total loans
outstanding.
51
<PAGE>
NONINTEREST INCOME
Noninterest income of $746,839 in 1997, $642,461 in 1996 and $490,534 in 1995
is primarily comprised of mortgage loan referral fees in 1997 of $233,734, 1996
of $245,897 and $113,289 in 1995 and service charges on deposit accounts. The
increase of $104,378, or 16.25%, in 1997 from 1996 in noninterest income is
primarily attributable to the increase in a new accounts receivable financing
product introduced in 1997 and service charges on deposit accounts. The
substantial portion of service charges on deposit accounts includes monthly
transaction fees on demand accounts and fees for returned checks. Eagle
continually evaluates the pricing of its demand deposit products to ensure such
products remain competitive in the marketplace, while providing appropriate
levels of noninterest income to Eagle to cover the costs of servicing and
maintaining such accounts.
Securities gains (losses), net of $1,293 were recognized by Eagle during 1997
compared to ($10,467) in 1996 and resulted from Eagle's sale of investment
securities to meet loan demand.
NONINTEREST EXPENSE
Noninterest expense increased $179,138, or 8.25%, in 1997 compared to 1996 and
increased $218,073, or 11.17%, in 1996 compared to 1995. Noninterest expense
was $2,350,170 for 1997, $2,171,032 for 1996, and $1,952,959 for 1995 and
represented approximately 3.68%, 3.87% and 3.91% of average assets in 1997, 1996
and 1995, respectively. Salaries and employee benefits expense was the largest
component of noninterest expense. Salaries and employee benefits expense was
$1,142,200 in 1997, $1,071,636 in 1996 and $953,836 in 1995 and represented
approximately 48.60%, 49.36% and 48.84% of non-interest expense in 1997, 1996
and 1995, respectively. These amounts include wages, payroll taxes, group
medical insurance, profit sharing plan contributions and all benefits paid to
Eagle's employees. The increase in salaries and employee benefits expense of
approximately $70,565 is attributable to normal salary increases and an increase
in group medical insurance premiums. Occupancy and equipment expenses of
approximately $307,272 in 1997, $272,664 in 1996 and $222,197 in 1995 also
represented approximately 13.07%, 12.56% and 11.37% of noninterest expense in
1997, 1996 and 1995, respectively. All other expenses of approximately $900,698
in 1997, $826,732 in 1996 and $776,926 in 1995 represented approximately 38.33%,
38.08% and 39.78% of noninterest expense in 1997, 1996 and 1995, respectively.
FDIC insurance expense decreased by approximately $48,000 in 1996 and $40,000 in
1995 due to decreased assessments from the Bank Insurance Fund. The more
significant components of other operating expenses for each of the last three
years are shown as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Stationery and supplies $ 65,225 $ 84,717 $74,317
Postage 62,402 56,267 51,066
Advertising and marketing 59,862 52,366 51,605
Professional fees - legal and accounting 85,590 74,864 54,471
Data Processing (1) 161,304 109,217 87,845
Directors' fees 58,900 53,300 55,400
</TABLE>
____________
(1) EBT renewed its core data processing agreement in February 1997, which
resulted in this expense increasing.
INCOME TAXES
Eagle provided income tax expense of $306,600 for 1997, $250,000 for 1996 and
$210,000 for 1995, representing effective tax rates of approximately 32%, 33%
and 30%, respectively. Eagle's effective tax rate was lower in 1995 because of
the impact of the reduction of the valuation allowance for deferred tax assets
recorded in 1995. Eagle believes its effective income tax rate will increase in
1998 to an effective rate of approximately 36%. Eagle will continue to seek
appropriate tax planning strategies such as investing in tax-free securities in
an effort to minimize its effective tax rate.
52
<PAGE>
NET INCOME
Eagle achieved net income of $673,941, or approximately 0.78 per common share
outstanding for 1997, 501,856, or approximately $0.58 per common share
outstanding for 1996, and net income of $500,180, or approximately $0.58 per
common share outstanding during 1995.
Loan Portfolio
Eagle does not have any concentrations of loans exceeding 10% of total loans
of which management is aware and which are not otherwise disclosed as a category
of loans in the table below.
Average loans were $46.0 million in 1997, $40.0 million in 1996, and $36.1
million in 1995. Average loans as a percentage of average interest-earning
assets were 78.8%, 77.7%, and 79.4% respectively. Average loans as a percentage
of average total assets were 72.0%, 70.3%, and 72.2% respectively.
The following two tables present the composition of Eagle's loan portfolio at
December 31, 1997, 1996 and 1995 and the contractual maturities and interest
rate sensitivity of certain categories of loans as of December 31, 1997:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------------------------------------
1997 1996 1995
---- ---- ----
(Amounts in Thousands)
<S> <C> <C> <C>
Commercial, financial and agricultural $32,072 $29,312 $24,806
Real estate - construction ,699 3,097 2,932
Real estate- mortgage 6,705 6,538 6,221
Consumer 5,006 3,693 3,511
------- ------- -------
Total loans 49,482 42,640 37,470
Less:
Allowance for possible loan losses (706) (640) (570)
Unearned income (8) (1) (28)
------- ------- -------
Loans, net $48,768 $41,999 $36,872
======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
MATURING
--------------------------------------------------------------------
AFTER ONE BUT
WITHIN WITHIN FIVE AFTER
ONE YEAR YEARS FIVE YEARS
-------- ---- ----------
(Amounts in thousands)
<S> <C> <C> <C>
Commercial, financial and agricultural $11,398 $17,764 $2,910
Real estate - construction 5,699 0 0
Real estate - mortgage 3,026 3,071 608
Consumer 2,259 2,293 454
Summary of loans:
Total fixed rate due after one year $27,048
Total adjustable rate due after one year 52
-------
Total loans due after one year $27,100
=======
</TABLE>
Actual repayments of loans may differ from the contractual maturities
reflected above because borrowers may have the right to prepay obligations with
or without prepayment penalties. Additionally, the refinancing of such loans or
the potential delinquency of such loans could also cause differences between the
contractual maturities reflected above and the actual repayment of such loans.
53
<PAGE>
INVESTMENT SECURITIES
Eagle's investment securities portfolio serves several essential functions,
such as providing a vehicle for the investment of available funds, furnishing
liquidity and supplying securities to pledge as required for certain deposits.
Average investment securities increased $0.9 million, or 9.17%, in 1997 as
compared to 1996 and increased $1.9 million, or 22.7%, in 1996 compared to 1995.
The increase in average investment securities results from Eagle's growth in
deposits and other borrowings. During 1997, 1996 and 1995, average investment
securities comprised 19.2%, 20.1% and 18.3% of average interest-earning assets,
respectively, and 17.5%, 18.2% and 16.7% of average total assets, respectively.
The two tables below present the carrying values and the composition of
investment securities at the end of each of the past two years and the
contractual maturities and yields of investment securities at December 31, 1997.
Expected maturities may differ from contractual maturities because issuers may
have the right to call or prepay obligations with or without call or prepayment
penalties.
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------------------------------------------------------------
1997 1996
------------------------------------- -------------------------------------------
AVAILABLE HELD TO AVAILABLE HELD TO
--------- ------- --------- -------
FOR SALE MATURITY FOR SALE MATURITY
------- -------- -------- --------
<S> <C> <C> <C> <C>
U.S. Treasury $ 0 $1,742 $ 997 $1,740
U.S. government agencies 3,403 2,800 2,887 2,050
State, county and municipal 2,950 0 2,857 0
Federal Home Loan Bank stock 244 0 158 0
------ ------ ------ ------
Total investment securities $6,597 $4,542 $6,899 $3,790
====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
MATURING AFTER ONE YEAR BUT
MATURING WITHIN ONE YEAR WITHIN FIVE YEARS MATURING AFTER FIVE YEARS
------------------------- ---------------------------- --------------------------
AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD
------------ ----------- ------------- ------------- ---------- --------------
(Amounts in thousands)
<S> <C> <C> <C> <C> <C> <C>
U.S. Treasury $ 0 0% $1,742 6.47% $ 0 0%
U.S. government agencies 300 4.98 5,403 6.39 500 6.25
State, county and municipal 790 3.81 1,696 3.94 464 5.81
Federal Home Loan Bank 0 0 0 0 244 7.25
------ ---- ------ ---- ------ ------
Total investment securities $1,090 4.13% $8,841 5.89% $1,208 6.28%
====== ==== ====== ==== ====== ======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
DECEMBER 31, 1997
---------------------------------------------------------------------
INVESTMENT SECURITIES INVESTMENT SECURITIES
AVAILABLE FOR SALE HELD TO MATURITY
------------------------------ ------------------------------
AMORTIZED COST FAIR VALUE AMORTIZED COST FAIR VALUE
------------ ----------- -------------- ----------
<S> <C> <C> <C> <C>
Due in one year $ 790 $ 790 $ 300 $ 300
Due after one year through five
years 5,087 5,099 3,742 3,772
Due after five years through ten
years 705 708 500 497
Over ten years 0 0 0 0
-------- -------- ------- -------
$ 6,582 $ 6,597 $ 4,542 $ 4,569
======== ======== ======= =======
</TABLE>
Excluding obligations of the U.S. Treasury and U.S. Government agencies, Eagle
did not have any investment which exceeded 10% of Eagle's shareholders' equity
at December 31, 1997.
54
<PAGE>
DEPOSITS
Average deposits increased $5.9 million to $54.1 million, or 12.61%, in 1997
and $5.0 million, or 11.68%, from $48.2 million during 1996. The increase in
average deposits represents growth in Eagle's existing market and reflects the
results of Eagle's marketing efforts in attracting new customers from competing
financial institutions.
The average deposits by type, their relationship to total average deposits and
the average rate paid on deposits by type for the years ended December 31, 1997
and 1996 are presented below.
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------------------------------
1997 1996
---------------------------- ---------------------------
AMOUNT % RATE AMOUNT % RATE
------ - ---- ------ - ----
(Amounts in thousands, except percentages and ratios)
<S> <C> <C> <C> <C> <C> <C>
Noninterest-bearing demand deposits $ 5,459 10% -- $ 4,681 10% --
Interest-bearing demand deposits 6,967 13 2.57 6,706 14 2.61
Money market and savings accounts 5,509 10 3.05 4,741 10 3.06
Certificates of deposit 32,909 61 5.71 29,268 60 5.92
Individual retirement accounts 3,239 6 5.99 2,823 6 6.34
------- --- ---- ------- --- ----
Total average deposits $54,083 100% 4.97% $48,219 100% 5.13%
======= === ==== ======= === ====
</TABLE>
The maturities of certificates of deposits and individual retirement accounts
of $100,000 or more as of December 31, 1997 and 1996 are presented below.
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------
1997 1996
---- ----
(Amounts in thousands)
<S> <C> <C>
Three months or less $ 3,984 $ 4,509
Over three months through six months 3,220 2,068
Over six months through 12 months 2,728 1,820
Over 12 months 1,886 2,818
------- -------
Total certificates of deposit and
individual retirement accounts of
$100,000 or more $11,818 $11,215
======= =======
</TABLE>
Eagle has analyzed the composition of certificates of deposit and individual
retirement accounts of $100,000 or more. The large deposits comprised 20.71% of
average deposits during 1997 compared to 22.6% of average deposits for 1996.
Total deposits included large deposits of $11,818,000 and $11,215,000 at
December 31, 1997 and 1996, representing 21.23% and 21.38% of total deposits at
the end of these periods, respectively. These large deposits are with
governmental bodies in the local community that Eagle serves or are with
individuals who reside in the local area and to whom Eagle has had consistent
deposit relations since Eagle's inception. There is no material reliance on
brokered deposits as a source of large deposit funding.
Results of Operations - Six Months Ended June 30, 1998, Compared to Six Months
Ended June 30, 1997
NET INTEREST INCOME
Eagle's net interest income, the difference between interest income on
interest-earning assets and interest expense on interest-bearing liabilities, is
Eagle's principal source of income. Interest-earning assets for Eagle include
loans, federal funds sold and investment securities.
Net interest income for the three-month period ended June 30, 1998 equaled
$701,603, or 5.48% more than the three-month period ended June 30, 1997 of
$665,137. The average yield earned on interest-earning assets
55
<PAGE>
decreased to 8.69% for the three-month period ended June 30, 1998 from 9.02% for
the three-month period ended June, 30, 1997, and the average rate paid on
interest-bearing liabilities decreased to 4.47% for the three-month period ended
June 30, 1998 from 4.97% for the comparable period ended June 30, 1997. Eagle's
net interest margin for the three-month period ended June 30, 1998 was 4.43%
compared to 4.73% for the comparable period ended June 30, 1997.
Net interest income for the six-month period ended June 30, 1998 equaled
$1,371,467 or 6.64% more than the six-month period ending June 30, 1997 of
$1,286,033. The average yield earned on interest-earning assets decreased to
8.55% for the six-month period ended June 30, 1998 from 9.14% for the similar
period ended June 30, 1997 and the average rate paid on interest-bearing
liabilities decreased to 4.44% for the six-month period ended June 30, 1998 from
4.84% for the six-month period ended June 30, 1997. Eagle's net interest margin
for the six-month period ended June 30, 1998 was 4.33% compared to 4.52% for the
period ended June 30, 1997.
Although management continues to explore methods to improve its net
interest margin, there can be no assurances that current levels can be
maintained due to market interest rate fluctuations and the very competitive
local banking environment.
PROVISION FOR POSSIBLE LOAN LOSSES
The allowance for possible loan losses approximated 1.43% of outstanding
loans at June 30, 1998 and at December 31, 1997. The allowance increased to
$728,500 at June 30, 1998 from $706,237 at December 31, 1997. The allowance
relates primarily to the level of the loan portfolio and related credit risks.
The provision for the first six months of 1998 was $32,332, compared to $41,000
for the first six months of 1997. The provision for the three months ended June
30, 1998 was $17,332, as compared to $35,000 for the same period ended June 30,
1997. Net chargeoffs for the six-month period ended June 30, 1998 equaled
$10,069, compared to net recoveries of $9,203 for the comparable period in 1997.
The following table summarizes nonperforming loans, potential problem
loans, and allowance for possible loan losses data as of June 30, 1998 and
December 31, 1997:
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
---- ----
(Amount in thousands)
<S> <C> <C>
Nonperforming loans (Over 90 days) 461 48
Potential problem loans (internally classified)** 291 399
Asset Quality Ratios:
Nonperforming loans to total loans,
net of unearned income 0.91% 0.09%
Nonperforming loans to total assets 0.67% 0.07%
Nonperforming loans and potential
problem loans to total assets 1.10% 0.67%
Allowance for possible loan losses to nonperforming loans 1.58x 14.71x
Allowance for possible loan losses to nonperforming
loans and potential problem loans .96x 1.57x
</TABLE>
56
<PAGE>
______________
** Potential problem loans are loans 60 to 89 days past due.
Nonperforming loans increased by approximately $413,000 from December 31,
1997 to June 30, 1998. This increase was due primarily to one customer with two
loans totalling $357,000. One of these loans was paid in full in August 1998.
The other is secured by real estate which, in the opinion of management, when
sold, will satisfy in full the remaining outstanding balance. Eagle's management
believes that the allowance for possible loan losses is adequate to cover
potential losses in the loan portfolio.
57
<PAGE>
NONINTEREST INCOME
Noninterest income is primarily comprised of service charges on deposit
accounts and referral fees from mortgages, which for the six-month period ended
June 30, 1998 was approximately $441,660, as compared to $329,418 for the
comparable period in 1997. Service charges on deposit accounts includes fees on
deposit accounts, fees for returned checks and fees for overdraft accounts.
Noninterest income for the three months ended June 30, 1998 was $208,060,
compared to $168,990 for the three months ended June 30, 1997. These increases
were primarily from service charges on deposit accounts which increase with the
overall levels of deposit accounts and referral fees on mortgages.
NONINTEREST EXPENSE
Noninterest expenses are composed primarily of salaries and employee
benefits, net occupancy and equipment expense, and other operating expense as
shown below. Eagle experienced noninterest expenses of approximately $1,240.616
for the six-month period ended June 30, 1998, compared to $1,150,414 for the
comparable period of 1997. Eagle experienced noninterest expenses of
approximately $645,489 for the three months ended June 30, 1998, compared to
$572,570 for the three months ended June 30, 1997. Noninterest expenses
increased approximately 7.84% and 12.74% for the six-month and three-month
periods ended June 30, 1998, as compared to the same periods ended June 30,
1997.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
-------------------------------------------------------
JUNE 30, JUNE 30,
1998 1997
---------------------- -----------------------
<S> <C> <C>
Salaries and employee benefits $ 606,232 $ 554,858
---------- ----------
Noninterest net occupancy and equipment expense 146,406 152,366
---------- ----------
Components of other non-interest expense:
Data processing expense 82,773 77,662
Regulatory assessments 10,746 7,721
Insurance expense 13,862 11,708
Stationery and supplies expense 28,311 33,213
Legal expense 42,126 17,472
Postage 26,315 29,205
Accounting and audit fees 17,995 19,550
Advertising and marketing expense 38,532 34,242
ATM expense 15,972 13,768
Directors' fees 55,100 23,400
Dues and subscription 8,007 10,845
Business taxes and licenses 23,250 10,832
Correspondent bank services 13,698 13,681
All other expenses 111,291 139,891
---------- ----------
Total other noninterest expense 487,978 443,190
---------- ----------
Total Noninterest Expense $1,240,616 $1,150,414
========== ==========
</TABLE>
INCOME TAXES
Eagle has recorded income tax expense of $171,342 for the six months ended
June 30, 1998, representing an effective tax rate of approximately 32%, which
compares to an effective tax rate of 34% recorded for the
58
<PAGE>
comparable period of 1997. Eagle recorded income tax expense of $78,042 or 32%
for the three months ended June 30, 1998, as compared to $75,622, or 33%, for
the same period ended June 30, 1997.
NET INCOME
Eagle earned net income of $368,837, or approximately 0.42 per share, for
the six-month period ended June 30, 1998. This compares to $279,315, or
approximately 0.32 per share, for the comparable period ended June 30, 1997.
Eagle earned net income of $168,800, or approximately 0.19 per share, for the
three months ended June 30, 1998. This compares to $150,935, or approximately
0.17 per share, for the same period ended June 30, 1997.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards (SFAS) No. 130 "Reporting Comprehensive
Income." This statement established standards for reporting and displaying
comprehensive income and its components in a full set of general-purpose
financial statements. This is effective for fiscal years beginning after
December 15, 1997.
Also in June 1997, the Financial Accounting Standards Board issued SFAS No.
131 "Disclosure about Segments of an Enterprise and Related Information" and is
effective for fiscal years beginning after December 15, 1997. This statement
establishes standards for reporting operating segments by public business
enterprises in annual financial statements and requires that those enterprises
report selected information about operating segments in interim financial
reports to shareholders. The adoption of this statement will have no effect on
the financial statements of Eagle.
YEAR 2000
Eagle has developed preliminary plans to address the possible exposures
related to the impact on its financial, informational and operational systems of
the Year 2000. The data processing systems and software include those developed
and maintained by Eagle's data processor (Marshall & Isley) and purchased
software which is run on in-house computer networks. Eagle's data processor and
those vendors, which have been contacted, have indicated that their hardware
and/or software will be Year 2000 compliant by the end of 1998. This will allow
time for testing for compliance during 1999. While there will be some capital
expenditures (approximately $200,000 to $250,000) during 1998, expenses incurred
are not expected to have a material adverse effect on Eagle's Consolidated
Financial Statements.
59
<PAGE>
DESCRIPTION OF EAGLE
GENERAL
Eagle was incorporated as a Georgia business corporation on September 19, 1989
for the purpose of becoming a bank holding company by acquiring all of the
common stock of EBT, Statesboro, Georgia upon its formation. Eagle became a
bank holding company within the meaning of the BHC Act and the Georgia Bank
Holding Company Act upon the acquisition of all of the common stock of EBT on
September 7, 1990.
EBT is the sole operating subsidiary of Eagle. EBT opened for business on
February 20, 1991. The deposits at EBT are insured by the Federal Deposit
Insurance Corporation (the "FDIC"). EBT conducts a general commercial banking
business in its primary service area, emphasizing the banking needs of
individuals and small- to medium-sized businesses. Eagle and EBT conduct
business from the main office located at 335 South Main Street, Statesboro,
Georgia 30458, and from EBT's branch facility located at 726 Northside Drive
East, Statesboro, Georgia 30458.
The principal business of EBT is to accept deposits from the public and to
make loans and other investments in and around Bulloch County, Georgia, its
primary service area.
EBT offers a full range of deposit services that are typically available from
financial institutions, including NOW accounts, demand, savings and other time
deposits. In addition, retirement accounts such as Individual Retirement
Accounts are available. All deposit accounts are insured by the FDIC up to the
maximum amount currently permitted by law.
EBT offers a full range of commercial and personal loans. EBT makes loans to
individuals for purposes such as home mortgage financing, personal vehicles and
various consumer purchases, and other personal and family needs. EBT makes
commercial loans to businesses predominantly in the primary service area for
purposes such as equipment and machinery purchases, commercial real estate
purchases and working capital.
EBT's lending philosophy is to make loans, taking into consideration the
safety of EBT's depositors' funds, the preservation of EBT's liquidity, the
interest of Eagle's shareholders and the welfare of the community. Interest
income from EBT's lending operations is the principal component of EBT's income.
The principal sources of income for EBT are interest and fees collected on
loans, interest and dividends collected on other investments, and mortgage
brokerage fees. The principal expenses of EBT are interest paid on deposits,
employee compensation, office and equipment expense and other overhead expenses.
EBT's business plan relies principally upon local advertising and promotional
activity and upon personal contacts by its directors, officers and shareholders
to attract business and to acquaint potential customers with EBT's personalized
services. EBT emphasizes a high degree of personalized client service to
provide for each customer's banking needs. EBT's marketing approach emphasizes
the advantages of dealing with an independent, locally-owned and managed state-
chartered bank to meet the particular needs of individuals, professionals and
small-to-medium-sized businesses in the community.
COMPETITION
The banking business is highly competitive. EBT competes with other
commercial banks in its primary service area. Banks generally compete with
other financial institutions through the banking products and services offered,
the pricing of services, the level of service provided, the convenience and
availability of services and the degree of expertise and the personal manner in
which services are offered. EBT encounters strong competition from most of the
financial institutions in EBT's primary service area. In the conduct of certain
areas of its banking business, EBT also competes with credit unions, consumer
finance companies, mortgage companies, insurance companies, money market mutual
funds and other financial institutions, some of which are not subject to the
same degree of regulation and restrictions imposed upon EBT. Many of these
competitors have substantially greater
60
<PAGE>
resources and lending limits than EBT has and offer certain services, such as
trust services, that EBT does not provide presently.
EMPLOYEES
As of June 30, 1998, EBT employed 30 full-time employees and 6 part-time
employees. Except for the officers of EBT who presently serve as officers of
Eagle, Eagle does not have any employees. Neither Eagle nor EBT is a party to
any collective bargaining agreement, and management believes EBT enjoys
satisfactory relations with its employees.
PROPERTIES
The operations of Eagle and EBT are conducted from EBT's main office located
at 335 South Main Street, Statesboro, Georgia and from EBT's branch facility
located at 726 Northside Drive East, Statesboro, Georgia. EBT owns both
facilities which contain approximately 11,500 and 2,500 square feet,
respectively.
LEGAL PROCEEDINGS
Neither Eagle nor EBT is a party to nor is any of their property the subject
of, any material pending legal proceedings, other than routine litigation
incidental to their business, which management believes would have a material
effect upon the operations or financial condition of Eagle or EBT.
61
<PAGE>
BENEFICIAL OWNERSHIP OF EAGLE COMMON STOCK
The following table sets forth the number of shares and percentages of
outstanding shares of Eagle Common Stock which were beneficially owned at
September 20, 1998 by each director and executive officer of Eagle and by the
directors and executive officers of Eagle as a group. Percentages of shares of
Eagle Common Stock beneficially owned are based on 873,875 shares outstanding at
September 20, 1998.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
NUMBER OF EAGLE
SHARES PERCENTAGE OF EAGLE PERCENTAGE OF PAB
BENEFICIALLY SHARES BENEFICIALLY SHARES BENEFICIALLY
NAME OF BENEFICIAL OWNER OWNED(1) OWNED OWNED AFTER MERGER(2)
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
James B. Lanier, Jr. 15,049 1.72% *
Chairman of the Board of Directors
- ----------------------------------------------------------------------------------------------------------------
Andrew M. Williams III(3) 42,211 4.67% *
President and Director
- ----------------------------------------------------------------------------------------------------------------
W. Earl Green(4) 4,011 * *
Vice President and Chief Financial Officer
- ----------------------------------------------------------------------------------------------------------------
Gary L. Johnson(5) 22,356 2.51% *
Vice President and Director
- ----------------------------------------------------------------------------------------------------------------
Robert D. Coston, Ph.D. 30,000 3.43% *
Director
- ----------------------------------------------------------------------------------------------------------------
Lemuel A. Deal, Sr. 7,700 * *
Director
- ----------------------------------------------------------------------------------------------------------------
J. Bird Hodges, Jr. 15,000 1.72% *
Director
- ----------------------------------------------------------------------------------------------------------------
Robert E. Lane 15,600 1.79% *
Director
- ----------------------------------------------------------------------------------------------------------------
Betty K. Minick 15,294 1.75% *
Director
- ----------------------------------------------------------------------------------------------------------------
T. J. Morris, Jr. 24,675 2.82% *
Director
- ----------------------------------------------------------------------------------------------------------------
Paul E. Parker 22,500 2.57% *
Director
- ----------------------------------------------------------------------------------------------------------------
W. Dale Parker 37,650 4.31% *
Director
- ----------------------------------------------------------------------------------------------------------------
Erskine Russell 15,000 1.72% *
Director
- ----------------------------------------------------------------------------------------------------------------
Marcus B. Seligman 18,000 2.06% *
Director
- ----------------------------------------------------------------------------------------------------------------
Solly Trapnell 15,375 1.76% *
Director
- ----------------------------------------------------------------------------------------------------------------
Paul A. Whitlock, Jr., M.D. 23,158 1.58% *
Director
- ----------------------------------------------------------------------------------------------------------------
All directors and executive officers as a
group (16 persons)(6) 323,579 34.98% 3.90%
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
62
<PAGE>
(1) Except as otherwise indicated, the persons named in the above table have
sole voting and investment power with respect to all of the shares of Eagle
Common Stock shown as beneficially owned by them. As to each director or
executive officer who has the right to acquire, within 60 days of September
20, 1998, shares of Eagle Common Stock upon the exercise by him of stock
options, such individual's percent of class has been calculated on the
assumption that such options have in fact been exercised, and the number of
issued and outstanding shares of Eagle Common Stock has been increased by a
corresponding amount.
(2) Assumes an exchange ratio of one share of PAB Common Stock for one share of
Eagle Common Stock, resulting in an aggregate of 8,246,510 shares of PAB
Common Stock (based on 7,372,635 shares of PAB Common Stock outstanding at
September 20, 1998).
(3) Includes shares underlying options to purchase 30,059 shares of Eagle
Common Stock exercisable within 60 days of September 20, 1998.
(4) Includes shares underlying options to purchase 4,000 shares of Eagle Common
Stock exercisable within 60 days of September 20, 1998.
(5) Includes shares underlying options to purchase 17,029 shares of Eagle
Common Stock exercisable within 60 days of September 20, 1998.
(6) Includes shares underlying options to purchase an aggregate of 51,088
shares of Eagle Common Stock exercisable within 60 days of September 20,
1998.
EXECUTIVE OFFICERS
Executive officers of Eagle are elected by the Eagle Board of Directors
annually at the first meeting of the Board following the annual meeting of Eagle
shareholders and hold office until such officers' successors are chosen and
qualified, unless they sooner resign or are removed from office by the Board of
Directors.
Information is set forth below with respect to the age, positions with Eagle
and EBT and business experience of the executive officers of Eagle as of
September 20, 1998.
<TABLE>
<CAPTION>
NAME (AGE) PRINCIPAL POSITION AND BUSINESS EXPERIENCE
- ---------- ------------------------------------------
<S> <C>
Andrew M. Williams, III (45) Mr. Williams currently serves as director,
President and Chief Executive Officer of EBT
and Eagle. He has held these positions since
EBT's inception. On September 10, 1998, Mr.
Williams tendered his resignation from these
positions effective October 30, 1998. From
September 1984 until August 1989, Mr. Williams
served as Senior Vice President, Loan
Administration, EBT of Coweta, in Newnan,
Georgia
Gary L. Johnson (43) Mr. Johnson has served as director and Vice
President of EBT since 1993. On September 29,
1998, Mr. Johnson and EBT entered into an
agreement pursuant to which Mr. Johnson agreed
to serve as EBT's President and Chief
Executive Officer effective October 31, 1998.
Previously, Mr. Johnson was branch manager and
banking officer for Farmers & Merchants Bank,
Statesboro, Georgia, and from April 1984 to
December 1988, he was branch manager of
Southeast Georgia Farm Credit Service.
W. Earl Green (54) Mr. Green has served as Vice President and
Chief Financial Officer for EBT since 1993.
Previously he served as Managing Officer,
Chief Operating Officer and Chief Financial
Officer of Admiralty Bank, Palm Beach Gardens,
Florida, and from 1988 until 1990, Mr. Green
served as Executive Vice President and Chief
Financial Officer of Palm Beach Federal
Savings Bank, Palm Beach Gardens, Florida.
</TABLE>
63
<PAGE>
DESCRIPTION OF PAB COMMON STOCK
GENERAL
PAB is authorized to issue 15,000,000 shares of PAB Common Stock, no par
value, of which 7,372,635 shares were issued and outstanding as of September 20,
1998. As of September 20, 1998, 400,000 shares of PAB Common Stock were
reserved for issuance upon the exercise of outstanding stock options under the
PAB Incentive Stock Option Plan and purchases under PAB's dividend reinvestment
and stock purchase plan. PAB Common Stock is traded on the American Stock
Exchange under the trading symbol "PAB."
VOTING AND OTHER RIGHTS
The holders of PAB Common Stock are entitled to one vote per share, and, in
general, a majority of votes cast with respect to a matter is sufficient to
authorize action upon routine matters. Directors are elected by a plurality of
the votes cast, and each shareholder entitled to vote in such election is
entitled to vote each share for as many persons as there are directors to be
elected. In elections for directors, such shareholders do not have the right to
cumulate their votes.
In the event of liquidation, holders of PAB Common Stock would be entitled
to receive pro rata any assets legally available for distribution to
shareholders with respect to shares held by them, subject to any prior rights of
any PAB preferred stock then outstanding.
Shares of PAB Common Stock do not have any preemptive rights, redemption
privileges, sinking fund privileges or conversion rights. All of the
outstanding shares of PAB Common Stock are, and upon issuance the shares of PAB
Common Stock to be issued to Eagle shareholders will be, validly issued, fully
paid and nonassessable.
DISTRIBUTIONS
The holders of PAB Common Stock are entitled to receive dividends or
distributions as the PAB Board may declare out of funds legally available for
such payments. The payment of distributions by PAB is subject to the
restrictions of Georgia law applicable to the declaration of distributions by a
business corporation. The corporation generally may not authorize and make
distributions if, after giving effect thereto, it would be unable to meet its
debts as they become due in their usual course of business or if the
corporation's total assets would be less than the sum of its total liabilities
plus the amount that would be needed, if it were to be dissolved at the time of
distribution, to satisfy claims upon dissolution of shareholders who have
preferential rights superior to the rights of the holders of its common stock.
In addition, the payment by distribution to shareholders is subject to any prior
rights of outstanding preferred stock. Share dividends, if any are declared,
may be paid from authorized but unissued shares.
The ability of PAB to pay distributions is affected by the ability of the
PAB Banks to pay dividends. The ability of the PAB Banks, as well as PAB, to
pay dividends in the future currently is and could be further influenced by bank
regulatory requirements and capital guidelines. See "CERTAIN REGULATORY
CONSIDERATIONS."
PAB PREFERRED STOCK
PAB is authorized to issue 1,500,000 shares of preferred stock, of which
none were issued as of September 20, 1998. The preferred stock would have such
preferences as conferred to it by PAB directors at the time of its issuance.
64
<PAGE>
CERTAIN DIFFERENCES IN THE RIGHTS OF SHAREHOLDERS OF PAB AND EAGLE
At the Effective Time, shareholders of Eagle automatically will become
shareholders of PAB, and their rights as shareholders will be governed by PAB's
Articles of Incorporation and Bylaws instead of by the Articles of Incorporation
and Bylaws of Eagle. The following is a summary of the material differences
between the rights of shareholders of PAB and Eagle. PAB and Eagle are both
Georgia corporations governed by the GBCC. The following summary does not
purport to be a complete discussion of the difference in the rights of Eagle
shareholders and PAB shareholders and is qualified in its entirety by reference
to the full text of the GBCC and the Articles of Incorporation and Bylaws of
each corporation.
AUTHORIZED CAPITAL STOCK
PAB. PAB is authorized to issue 15,000,000 shares of PAB Common Stock, no
par value, of which 7,372,635 shares were issued and outstanding as of September
20, 1998. As of September 20, 1998, 400,000 shares of PAB Common Stock were
reserved for issuance upon the exercise of outstanding stock options under the
PAB Incentive Stock Option Plan and purchases under PAB's dividend reinvestment
and stock purchase plan. PAB is also authorized to issue 1,500,000 shares of
preferred stock, of which none were issued as of June 30, 1998.
Eagle. Eagle is authorized to issue 10,000,000 shares of Eagle Common
Stock, par value $1.00 per share, of which 873,875 shares were issued and
outstanding as of September 20, 1998. As of September 20, 1998, 51,088 shares of
Eagle Common Stock were reserved for issuance upon the exercise of outstanding
stock options under the Eagle Option Plan.
DIRECTORS
PAB. The PAB Articles of Incorporation provide for a Board of Directors
having not less than nine members, and the number of directors may be fixed from
time to time by a majority vote of the PAB directors. Vacancies may be filled
for the unexpired term by the affirmative vote of a majority of the remaining
directors. The PAB Board of Directors currently has 13 members.
Pursuant to PAB's Articles, a member of the PAB Board may only be removed
by a two-thirds vote of the total issued and outstanding shares of PAB Common
Stock.
Eagle. The Eagle Articles provide for a Board of Directors having not less
than five nor more than twenty-five members, and the number of directors may be
fixed from time to time by a vote of not less than two-thirds of the entire
Eagle Board of Directors. The Board is divided into three classes with the
directors in each class serving three year terms. Vacancies may be filled by a
two-thirds vote of the remaining directors until the shareholders have elected a
successor. The Eagle Board of Directors currently has 14 members.
Eagle's Articles of Incorporation provide that the affirmative vote of the
holders of not less than two-thirds of the outstanding Eagle Common Stock
entitled to vote at an election of directors shall be required to remove any
Eagle director without cause. However, a director may be removed for cause by
the affirmative vote of either (i) a majority of the directors serving at the
date of the vote or (ii) the holders of a majority of the then outstanding
shares of Eagle Common Stock. "Cause" shall only mean either (i) the conviction
of a felony or (ii) the request or demand for such removal by any bank
regulatory agency.
65
<PAGE>
SPECIAL MEETING OF SHAREHOLDERS
PAB. Under the PAB Bylaws, special meetings may be called by (i) the
Chairman, (ii) the President, (iii) the Chairman or President when so directed
by the Board of Directors or by two directors in writing or (iv) the Chairman or
President when so requested by the shareholders in writing. Under the PAB
Articles, a two-thirds vote of the total issued and outstanding shares of PAB
Common Stock is required in order to call a special meeting of shareholders.
Eagle. The Eagle Bylaws provide that special meetings of the shareholders
may be called at any time by (i) the Board of Directors by majority vote, (ii)
the Chairman of the Board, (iii) the President and (iv) Eagle upon the written
request of the holders of shares representing two-thirds or more of the shares
of capital stock of Eagle entitled to vote in an election of directors.
VOTING REQUIREMENTS GENERALLY
PAB. According to the PAB Articles, each shareholder receives one vote for
each share held of record by such holder. The affirmative vote of the majority
of the shares represented at the meeting and entitled to vote on the subject
matter is the act of the shareholders, except as otherwise provided by law or
the PAB Articles. A two-thirds vote of the issued and outstanding shares of PAB
Common Stock is required to (i) approve any merger or consolidation of PAB with
or into any other corporation and the sale, lease, exchange or other disposition
of all, or substantially all, of the assets of PAB to or with any other
corporation, person or entity, with respect to which the approval of PAB's
shareholders is required by the GBCC, (ii) remove a member of the PAB Board of
Directors, (iii) call a special meeting of the shareholders and (iv) alter,
amend, delete or rescind any portion of the provision requiring a two-thirds
vote for certain actions.
Eagle. The Eagle Articles provide that each outstanding share of Eagle
Common Stock shall be entitled to one vote on any matter that is submitted to a
shareholder vote. If a quorum is present, the vote of the holders of a majority
of the shares outstanding and entitled to vote that are represented at the
meeting will determine any matter coming before the meeting unless a different
vote is required by the GBCC or by Eagle's Articles of Incorporation or Bylaws.
The Eagle Articles require a two-thirds vote of the outstanding shares of Eagle
Common Stock with respect to: (i) the merger or consolidation of Eagle with any
other corporation, partnership, trust, estate or association, (ii) the sale or
exchange by Eagle of all or a substantial part of its assets, (iii) the issuance
or delivery by Eagle of any stock or other securities issued by it in exchange
or payment for any properties or assets (other than cash) or securities of any
other entity, (iv) the merger of any affiliate of Eagle with or into any other
entity or any of its affiliates, or (v) the dissolution of Eagle. This special
voting requirement does not apply, however, to any such merger, consolidation,
sale or exchange, issuance or delivery of stock or other securities or
dissolution which has first been approved in writing by the affirmative vote of
two-thirds of the directors, nor does it apply to any such transactions solely
between Eagle and another entity 100% of the voting stock or voting equity
interests of which is owned by Eagle.
AMENDMENT OF ARTICLES OF INCORPORATION AND BYLAWS
PAB. Under the PAB Articles, a two-thirds vote of the total issued and
outstanding shares of PAB Common Stock is required in order to alter, amend,
delete or rescind the provision in the Articles of Incorporation requiring a
two-thirds vote for certain actions. The PAB Bylaws may be altered or amended
and new Bylaws may be adopted by PAB's Board of Directors at any annual, regular
or special meeting of the Board of Directors.
Eagle. The Eagle Articles provide that the affirmative vote of the holders
of not less than two-thirds of the Eagle Common Stock entitled to vote at an
election of directors shall be required to amend, alter or repeal the Articles
of Incorporation or to adopt provisions inconsistent with any such provisions,
unless not less than two-thirds of the directors approve such amendment, in
which case the voting requirements otherwise provided for by law shall apply.
Under the Eagle Articles, the Eagle shareholders shall not make, alter, amend or
repeal any Bylaws except by the affirmative vote of the holders of not less than
two-thirds of the Eagle Common Stock entitled to vote at an election of
directors.
66
<PAGE>
RESTRICTIONS ON CERTAIN BUSINESS COMBINATIONS
PAB. The PAB Articles and Bylaws do not contain restrictions on certain
business combinations.
Eagle. The Eagle Articles provide that in the event Eagle receives an
acquisition proposal from another person or entity, the Eagle Board of Directors
shall review such acquisition proposal based on its evaluation of the best
interests of Eagle and its shareholders. As used in the Eagle Articles, the
term "acquisition proposal" refers to any offer of another party (i) to make a
tender offer or exchange offer for any equity security of Eagle or any of its
subsidiaries, (ii) to merge or consolidate Eagle or any of its subsidiaries with
another corporation, or (iii) to purchase or otherwise acquire all or
substantially all of the properties and assets owned by Eagle or any of its
subsidiaries.
In evaluating an acquisition proposal, the Eagle Board shall consider all
relevant factors including, but not limited to, (i) the expected social and
economic effects of the proposed transaction on the employees, customers,
suppliers, creditors and other persons or entities associated or affiliated with
or doing business with Eagle and its subsidiaries, (ii) the expected social and
economic effects on the communities within which Eagle and its subsidiaries
operate, and (iii) the consideration being offered by the other party in
relation to (a) the then current value of Eagle as determined by a freely
negotiated transaction and (b) the estimate of the directors as to Eagle's
future value as an independent entity without regard to the impact of temporary
or current market conditions on the value of the Eagle Common Stock or other
security. No director who, in good faith, votes against an acquisition proposal
(after taking into consideration the above-referenced factors) shall be held
liable to Eagle or any of its shareholders for any liabilities, losses or
damages incurred by it or them.
ADVANCE NOTICE REQUIREMENTS FOR DIRECTOR NOMINATIONS
PAB. The PAB Articles and Bylaws do not contain any advance notice
requirements.
Eagle. The Eagle Bylaws establish advance notice procedures with regard to
shareholder nominations of candidates for election as directors. For a
nomination to be brought properly by a shareholder, the shareholder must have
given timely notice of the nomination in writing to the Secretary of Eagle. To
be timely, a shareholder's notice of nomination must be given at least 90 days
but not more than 120 days prior to the annual meeting of shareholders at which
such directors are to be elected.
CERTAIN REGULATORY CONSIDERATIONS
HOLDING COMPANY REGULATION GENERALLY
PAB and Eagle are registered bank holding companies subject to regulation
by the Federal Reserve under the BHC Act. PAB and Eagle are required to file
financial information with the Federal Reserve periodically and are subject to
periodic examination by the Federal Reserve.
The BHC requires every bank holding company to obtain the prior approval of
the Federal Reserve 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 Federal
Reserve, by order or regulation, to be so closely related to banking or managing
or controlling banks as to be a proper incident thereto. Some of the activities
that the Federal Reserve has determined by regulation or order to be closely
related to banking are: making or servicing loans and certain types of leases,
performing certain data processing services, acting as fiduciary or investment
or financial advisor, providing discount brokerage services, underwriting bank
eligible securities, underwriting debt and equity securities on a limited basis
through separately
67
<PAGE>
capitalized subsidiaries and making investments in corporations or projects
designed primarily to promote community welfare.
PAB and Eagle must also register with the DBF and file periodic information
with the DBF. As part of such registration, the DBF requires information with
respect to the financial condition, operations, management and intercompany
relationships of PAB, the PAB Banks, Eagle and EBT 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
PAB or Eagle.
PAB and Eagle are "affiliates" of the PAB Banks and EBT, respectively,
under the Federal Reserve Act, which imposes certain restrictions on (i) loans
by the PAB Banks to PAB or by EBT to Eagle, (ii) investments in the stock or
securities of PAB or Eagle by the PAB Banks or EBT, respectively, (iii) the PAB
Banks or EBT's taking the stock or securities of an "affiliate" as collateral
for loans by the PAB Banks or EBT to a borrower and (iv) the purchase of assets
from PAB or Eagle by the PAB Banks or EBT, respectively. 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.
The PAB Banks and EBT are state banks chartered under the FICG and are
subject to examination by the DBF. The DBF regulates or monitors all areas of
the PAB Banks' and EBT's operations and activities, including reserves, loans,
mergers, issuance of securities, payment of dividends, interest rates and
establishment of branches.
PAYMENT OF DIVIDENDS
PAB and Eagle are legal entities separate and distinct from their
respective subsidiary banks. Most of the revenues of PAB and Eagle result from
dividends paid to them by their respective subsidiary banks. There are
statutory and regulatory requirements applicable to the payment of dividends by
the PAB Banks and EBT, as well as by PAB and Eagle to their shareholders.
The payment of dividends by the PAB Banks and EBT is subject to the FICG
and the regulations of the DBF promulgated thereunder which, among other things,
provides that the PAB Banks and EBT may pay dividends in cash or property only
if they are not insolvent and the payment of dividends would not render them
insolvent. Additionally, the PAB Banks and EBT may pay dividends only out of
their retained earnings, and no dividends may be paid if paid-in capital plus
unappropriated retained earnings are less than 20% of their capital stock.
Further, dividends may not be declared and paid without the approval of the DBF
if (i) their total classified assets exceed 80% of their equity capital, (ii)
their ratio of equity capital to adjusted total assets is less than 6%, or (iii)
the aggregate amount of dividends declared or anticipated to be declared in the
calendar year exceeds 50% of their net profits after taxes but before dividends
for the previous calendar year.
The payment of dividends by PAB and the PAB Banks and by Eagle and EBT may
also be affected or limited by other factors, such as the requirement to
maintain adequate capital above regulatory guidelines. In addition, if in the
opinion of the applicable regulatory authority a bank under its jurisdiction is
engaged in or is about to engage in an unsafe or unsound practice (which,
depending upon the financial condition of the banks, could include the payment
of dividends), such authority may require, after notice and hearing, that such
bank cease and desist from such practice. For 1997, PAB's cash dividend payout
to shareholders was 24.31% of net income, and Eagle's cash dividend payout to
shareholders was 41.49% of net income.
MONETARY POLICY
The results of operations of the PAB Banks and EBT are affected by credit
policies of monetary authorities, particularly the Federal Reserve. The
instruments of monetary policy employed by the Federal Reserve include open
market operations in U.S. government securities, changes in the discount rate on
bank borrowings and changes in reserve requirements against bank deposits. In
view of changing conditions in the national economy and in the money markets, as
well as the effect of actions by monetary and fiscal authorities including the
Federal
68
<PAGE>
Reserve, no prediction can be made as to possible future changes in interest
rates, deposit levels, loan demand or the business and earnings of the PAB Banks
or EBT.
CAPITAL ADEQUACY
The Federal Reserve has implemented risk-based rules for assessing bank and
bank holding company capital adequacy. These regulations establish minimum
capital standards in relation to assets and off-balance sheet exposures as
adjusted for credit risk. Banks and bank holding companies are required to have
(i) a minimum level of total capital (as defined) to risk-weighted assets of 8%,
(ii) a minimum Tier 1 Capital (as defined) to risk-weighted assets of 4%, and
(iii) a minimum 3% leverage ratio of Tier 1 Capital to total average assets for
the most highly-rated banks and bank holding companies. "Tier 1 Capital"
generally consists of common equity not including unrecognized gains and losses
on securities, minority interests in equity accounts of consolidated
subsidiaries and certain perpetual preferred stock less certain intangibles.
The Federal Reserve will require a bank holding company and a bank,
respectively, to maintain a leverage ratio greater than 3% if either is
experiencing or anticipating significant growth or is operating with less than
well-diversified risks in the opinion of the Federal Reserve. The Federal
Reserve uses the leverage ratio in tandem with the risk-based ratio to assess
the capital adequacy of banks and bank holding companies.
The Federal Reserve has proposed amending the capital adequacy standards to
provide for the consideration of interest rate risk in the overall determination
of a bank's capital ratio, requiring banks with greater interest rate risk to
maintain adequate capital for the risk. The proposed revisions are not expected
to have a significant effect on PAB's, the PAB Banks', Eagle's or EBT's capital
requirements, if adopted in their current form.
Effective December 19, 1992, a new Section 38 to the Federal Deposit
Insurance Act implemented the prompt corrective action provisions that Congress
enacted as a part of the Federal Deposit Insurance Corporation Improvement Act
of 1991 (the "1991 Act"). The "prompt corrective action" provisions set forth
five regulatory zones in which all banks are placed largely based on their
capital positions. Regulators are required 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 2%. Better capitalized
institutions are generally subject to less onerous regulation and supervision
than banks with lesser amounts of capital.
The FDIC has adopted regulations implementing the prompt corrective action
provisions of the 1991 Act, which place financial institutions in the following
five categories based upon capitalization ratios: (i) a "well capitalized"
institution has a total risk-based capital ratio of at least 10%, a Tier 1 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 1 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 1 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 1 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. Under the FDIC's regulations, the PAB
Banks and EBT are all "well capitalized" institutions.
69
<PAGE>
Set forth below are pertinent capital ratios for PAB, the PAB Banks, Eagle
and EBT as of June 30, 1998.
<TABLE>
<CAPTION>
MINIMAL CAPITAL REQUIREMENT PAB PAB BANKS EAGLE EBT
--------------------------- --- --------- ----- ---
<S> <C> <C> <C> <C>
Tier 1 Capital to Risk-based Assets: 4.00%(1) 13.42% 11.92% 12.70% 12.69%
Total Capital to Risk-based Assets: 8.00% (2) 14.67% 13.17% 13.95% 13.95%
Leverage Ratio (Tier 1 Capital to Total Average
Assets): 3.00%(3) 9.40% 8.27% 10.54% 10.58%
</TABLE>
______________
(1) Minimum required ratio for "well capitalized" banks is 6%.
(2) Minimum required ratio for "well capitalized" banks is 10%.
(3) Minimum required ratio for "well capitalized" banks is 5%.
Federal banking regulators have also adopted final regulations which
mandate that regulators take into consideration (i) concentrations of credit
risk, (ii) interest rate risk (when the interest rate sensitivity of an
institution's assets does not match the sensitivity of its liabilities or its
off balance-sheet position), and (iii) risks from non-traditional activities, as
well as an institution's ability to manage those risks, when determining the
adequacy of an institution's capital. That evaluation will be made as a part of
the institution's regular safety and soundness examination. In addition, the
banking regulators have amended their regulatory capital guidelines to
incorporate a measure for market risk. In accordance with the amended
guidelines, PAB, Eagle, the PAB Banks and EBT must incorporate a measure for
market risk in their regulatory capital calculations effective for reporting
periods after January 1, 1998. The revised guidelines are not expected to have
a material impact on PAB's, the PAB Banks', Eagle's or EBT's regulatory capital
ratios or their well capitalized status.
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 regulation 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. This regulation became effective on January 1, 1996, at which
time evaluation under streamlined procedures began for institutions with assets
of less than $250 million that are owned by a holding company with total assets
of less than $1 billion.
Congress and various federal agencies (including, in addition to the bank
regulatory agencies, the Department of Housing and Urban Development, the
Federal Trade Commission and the Department of Justice) (collectively, the
"Federal Agencies") responsible for implementing the nation's fair lending laws
have been increasingly concerned that prospective home buyers and other
borrowers are experiencing discrimination in their efforts to obtain loans. In
recent years, the Department of Justice has filed suit against financial
institutions which it determined had discriminated, seeking fines and
restitution for borrowers who allegedly suffered from discriminatory practices.
Most, if not all, of these suits have been settled (some for substantial sums)
without a full adjudication on the merits.
70
<PAGE>
On March 8, 1994, the Federal Agencies, in an effort to clarify what
constitutes lending discrimination and specify the factors that agencies will
consider in determining if lending discrimination exists, announced a joint
policy statement detailing specific discriminatory practices prohibited under
the Equal Credit Opportunity Act and the Fair Housing Act. In the policy
statement, three methods of proving lending discrimination were identified: (i)
overt 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.
On September 23, 1994, President Clinton signed the Riegle 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 Riegle-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 any interstate bank holding
company is permitted to merge its various bank subsidiaries into a single bank
with interstate branches after May 31, 1998. States have the authority to
authorize interstate branching prior to June 1, 1998, or alternatively, to opt
out of interstate branching prior to that date. The Georgia legislature did not
opt out of interstate branching.
On January 26, 1996, the Georgia Legislature adopted a bill (the "Georgia
Intrastate Bill") to permit, effective July 1, 1996, any Georgia bank or group
of affiliated banks under one holding company to establish new or additional
branch banks in any three counties within the State of Georgia in which it is
not currently operating. After July 1, 1998, all restrictions on state-wide
branching were removed. Prior to adoption of the Georgia Intrastate Bill,
Georgia only permitted branching via merger or consolidation with an existing
bank or in certain other limited circumstances.
On July 3, 1997, President Clinton signed legislation to clarify that
branches of state-chartered banks operating in host states are covered by the
laws of their home chartering state. The Riegle-Neal Amendment Act of 1997 is
intended to preserve the dual banking system by having state banks come under
only the rules of their chartering states. Other legislation dealing with bank
modernization is in various stages of the legislative process, and no prediction
as to the outcome or the impact of such legislation can be made at this time.
FDIC INSURANCE ASSESSMENTS FOR THE BANKS
EBT and the PAB Banks are subject to FDIC deposit insurance assessments for
the Bank Insurance Fund (the "BIF"). In the first five months of 1995, EBT was
assessed $.23 per $100 of deposits, based on a risk-based system whereby banks
were assessed on a sliding scale depending upon their placement in nine separate
supervisory categories, from $.23 per $100 of deposits for the healthiest banks
(those with the highest capital, best management and best overall condition) to
as much as $.31 per $100 of deposits for the less-healthy institutions.
During 1996, PAB's then thrift subsidiary, First Community Bank of
Southwest Georgia, was assessed a charge of $.657 per $100 of domestic deposits
held as of March 31, 1995, which amounted to approximately $385,000, to
recapitalize the thrift industry insurance fund.
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 new rate took effect on September 29,
1995 retroactive to June 1, 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, EBT has paid
only the legally required annual minimum payment of $2,000 per year for
71
<PAGE>
insurance beginning in January 1996, and the PAB Banks have collectively paid
$64,240 for insurance beginning in 1997 and $103,175 in 1996.
On September 29, 1996, the Economic Growth and Regulatory Paperwork
Reduction Act of 1996 was enacted (the "1996 Act"). The 1996 Act's primary
accomplishment was to provide for the recapitalization of the Savings
Association Insurance Fund ("SAIF") by levying a one-time special assessment on
SAIF deposits to bring the fund to a reserve ratio equal to $.25 per $100 of
insured deposits and to provide that beginning in 1998, BIF assessments would be
used to help pay off the $780 million in annual interest payments on the $8
billion Financing Corporation ("FICO") bonds issued in the late 1980s as part of
the government rescue of the thrift industry. The law provides that BIF
assessments for FICO bond payments must be set at a rate equal to 20% of the
SAIF rates for such assessments for 1997, 1998 and 1999. After 1999, all FDIC
insured institutions will pay the same assessment rates. For the first six
months of 1998, the assessment for the FICO bond payments will be $.0132 per
$100 of deposits for BIF deposits and $.0648 per $100 of deposits for SAIF
deposits.
EXPERTS
The consolidated financial statements of PAB as of December 31, 1997 and
1996, and for each of the years in the two-year period ended December 31, 1997
have been incorporated by reference herein and in the registration statement in
reliance upon the report of Stewart, Fowler & Stalvey, P.C., independent
certified public accountants, incorporated by reference herein, and upon the
authority of said firm as experts in accounting and auditing.
The consolidated financial statements of Eagle at December 31, 1997 and for
the period ended December 31, 1997 have been included herein and in the
registration statement in reliance upon the report of Moore Stephens Tiller LLC,
independent certified public accountants, included herein, and upon the
authority of said firm as experts in accounting and auditing.
The consolidated financial statements of Eagle at December 31, 1996 and for
each of the years in the two-year period ended December 31, 1996 have been
included herein and in the registration statement in reliance upon the report of
KPMG Peat Marwick LLP, independent certified public accountants, appearing
elsewhere herein, and upon the authority of said firm as experts in accounting
and auditing.
LEGAL MATTERS
The validity of the shares of PAB Common Stock being offered hereby is
being passed upon for PAB by Troutman Sanders LLP, Atlanta, Georgia. Troutman
Sanders LLP, counsel for PAB, also will opine as to certain federal income tax
consequences of the Merger.
OTHER MATTERS
As of the date of this Proxy Statement/Prospectus, Eagle's Board of
Directors knows of no matters that will be presented for consideration at the
Special Meeting other than as described in this Proxy Statement/Prospectus.
However, if any other matter shall come before the Special Meeting or any
adjournments thereof and shall be voted upon, the proposed proxy will be deemed
to confer authority to the individuals named as authorized therein to vote the
shares represented by such proxy as to any such matters that fall within the
purposes set forth in the Notice of Special Meeting as determined by a majority
of the Board of Directors of Eagle.
72
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
EAGLE BANCORP, INC. AND SUBSIDIARY
Independent Auditor's Report of Tiller, Stewart & Company, LLC......................................... F-2
Independent Auditors' Report of KPMG Peat Marwick LLP.................................................. F-3
Consolidated Balance Sheets - December 31, 1997 and 1996............................................... F-4
Consolidated Statements of Income - Years ended December 31, 1997, 1996 and 1995....................... F-5
Consolidated Statements of Shareholders' Equity - Years ended December 31, 1997, 1996 and 1995......... F-6
Consolidated Statements of Cash Flows - Years ended December 31, 1997, 1996 and 1995................... F-7
Notes to Consolidated Financial Statements - December 31, 1997, 1996 and 1995.......................... F-8
Unaudited Consolidated Balance Sheet - June 30, 1998................................................... F-21
Unaudited Consolidated Statements of Income and Comprehensive Income - Three Months ended June 30,
1998 and 1997......................................................................................... F-22
Unaudited Consolidated Statements of Income and Comprehensive Income - Six Months ended June 30,
1998 and 1997......................................................................................... F-23
Unaudited Consolidated Statements of Cash Flows - Six Months ended June 30, 1998 and 1997............. F-24
Notes to Unaudited Consolidated Financial Statements................................................... F-26
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITOR'S REPORT
The Board of Directors and Shareholders
Eagle Bancorp, Inc.
We have audited the accompanying consolidated balance sheet of Eagle Bancorp,
Inc. and subsidiary as of December 31, 1997, and the related consolidated
statements of income, shareholders' equity, and cash flows for the year then
ended. 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 audit. The financial statements of Eagle Bancorp, Inc.
and subsidiary as of December 31, 1996 and 1995 were audited by other auditors
whose report dated February 7, 1997, expressed an unqualified opinion on those
financial statements.
We conducted our audit 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 audit provides a reasonable basis for our opinion.
In our opinion the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Eagle Bancorp, Inc.
and subsidiary at December 31, 1997 and the results of their operations and
their cash flows for the year then ended in conformity with generally accepted
accounting principles.
/s/ Tiller, Stewart & Company, LLC
TILLER, STEWART & COMPANY, LLC
Savannah, Georgia
January 15, 1998
F-2
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Eagle Bancorp, Inc.:
We have audited the accompanying consolidated balance sheet of Eagle Bancorp,
Inc. and subsidiary as of December 31, 1996, and the related consolidated
statements of income, shareholders' equity and cash flows for each of the years
in the two-year period ended December 31, 1996. These consolidated financial
statements are the responsibility of Eagle's management. Our responsibility is
to express an opinion on these consolidated financial statements based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Eagle Bancorp, Inc.
and subsidiary at December 31, 1996, and the results of their operations and
their cash flows for each of the years in the two-year period ended December 31,
1996 in conformity with generally accepted accounting principles.
/s/ KPMG PEAT MARWICK LLP
KPMG PEAT MARWICK LLP
Atlanta, Georgia
February 7, 1997
F-3
<PAGE>
EAGLE BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
1997 1996
--------------------------- -------------------------
<S> <C> <C>
ASSETS
Cash and due from banks $ 1,677,651 $ 2,237,822
Federal funds sold 1,280,000 1,500,000
----------- -----------
Total cash and cash equivalents 2,957,651 3,737,822
Interest-bearing deposits with other banks 1,000,000
Investment securities available for sale 6,597,422 6,898,784
Investment securities held to maturity
(estimated market value of $4,568,561
in 1997 and $3,791,932 in 1996) 4,541,697 3,790,335
Loans 49,474,280 42,638,858
Less allowance for loan losses (706,237) (639,500)
----------- -----------
Loans, net 48,768,043 41,999,358
Premises and equipment, net 2,437,122 2,474,386
Other assets 1,033,491 829,308
----------- -----------
Total assets $66,335,426 $60,729,993
=========== ===========
LIABILITIES
Deposits:
Noninterest-bearing $ 6,175,919 $ 5,184,539
Interest-bearing 49,491,445 47,280,321
----------- -----------
Total deposits 55,667,364 52,464,860
Federal Home Loan Bank advances 2,643,507 548,250
Federal funds purchased 200,000
Other liabilities 1,272,136 1,257,832
----------- -----------
Total liabilities 59,583,007 54,470,942
----------- -----------
SHAREHOLDERS' EQUITY
Common stock - par value $1 per share;
authorized 10,000,000 shares;
issued and outstanding 873,875 shares
in 1997 and 862,845 shares in 1996 873,875 862,845
Additional paid-in capital 4,887,567 4,821,527
Retained earnings 980,884 586,583
Net unrealized gain (loss) on investment
securities
available for sale, net of deferred income taxes 10,093 (11,904)
----------- -----------
Total shareholders' equity 6,752,419 6,259,051
----------- -----------
Total liabilities and shareholders' equity $66,335,426 $60,729,993
=========== ===========
See Notes to Consolidated Financial Statements
</TABLE>
F-4
<PAGE>
EAGLE BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
1997 1996 1995
-------------------------- ---------------------- --------------------
<S> <C> <C> <C>
INTEREST INCOME
Loans $4,512,884 $4,017,584 $3,687,797
Investment securities:
Taxable 538,524 491,027 419,279
Tax-exempt 122,054 88,815 33,191
Federal funds sold 63,557 58,743 89,364
Deposits in other banks 1,186 1,055 6,429
---------- ---------- ----------
Total interest income 5,238,205 4,657,224 4,236,060
---------- ---------- ----------
INTEREST EXPENSE
Deposits 2,419,477 2,232,006 1,986,892
Federal Home Loan Bank advances 75,274 35,221
Other borrowed funds 43,582 1,728 1,060
---------- ---------- ----------
Total interest expense 2,538,333 2,268,955 1,987,952
---------- ---------- ----------
NET INTEREST INCOME 2,699,872 2,388,269 2,248,108
---------- ---------- ----------
PROVISION FOR LOAN LOSSES 116,000 107,842 75,503
---------- ---------- ----------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 2,583,872 2,280,427 2,172,605
---------- ---------- ----------
NONINTEREST INCOME
Service charges on deposit accounts 122,221 116,391 105,786
Other service charges and fees 256,299 223,665 217,102
Net realized gain (loss) on sales of available
for sale securities 1,293 (10,467) (4,531)
Other noninterest income 367,026 312,872 172,177
---------- ---------- ----------
746,839 642,461 490,534
---------- ---------- ----------
NONINTEREST EXPENSES
Salaries and employee benefits 1,142,200 1,071,636 953,836
Occupancy 307,272 272,664 222,197
Other noninterest expenses 900,698 826,732 776,926
---------- ---------- ----------
2,350,170 2,171,032 1,952,959
---------- ---------- ----------
INCOME BEFORE INCOME TAXES 980,541 751,856 710,180
PROVISION FOR INCOME TAXES 306,600 250,000 210,000
---------- ---------- ----------
NET INCOME $ 673,941 $ 501,856 $ 500,180
========== ========== ==========
Basic earnings per share $0.78 $0.58 $0.58
========== ========== ==========
Diluted earnings per share $0.76 $0.57 $0.57
========== ========== ==========
</TABLE>
See Notes to Consolidated Financial Statements
F-5
<PAGE>
EAGLE BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Net Unrealised
Gain (Loss)
Common Stock on Investment
---------------------- Additional Securities
Paid-In Retained Available
Shares Amount Capital Earnings for Sale Total
---------- ----------- ----------- --------- -------------- ----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE - DECEMBER 31, 1994 862,755 $862,755 $4,820,841 $ 231,659 $(92,862) $5,822,393
Net income 500,180 500,180
Cash paid in lieu of fractional
shares
in connection with stock split (349) (349)
Cash dividends declared, $.25 per
share (215,689) (215,689)
Net change in unrealized gain
(loss) on investment securities
available for sale
92,396 92,396
------- --------- ---------- --------- -------- ----------
BALANCE - DECEMBER 31, 1995 862,755 862,755 4,820,492 516,150 (466) 6,198,931
Net income 501,856 501,856
Issuance of stock 90 90 1,035 1,125
Cash dividends declared, $.50 per (431,423) (431,423)
share
Net change in unrealized gain (loss
on investment securities
available for sale
(11,438) (11,438)
------- --------- ---------- --------- -------- ----------
BALANCE - DECEMBER 31, 1996 862,845 862,845 4,821,527 586,583 (11,904) 6,259,051
Net income 673,941 673,941
Issuance of stock 11,030 11,030 66,040 77,070
Cash dividends declared, $.32 per (279,640) (279,640)
share
Net change in unrealized gain
(loss) on investment securities
available for sale 21,997 21,997
------- --------- ---------- --------- -------- ----------
BALANCE - DECEMBER 31, 1997 873,875 $873,875 $4,887,567 $ 980,884 $ 10,093 $6,752,419
======= ========= ========== ========= ======== ==========
</TABLE>
See Notes to Consolidated Financial Statements
F-6
<PAGE>
<TABLE>
<CAPTION>
EAGLE BANCORP, INC AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
- ------------------------------------------------------------------------------------------------------------------------------------
1997 1996 1995
------------------ ----------------- -----------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 673,941 $ 501,856 $ 500,180
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation 179,211 165,622 134,666
Amortization and accretion, net (22,024) (20,593) 13,211
Amortization of net deferred loan fees (4,977) 757
Provision for loan losses 116,000 107,842 75,503
Net realized (gain) loss on available for sale securities (1,293) 10,467 4,531
Compensation expense under stock options 1,125
Changes in:
Other assets (216,028) (83,997) (68,650)
Other liabilities 169,587 49,543 244,430
----------- ----------- -----------
Net cash provided by operating activities 899,394 726,888 904,628
----------- ----------- -----------
INVESTING ACTIVITIES
Net (increase) decrease in time deposits in other banks 1,000,000 (1,000,000)
Proceeds from maturities of investment securities:
Held to maturity securities 500,000 1,050,000
Available for sale securities 550,000 2,143,333
Proceeds from sales of available for sale securities 1,895,484 1,739,405 992,938
Purchase of investment securities:
Held to maturity securities (1,245,625) (748,359) (1,727,027)
Available for sale securities (1,542,700) (4,250,098) (1,613,872)
Net increase in loans (6,884,685) (5,229,898) (3,994,395)
Additions to premises and equipment (141,947) (91,313) (618,177)
----------- ----------- -----------
Net cash used for investing activities (6,419,473) (7,980,263) (4,817,200)
----------- ----------- -----------
FINANCING ACTIVITIES
Net increase in deposits 3,202,504 7,582,171 4,179,869
Federal Home Loan Bank advance proceeds 2,180,000 590,000
Repayment of Federal Home Loan Bank advances (84,743) (41,750)
Net increase (decrease) in other borrowings (200,000) (500,000) 700,000
Dividends paid (431,423) (215,689)
Cash paid in lieu of fractional shares (349)
Issuance of stock 73,570
----------- --------------- ----------------
Net cash provided by financing activities 4,739,908 7,414,732 4,879,520
----------- --------------- -----------
Increase (decrease) in cash and cash equivalents (780,171) 161,357 966,948
Cash and cash equivalents - beginning 3,737,822 3,576,465 2,609,517
----------- ----------- -----------
Cash and cash equivalents - ending $ 2,957,651 $ 3,737,822 $ 3,576,465
=========== =========== ===========
</TABLE>
See Notes to Consolidated Financial Statements
F-7
<PAGE>
EAGLE BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS - Eagle Bancorp, Inc. ("Eagle") through its wholly-
owned subsidiary, Eagle Bank and Trust (the "Bank"), provides a full range
of banking services from its main office and branch facilities to
individuals and business throughout Bulloch and surrounding counties.
BASIS OF PRESENTATION - The consolidated financial statements include the
accounts of Eagle and its wholly-owned subsidiary. All intercompany
balances and transactions have been eliminated. The accounting and
reporting policies and practices of Eagle conform to generally accepted
accounting principles and to general practice within the banking industry.
The following is a summary of the more significant of such policies and
practices.
USE OF ESTIMATES - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
Material estimates that are particularly susceptible to significant change
relate to the determination of the allowance for loan losses. The
allowance for loan losses is maintained at a level which, in management's
judgment, is adequate to absorb credit losses inherent in the loan
portfolio. Management's periodic evaluation of the adequacy of the
allowance is based on the Bank's past loss experience, known and inherent
risks in the portfolio, adverse situations that may affect the borrower's
ability to pay, the estimated value of the underlying collateral, current
economic conditions, and other pertinent factors. The allowance for loan
losses is increased by charges to income and recoveries on loans previously
charged off as uncollectible. Decreases in the allowance occur as loans
deemed uncollectible are charged to the allowance.
INVESTMENT SECURITIES AVAILABLE FOR SALE - Investments securities
available for sale are carried at market value. The related unrealized
gain or loss, net of tax, is included as a separate component of
shareholders' equity. Premiums and discounts are amortized and accreted
using a method which approximates a level yield. Gains and losses from
dispositions are based on the net proceeds and adjusted carrying amounts of
the securities sold, using the specific identification method.
INVESTMENT SECURITIES HELD TO MATURITY - Investment securities held to
maturity are stated at cost, adjusted for amortization of premiums and
accretion of discounts which are recognized as adjustments to interest
income. Eagle has the intent and ability to hold these investment
securities to maturity. Premiums and discounts are amortized and accreted
using a method which approximates a level yield. Gains and losses on
dispositions are based on the net proceeds and the adjusted carrying
amounts of the security sold, using the specific identification method.
LOANS - Effective January 1, 1995, the Bank adopted Statement of Financial
Accounting Standards No. 114 (as amended by No. 118), "Accounting by
Creditors for Impairment of a Loan." SFAS 114 establishes the accounting by
creditors for impairment of loans by specifying how allowances for credit
losses related to certain loans should be determined. This statement also
addresses the accounting by creditors for certain loans that are
restructured in a troubled debt restructuring. When a loan is impaired, the
amount of the impairment is measured based on the present value of expected
future cash flows discounted at the loan's effective interest rate.
For collateral dependent loans, impairment is measured based on a loan's
observable market price or the fair value of the collateral.
F-8
<PAGE>
EAGLE BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Loans that management has the intent and ability to hold for the
foreseeable future or until maturity or pay-off are reported at their
outstanding principal amounts adjusted for any charge-offs, the allowance
for possible loan losses, and any deferred fees or costs.
Interest on loans is recognized using the simple interest method based on
the principal balance outstanding. Interest accruals including accruals of
interest on impaired loans are discontinued when either principal or
interest becomes 90 days past due, or when in management's opinion, after
considering economic and business conditions and collection efforts, the
borrower's financial condition is such that it is not reasonable to expect
such interest will be collected. Interest income is subsequently recognized
only to the extent cash payments are received.
Loan fees, net of direct origination costs, are deferred and amortized over
the terms of the loans using a method which approximates a level yield.
PREMISES AND EQUIPMENT - Property is stated at cost less accumulated
depreciation. Depreciation is computed using the straight-line method over
the estimated useful lives of such assets.
INCOME TAXES - The provision for income taxes is based upon amounts
reported in the statements of income (after exclusion of non-taxable income
such as interest on state and municipal securities) and consist of taxes
currently due plus deferred taxes related primarily to temporary
differences between the basis of the allowance for loan losses and
accumulated depreciation. The deferred tax assets and liabilities represent
the future tax return consequences of those differences, which will either
be taxable or deductible when the assets and liabilities are recovered or
settled. Deferred tax assets and liabilities are reflected at income tax
rates applicable to the period in which the temporary differences are
expected to be realized or settled. As changes in tax laws or rates are
enacted, deferred tax assets and liabilities are adjusted through the
provision for income taxes.
RECLASSIFICATIONS - Certain amounts in the 1996 and 1995 consolidated
financial statements have been reclassified to conform with the
presentation adopted in 1997.
CASH AND CASH EQUIVALENTS - For purposes of reporting cash flows, cash and
cash equivalents include cash on hand and amounts due from banks and
federal funds sold.
RECENT ACCOUNTING PRONOUNCEMENTS - In June 1997, the Financial Accounting
Standards Board (FASB) issued Statements of Financial Accounting Standards
(SFAS) No. 130 "Reporting Comprehensive Income". This statement established
standards for reporting and displaying comprehensive income and its
components in a full set of general-purpose financial statements. This is
effective for fiscal years beginning after December 15, 1997.
Also, in June 1997, the Financial Accounting Standards Board issued SFAS
No. 131 "Disclosure about Segments of an Enterprise and Related
Information" and is effective for fiscal years beginning after December 15,
1997. This statement establishes standards for reporting operating segments
by public business enterprises in annual financial statements and requires
that those enterprises report selected information about operating segments
in interim financial reports to shareholders. The adoption of this
statement will have no effect on the financial statements of Eagle.
2. RESTRICTIONS ON CASH AND DUE FROM BANKS
The Bank is required to maintain certain reserve balances in the form of
vault cash. Such reserve requirements totaled approximately $199,000 and
$212,000 at December 31, 1997 and 1996, respectively.
F-9
<PAGE>
EAGLE BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
3. SECURITIES
Debt and equity securities have been classified according to
management's intent. The amortized cost, estimated market value and
gross unrealized gains and losses on securities are as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Available For Sale Securities
-----------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Costs Gains Losses Value
------------ --------- ---------- ------------
December 31, 1997:
-----------------------------------------------
U.S. Government agencies $ 3,396,930 $ 9,806 $ 3,283 $ 3,403,453
State, county, and municipal securities 2,940,664 10,636 1,631 2,949,669
------------ -------- ---------- ------------
Total debt securities 6,337,594 20,442 4,914 6,353,122
Federal Home Loan Bank stock 244,300 244,300
------------ -------- ---------- ------------
Total $ 6,581,894 $ 20,442 $ 4,914 $ 6,597,422
============ ======== ========== ============
December 31, 1996:
-----------------------------------------------
U.S. Treasury and U.S. Government agencies $ 3,890,204 $ 11,989 $ (18,043) $ 3,884,150
State, country, and municipal securities 2,868,494 6,855 (19,115) 2,856,234
------------ -------- ---------- ------------
Total debt securities 6,758,698 18,844 (37,158) 6,740,384
------------ -------- ---------- ------------
Federal Home Loan Bank stock 158,400 158,400
------------ -------- ---------- ------------
Total $ 6,917,098 $ 18,844 $ (37,158) $ 6,898,784
============ ======== ========== ============
Held To Maturity Securities
-----------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Costs Gains Losses Value
------------ --------- ---------- ------------
December 31, 1997:
-----------------------------------------------
U.S. Treasury and U.S. Government agencies $ 4,541,697 $ 33,795 $ 6,931 $ 4,568,561
------------ --------- ---------- ------------
$ 4,541,697 $ 33,795 $ 6,931 $ 4,568,561
============ ========= ========== ------------
December 31, 1996:
-----------------------------------------------
U.S. Treasury and U.S. Government agencies $ 3,790,355 $ 36,868 $ (35,271) $ 3,791,932
------------ --------- ---------- ------------
Total $ 3,790,355 $ 36,868 $ (35,271) $ 3,791,932
============ ========= ========== ============
</TABLE>
Gross realized gains and gross realized losses on available-for-sale
securities were $4,500 and $3,207, respectively, in 1997. Gross
realized losses on available-for-sale securities were $10,467 in 1996.
The amortized cost and estimated market value of debt securities at
December 31, 1997, by contractual maturity are as follows:
<TABLE>
<CAPTION>
Available for sale Held To Maturity
--------------------------- --------------------------
Amortized Market Amortized Market
Cost Value Cost Value
------------ ----------- ----------- -----------
<S> <C> <C> <C> <C>
Due in one year or less $ 790,000 $ 790,010 $ 299,672 $ 298,080
Due after one year through five years 5,087,443 5,098,640 3,742,025 3,773,291
Due after five years through ten years 460,151 464,472 500,000 497,190
------------ ----------- ----------- -----------
$ 6,337,594 $ 6,353,122 $ 4,541,697 $ 4,568,561
============ =========== =========== ===========
</TABLE>
Securities with a carrying amount of approximately $4,797,000 at
December 31, 1997 and approximately $2,500,000 at December 31, 1996
were pledged to secure deposits of public funds and for other purposes
required or permitted by law.
F-10
<PAGE>
EAGLE BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
4. LOANS
Loans are summarized as follows:
<TABLE>
<CAPTION>
December 31,
----------------------------------
1997 1996
-------------- --------------
<S> <C> <C>
Agricultural $ 1,699,641 $ 1,301,314
Commercial 8,443,154 8,275,067
Commercial real estate 21,655,639 19,194,293
Real estate construction 5,699,007 3,097,285
Residential real estate 6,705,326 6,538,226
Consumer 5,271,768 4,231,252
-------------- --------------
49,474,535 42,637,437
Net deferred loan fees (costs) (255) 1,421
-------------- --------------
$ 49,474,280 $ 42,638,858
============== ==============
</TABLE>
An analysis of the allowance for loan losses follows:
<TABLE>
<CAPTION>
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Balance, beginning of year $ 639,500 $ 570,000 $ 527,500
Provision for loan losses 116,000 107,842 75,503
Loans charged off (70,498) (59,423) (35,179)
Recoveries 21,235 21,081 2,176
------------ ------------ ------------
Balance, end of year $ 706,237 $ 639,500 $ 570,000
============ ============ ============
</TABLE>
Loans having recorded investments of approximately $48,000 at December
31, 1997 and approximately $123,000 at December 31, 1996 have been
identified as impaired in accordance with the provisions of FASB No.
114. The total allowance for possible loan losses related to these
loans was $8,000 and $18,000 at December 31, 1997 and 1996,
respectively.
In the normal course of its lending activities, Eagle is a party to
financial instruments with off-balance-sheet risk. These financial
instruments include commitments to extend credit and standby letters of
credit. Eagle's exposure to credit loss in the event of non-performance
by the other party of the financial instrument for commitments to
extend credit and standby letters of credit is represented by
contractual amount of those instruments. Eagle uses the same credit
policies in making these commitments as it does for on-balance-sheet
instruments and evaluates each customer's credit worthiness on a
case-by-case basis. At December 31, 1997, Eagle had outstanding loan
commitments of approximately $6,136,000 and standby letters of credit
of approximately $102,000. The amount of collateral obtained, if deemed
necessary, for these commitments by Eagle, upon extension of credit, is
based on management's credit evaluation of the customer. Collateral
held, if any, varies but may include inventory, equipment, real estate,
or other property. The Bank's loans are primarily concentrated in its
market area of the City of Statesboro, Georgia and surrounding Bulloch
county.
5. RELATED PARTY TRANSACTIONS
In the ordinary course of business, the Bank has direct and indirect
loans outstanding to certain directors, executive officers, and
principal shareholders, including their associates. Such loans are made
on the same terms as those prevailing at the time for comparable
transactions with unaffiliated customers.
F-11
<PAGE>
EAGLE BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
The following is a summary of the activity of loans to directors,
executive officers, and principal shareholders:
<TABLE>
<CAPTION>
December 31,
------------------------------
1997 1996
------------- ------------
<S> <C> <C>
Balance, beginning of year $ 1,749,000 $ 1,850,000
Amounts advanced 2,045,000 1,939,000
Repayments (1,990,000) (2,040,000)
-------------- ------------
Balance, end of year $ 1,804,000 $ 1,749,000
============== ============
</TABLE>
6. PREMISES AND EQUIPMENT
Premises and equipment is summarized as follows:
<TABLE>
<CAPTION>
December 31,
------------------------------
1997 1996
------------ ------------
<S> <C> <C>
Building and improvements $ 1,473,463 $ 1,469,358
Furniture and equipment 927,150 813,653
Automobiles 58,142 33,798
------------ ------------
2,458,755 2,316,809
Less accumulated depreciation 826,614 647,404
------------ ------------
1,632,141 1,669,405
804,981 804,981
------------ ------------
Land $ 2,437,122 $ 2,474,386
============ ============
</TABLE>
7. INTEREST-BEARING DEPOSITS
Interest-bearing deposits are summarized as follows:
<TABLE>
<CAPTION>
December 31,
------------------------------
1997 1996
------------ ------------
<S> <C> <C>
NOW $ 6,867,140 $ 7,420,192
Money Market 2,137,149 3,077,437
Savings 2,824,983 2,586,187
------------ ------------
11,817,762 10,319,613
Less accumulated depreciation 25,844,411 23,876,892
------------ ------------
$ 49,491,445 $ 47,280,321
============ ============
</TABLE>
Scheduled maturities of certificates of deposit are as follows:
<TABLE>
<CAPTION>
Years Ended December 31,
-------------------------
<S> <C>
1998 $ 30,517,479
1999 4,335,023
2000 1,691,063
2001 1,118,608
-------------
$ 37,662,173
=============
</TABLE>
<PAGE>
EAGLE BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
8. FEDERAL HOME LOAN BANK ADVANCES
The Bank has an agreement for advances with the Federal Home Loan Bank
of Atlanta. These advances are secured by a blanket floating lien
agreement which provides a security interest in all unencumbered first
mortgage residential loans and by stock in the Federal Home Loan Bank.
Advances from the Federal Home Loan Bank are summarized as follows:
<TABLE>
<CAPTION>
December 31,
------------------------------
1997 1996
------------ -------------
<S> <C> <C>
Advance payable-interest payable monthly
at 6.81%, monthly principal reductions
of $2,417 through March 2006. $ 239,249 $ 268,250
Advance payable-interest payable monthly
at 7.01%, monthly principal reductions
of $2,500 through April 2006. 250,000 280,000
Advance payable-interest payable monthly
at 6.70%, monthly principal reductions
of $3,167 through July 2007. 360,981
Advance payable-interest payable monthly
at 6.18%, monthly principal reductions
of $6,667 through November 2007. 793,277
Advance payable-interest payable monthly
at 6.06%, principal due June 1998. $ 1,000,000
-------------- ------------
$ 2,643,507 $ 548,250
============== ============
Aggregate annual maturities of FHLB advances:
Years Ended December 31, 1998 $ 1,173,814
1999 177,000
2000 177,000
2001 177,000
2002 177,000
thereafter 761,693
--------------
$ 2,643,507
==============
</TABLE>
9. CREDIT ARRANGEMENTS
At December 31, 1997, federal funds line of credit arrangements
aggregating $5,000,000 were available to the Bank from corresponding
banking institutions. There are no commitment fees and compensation
balances are not required. The Bank also has a Blanket Floating Lien
Agreement with the Federal Home Loan Bank of Atlanta. Under this
agreement, the Bank has a credit line up to seventy-five percent of the
book value of its one-to-four family first mortgage loans.
F-13
<PAGE>
EAGLE BANCORP, INC, AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
10. INCOME TAXES
The provision for income taxes is as follows:
YEARS ENDED DECEMBER 31,
--------------------------------------
1997 1996 1995
--------- --------- ---------
CURRENT $ 340,600 $ 269,128 $ 272,760
DEFERRED (34,000) (19,128) (62,760)
--------- --------- ---------
$ 306,600 $ 250,000 $ 210,000
========= ========= =========
The provision for income taxes is less than computed by applying the
statutory federal income tax rate of 34% to income before income taxes as
indicated by the following:
YEARS ENDED DECEMBER 31,
--------------------------------------
1997 1996 1995
--------- --------- ---------
Income tax at statutory rate $ 333,384 $ 255,631 $ 241,461
Increase (decrease) in taxes (33,507) (19,247) (7,673)
Tax-exempt interest
Valuation allowance for deferred
tax assets (29,718)
Other 6,723 13,616 5,930
--------- --------- ---------
Provision for income taxes $ 306,600 $ 250,000 $ 210,000
========= ========= =========
The components of net deferred tax assets are as follows:
December 31,
------------------------
1997 1996
--------- ---------
Deferred tax assets $ 262,000 $ 203,000
Allowance for loans losses 4,000 14,000
State tax credit carryforwards
Unrealized loss on investment
securities available for sale 6,000
--------- ---------
Total deferred tax assets 266,000 223,000
--------- ---------
Deferred tax liabilities:
Accumulated depreciation 70,000 54,000
Unrealized gain on investment
securities available for sale 5,000
Other 6,000 4,000
--------- ---------
Total deferred tax liabilities 81,000 58,000
--------- ---------
Net deferred tax assets $ 185,000 $ 165,000
========= =========
Eagle recognizes deferred income tax assets and liabilities for differences
between the financial statement carrying amounts and the tax bases of assets and
liabilities which will result in future deductible or taxable amounts and for
net operating loss and tax credit carryforwards. A valuation allowance is then
established to reduce the deferred income tax assets to the level at which it is
"more likely than not" that the tax benefits will be realized. Realization of
tax benefits of deductible temporary differences and operating loss and tax
credit carryforwards depends on having sufficient taxable income within the
carryback and carryforward periods. Sources of taxable income that may allow for
the realization of tax benefits include 1) taxable income in the current year or
prior years that is available through carryback, 2) future taxable
F-14
<PAGE>
EAGLE BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
income that will result from the reversal of existing taxable temporary
differences, and 3) future taxable income generated by future
operations. During the year ended December 31, 1995, Eagle decreased
its valuation allowance for deferred income tax assets by $29,718, as
accumulated deficits were recovered and taxable income was generated.
Based on the availability of carrybacks to prior taxable periods,
management believes that the Company, more likely than not, will
realize the net deferred tax assets recorded at December 31, 1997.
11. PROFIT SHARING PLAN
The Eagle Bank Profit Sharing Plan (the "Plan") provides employees of
the Bank a vehicle to save for retirement. The Plan allows the Bank to
make annual discretionary contributions for the benefit of plan
participants. All employees of the Bank can participate in the Plan
after they have met certain eligibility requirements. Under the terms
of the plan employer contributions are allocated to participants in the
same proportion that the participant's compensation, as defined, bears
to the total compensation of all participants for the year. For the
years ended December 31, 1997, 1996 and 1995, employer contributions
were $40,000, $30,000 and $25,000, respectively.
12. SUPPLEMENTAL CASH FLOW INFORMATION
Certain supplemental disclosure of cash flow information and noncash
investing and financing activities follows:
<TABLE>
<CAPTION>
Years Ended December 31,
---------------------------------------
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Cash paid during the year for:
Income taxes $ 260,542 $ 316,093 $ 379,699
----------- ----------- -----------
Interest $ 2,489,244 $ 2,204,231 $ 1,609,873
=========== =========== ===========
</TABLE>
13. REGULATORY REQUIREMENTS
The approval of the Georgia Department of Banking and Finance is
required if dividends declared by the Bank to Eagle in any year will
exceed 50% of the net income of the Bank for the previous calendar
year. As of December 31, 1997, the Bank could declare approximately
$375,000 of dividends without prior approval.
The Bank is subject to various regulatory capital requirements
administered by the federal banking agencies. Failure to meet minimum
capital requirements can initiate certain mandatory and possible
additional discretionary actions by regulators that, if undertaken,
could have a direct material effect on the Bank's financial statements.
Under capital adequacy guidelines and the regulatory framework for
prompt corrective action, the Bank must meet specific capital
guidelines that involve quantitative measures of the Bank's assets,
liabilities, and certain off-balance sheet items as calculated under
regulatory accounting practices. The Bank's capital amounts and the
classification are also subject to qualitative judgments by the
regulators about components, risk weightings, and other factors.
Quantitative measures established by regulation to ensure capital
adequacy require the Bank to maintain minimum amounts and ratios (set
forth in the table below) of Tier 1 capital (as defined in the
regulations) to total average assets (as defined) and minimum ratios of
Tier 1 and total capital (as defined) to risk-weighted assets (as
defined). Management believes, as of December 31, 1997, that the Bank
meets all capital adequacy requirements to which it is subject.
As of December 31, 1996, the most recent notification from the FDIC
categorized the Bank as well capitalized under the regulatory framework
for prompt corrective action. To be categorized as well capitalized the
Bank must maintain minimum total risk-based, Tier I risk-based, and
Tier I leverage ratios
F-15
<PAGE>
EAGLE BANCORP, INC AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
as set forth in the table. There are no conditions or events since that
notification that management believes have changed the institution's
category.
<TABLE>
<CAPTION>
For Capital Under Prompt Corrective
Actual Adequacy Purposes Action Provisions
----------------------- --------------------- --------------------------
Amount Ratio Amount Ratio Amount Ratio
----------- ---------- ---------- --------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
December 31, 1997:
- ------------------
Total Capital (to Risk Weighted Assets)
Consolidated $ 7,375,745 15% $ 4,054,829 8% $ 5,068,537 10%
Bank $ 7,372,581 15% $ 4,053,885 8% $ 5,067,356 10%
Tier 1 Capital (to Risk Weighted Assets)
Consolidated $ 6,742,326 13% $ 2,027,415 4% $ 3,041,122 6%
Bank $ 6,739,162 13% $ 2,026,942 4% $ 3,040,413 6%
Tier 1 Capital (to Average Assets)
Consolidated $ 6,742,326 11% $ 2,547,761 4% $ 3,184,701 5%
Bank $ 6,739,162 11% $ 2,547,297 4% $ 3,184,121 5%
December 31, 1996:
- ------------------
Total Capital (to Risk Weighted Assets)
Consolidated $ 6,842,455 15% $ 3,652,080 8% $ 4,565,100 10%
Bank $ 6,561,517 14% $ 3,652,080 8% $ 4,565,100 10%
Tier 1 Capital (to Risk Weighted Assets)
Consolidated $ 6,270,955 14% $ 1,826,040 4% $ 2,739,060 6%
Bank $ 5,990,017 13% $ 1,826,040 4% $ 2,739,060 6%
Tier 1 Capital (to Average Assets)
Consolidated $ 6,270,955 11% $ 2,367,400 4% $ 2,959,250 5%
Bank $ 5,990,017 10% $ 2,367,400 4% $ 2,959,250 5%
</TABLE>
14. STOCK OPTIONS
Eagle has an Incentive Stock Option Plan which provides for granting of
120,000 stock options to officers and certain key employees of the Bank.
The exercise price of these options is equal to the fair market value of
Eagle's stock on the date of grant. The maximum term of the options is ten
years and they vest and become exercisable at such times and in such
installments as the Board of Directors shall provide in each individual
stock option agreement. There are 55,882 remaining stock options authorized
to be granted under this plan as of December 31, 1997.
<TABLE>
<CAPTION>
Shares Exercise Price
-------- ----------------
<S> <C> <C>
Options outstanding - December 31, 1994 44,118 $ 6.67
Options granted
Options exercised
------------ ---------------
Options outstanding - December 31, 1995 44,118 $ 6.67
Options granted
Options exercised
------------ ---------------
Options outstanding - December 31, 1996 44,118 $ 6.67
Options granted 20,000 $14.00
Options exercised (11,030) $ 6.67
------------ --------------
Options outstanding - December 31, 1997 53,088 $6.67 - $14.00
------------ --------------
</TABLE>
As of December 31, 1997, the total outstanding options under the plan had a
weighted average exercise price of $9.43 and a weighted average remaining
contractual life of 2.75 years.
F-16
<PAGE>
EAGLE BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
Eagle has elected not to adopt the fair value method of accounting for
employee stock options as prescribed by Statement of Financial Accounting
Standards (SFAS) No. 123 "Accounting for Stock-Based Compensation" issued
by the Financial Accounting Standards Board. Instead, as permitted by SFAS
No. 123, Eagle has elected to continue to apply the intrinsic value method
of accounting prescribed under the provisions of Accounting Principles
Board Statement No. 25, "Accounting for Stock Issued to Employees".
Accordingly, no compensation cost has been recognized for options granted
in 1997. Had compensation cost been determined on the basis of fair value
pursuant to SFAS No. 123, net income and earnings per share would have been
reduced to the pro forma amounts as disclosed below:
<TABLE>
<CAPTION>
Years Ended December 31, 1997 As reported Proforma
----------------------------- ------------- ----------
<S> <C> <C>
Net income: $ 637,941 $ 650,941
--------------------- ============= ==========
Earnings per share:
---------------------
Basic $ 0.78 $ 0.75
------------- ----------
Diluted $ 0.76 $ 0.74
============= ==========
</TABLE>
The fair value of each option granted in 1997 is estimated on the date of
grant using the Black Scholes option pricing model with the following
assumptions: dividend yield of 2.5%; risk free interest rate of 5.89%;
expected life of options of five years and expected volatility of near 0%.
15. EARNINGS PER SHARE
Earnings per share has been calculated in accordance with the provisions of
Statement of Financial Accounting Standards (SFAS) No. 128 "Earnings Per
Share" issued by the Financial Accounting Standards Board. SFAS No. 128
requires presentation of earnings per share on a basic computation and a
diluted computation. The basic computation divides net income by only the
weighted average number of common shares outstanding for the year and the
diluted computation gives effect to all diluted common shares that were
outstanding during the year.
Earnings per share amounts for 1996 and 1995 have been restated to give
effect to the application of this new standard.
The following data shows the amounts used in computing earnings per share
and the effect on income and the weighted average number of shares of
dilutive potential common stock.
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------------------------------------
1997 1996 1995
-------------- -------------- --------------
<S> <C> <C> <C>
Income available to common shareholders:
Used in basic earnings per share $ 673,941 $ 501,856 $ 500,180
============== =============== ==============
Used in diluted earnings per share $ 673,941 $ 501,856 $ 500,180
=============== =============== ==============
Weighted average number of common
shares used in basic earnings per share 865,143 862,845 862,755
Effect of dilutive securities:
Stock options 17,324 22,353 20,577
-------------- -------------- --------------
Weighted average number of common
and dilutive potential common shares
used in diluted earnings per share 882,467 885,198 883,332
=============== ============== ==============
</TABLE>
F-17
<PAGE>
16. FAIR VALUES OF FINANCIAL INSTRUMENTS
EAGLE BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
The following disclosures of the estimated fair value of financial
instruments is made in accordance with requirements of Statement of
Financial Standards No, 107, "Disclosures about Fair Value of Financial
Instruments". The estimated fair value amounts have been determined by
Eagle using available market information and appropriate valuation
methodologies. However, considerable judgment is necessarily required
to interpret market data to develop the estimates of fair value.
Accordingly, the estimates presented herein are not necessarily
indicative of the amounts Eagle could realize in a current market
exchange. The use of different market assumptions and/or estimation
methodologies may have a material effect on the estimated fair value
amounts.
The following methods and assumptions were used by Eagle in estimating
fair values of financial instruments:
CASH AND CASH EQUIVALENTS AND INTEREST-BEARING DEPOSITS IN OTHER
FINANCIAL INSTITUTIONS - The carrying amounts of these assets
approximates fair value because of their short-term maturities.
INVESTMENTS SECURITIES - Fair values for investment securities are
based on quoted market prices.
LOANS - For variable-rate loans that reprice frequently and have no
significant change in credit risk, fair values are based on carrying
values. The fair values for all other loans are estimated using
discounted cash flow analyses, using interest rates currently being
offered for loans with similar terms to borrowers of similar credit
quality. The carrying value of off-balance-sheet commitments
approximates fair value based on the fact that Eagle generally does not
offer lending commitments to its customers for long periods and, the
underlying rates of the commitments approximate market rates.
DEPOSIT LIABILITIES - Fair values of certificates of deposit are
estimated using a discounted cash flow calculation that applies
interest rates currently being offered on certificates of similar terms
and remaining maturities. The carrying amounts of all other deposits,
due to their nature, approximate their fair values.
FEDERAL HOME LOAN BANK ADVANCES - Fair value for fixed-rate borrowings
from the Federal Home Loan Bank are estimated using a discounted cash
flow calculation that considers interest rates currently being offered
on advances of similar terms to maturity.
FEDERAL FUNDS PURCHASED - The carrying amount of federal funds
purchased approximates fair values.
The carrying values and estimated fair values of Eagle's financial
instruments were as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1997 DECEMBER 31, 1996
--------------------------- ---------------------------
CARRYING FAIR CARRYING FAIR
VALUE VALUE VALUE VALUE
------------ ----------- ----------- -----------
<S> <C> <C> <C> <C>
FINANCIAL ASSETS:
Cash and cash equivalents
and interest-earning deposits $ 2,957,651 $ 2,957,651 $ 4,737,822 $ 4,737,822
Investment securities:
Available for sale 6,597,422 6,597,422 6,898,784 6,898,784
Held to maturity 4,541,697 4,58=68,561 3,790,355 3,791,932
Loans, net 48,768,043 49,477,93861 41,999,358 41,951,522
FINANCIAL LIABILITIES:
Deposits $55,667,364 $55,893,556 $52,464,860 $52,624,058
Federal Home Loan advances 2,643,507 2,685,613 548,250 554,724
Other borrowed funds 200,000 200,000
</TABLE>
F-18
<PAGE>
EAGLE BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
17. OTHER NONINTEREST EXPENSES
The major components of other noninterest expenses are as follows:
<TABLE>
<CAPTION>
December 31,
--------------------------------------------
1997 1996 1995
----------- ----------- ---------
<S> <C> <C> <C>
Postage $ 62,402 $ 56,267 $ 51,605
Stationery and supplies 61,205 84,717 74,317
Advertising and marketing 58,824 52,366 51,605
Professional services 85,589 74,864 54,471
Data processing 129,081 109,217 87,845
Director fees 58,900 53,300 55,400
Other 444,697 396,001 401,683
----------- ----------- ---------
Total $ 900,698 $ 826,732 $ 776,926
=========== =========== =========
</TABLE>
18. EAGLE BANCORP, INC. (PARENT ONLY) FINANCIAL INFORMATION
Eagle Bancorp, Inc. condensed balance sheets and the related condensed
statements of income and cash flows follow:
<TABLE>
<CAPTION>
Condensed Balance Sheets
---------------------------------
December 31,
----------------------------------
1997 1996
------------- -------------
<S> <C> <C>
ASSETS
Cash $ 338,431 $ 774,702
Investment in Bank 6,749,255 5,978,113
Other assets 11,809
------------- -------------
Total assets $ 7,099,495 $ 6,752,815
============= =============
LIABILITIES
Dividends payable $ 279,640 $ 431,423
Other liabilities 67,436 62,341
------------- -------------
Total liabilities 347,076 493,764
============= =============
SHAREHOLDERS' EQUITY
Common Stock 873,875 862,845
Additional paid-in capital 4,887,567 4,821,527
Retained Earnings 980,884 586,583
Net unrealized gain (loss) on investment
securities available for sale, net of taxes 10,093 (11,904)
------------- -------------
Total shareholders' equity 6,752,419 6,259,051
------------- -------------
Total liabilities and shareholders' equity $ 7,099,495 $ 6,752,815
============= =============
</TABLE>
F-19
<PAGE>
EAGLE BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
<TABLE>
<CAPTION>
CONDENSED STATEMENTS OF INCOME
- ------------------------------
Years Ended December 31,
--------------------------------------
1997 1996 1995
--------- --------- ----------
<S> <C> <C> <C>
Noninterest expenses $ 75,204 $ 113,778 $ 73,925
--------- --------- ---------
Loss before equity in undistributed
income of Bank (75,204) (113,778) (73,925)
Equity in undistributed income of Bank 749,145 615,634 574,105
--------- --------- ---------
Net income $ 673,941 $ 501,856 $ 500,180
========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
CONDENSED STATEMENTS OF CASH FLOWS
- ----------------------------------
Years Ended December 31,
----------------------------------
1997 1996 1995
-------- ---------- ----------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 673,941 $ 501,856 $ 500,180
Adjustments to reconcile net income
to net cash used for operating activities;
Equity in undistributed income of Bank (749,145) (615,634) (574,105)
Compensation expense under stock awards
and options 1,125
Amortization of organization costs 382 4,584
Decrease (increase) in other assets (11,809) 28,420
Increase (decrease) in other liabilities 8,595 10,964 (28,105)
--------- ---------- ----------
Net cash used for operating activities (78,418) (101,307) (69,026)
--------- ---------- ----------
FINANCING ACTIVITIES
Cash paid in lieu of fractional shares in
connection with stock split (349)
Exercise of stock options 73,570
Dividends paid (431,423) (215,689)
--------- ---------- ----------
Net cash used for financing activities (357,853) (215,689) (349)
--------- ---------- ----------
Decrease in cash (436,271) (316,996) (69,375)
Cash - beginning of year 774,702 1,091,698 1,161,073
--------- ---------- ----------
Cash - end of year $ 338,431 $ 774,702 $1,091,698
========= ========== ==========
</TABLE>
F-20
<PAGE>
<TABLE>
<CAPTION>
EAGLE BANCORP, INC. AND SUBSIDIARY
Consolidated Balance Sheets
06/30/98 12/31/97
----------- -----------
<S> <C> <C>
ASSETS (Unaudited)
Cash & Due From Banks $ 2,736,848 $ 1,677,651
Federal Funds Sold - 1,280,000
----------- -----------
Total cash and cash equivalents 2,736,848 2,957,651
Investment securities:
Available for sale 7,990,926 6,597,422
held for maturity 4,043,909 4,541,697
----------- -----------
Total investments securities 12,034,835 11,139,119
Loans 50,834,817 49,474,280
Allowance for Loan Loss (728,500) (706,237)
----------- -----------
Loans, net 50,106,317 48,768,043
Premises and equipment, net 2,397,851 2,437,122
Other Assets 1,270,041 1,033,491
----------- -----------
TOTAL ASSETS $68,545,892 $66,335,426
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Deposits:
Noninterest-bearing deposits $ 6,176,452 $ 6,175,919
Interest-bearing deposits 50,038,712 49,491,445
----------- -----------
Total Deposits 56,215,164 55,667,364
Borrowings 4,446,166 2,643,507
Accrued expenses and other liabilities 909,511 1,272,136
----------- -----------
Total Liabilities 61,570,841 59,583,007
----------- -----------
Shareholders' Equity:
Common Stock, $1 par value, Authorized 10,000,000 shares:
873,875 shares issued and outstanding 873,875 873,875
Additional paid-in capital 4,887,568 4,887,567
Retained Earnings 1,209,899 980,884
Accumulated comprehensive income 3,709 10,093
----------- -----------
Total shareholders' equity 6,975,051 6,752,419
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $68,545,892 $66,335,426
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-21
<PAGE>
EAGLE BANCORP, INC. AND SUBSIDIARY
Consolidated Statements of Income and Comprehensive Income
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended
---------------------------------------------
June 30, June 30,
1998 1997
---- ----
<S> <C> <C>
Interest Income:
Loans, Including fees $1,199,047 $1,091,198
Federal Funds Sold 7,277 3,311
Investment securities:
Taxable 139,004 141,688
Nontaxable 30,248 31,517
---------- ----------
Total interest income 1,375,576 1,267,714
---------- ----------
Interest Expense:
Deposits 623,168 583,489
Other borrowings 50,805 19,088
---------- ----------
Total Interest Expense 673,973 602,577
---------- ----------
Net interest income 701,603 665,137
Provision for possible loan losses 17,332 35,000
---------- ----------
Net interest income after provision
for possible loan losses 684,271 630,137
---------- ----------
Noninterest income:
Service Charges 87,227 104,221
Referral Fees Mortgages 82,819 21,267
Net realized gain (loss) on available for sale securities 913 1,293
Other Income 37,106 42,209
---------- ----------
Total noninterest income 208,060 168,990
---------- ----------
Noninterest expense:
Salaries and employee benefits 308,547 274,697
Net occupancy and equipment expense 70,275 77,596
Other operating expense 266,667 220,277
---------- ----------
Total noninterest expenses 645,489 572,570
---------- ----------
Income before income taxes 246,842 226,557
Income taxes 78,042 75,622
---------- ----------
Net income $ 168,800 $ 150,935
---------- ----------
Other comprehensive income (loss), net of tax:
Unrealized gains (losses) on securities:
Unrealized holding gains (losses) arising during the period 4,130 62,333
Less reclassification adjustment for gains (losses) included in net (350) (500)
income ---------- ----------
Other comprehensive income (loss) 3,780 61,833
---------- ----------
Comprehensive Income $ 172,580 $ 212,768
========== ==========
Basic earnings per share $0.19 $0.17
========== ==========
Diluted earnings per share $0.18 $0.16
========== ==========
</TABLE>
See accompanying notes to financial statements
F-22
<PAGE>
<TABLE>
<CAPTION>
EAGLE BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(UNAUDITED)
Six months ended
---------------------------------------------
June 30, June 30,
1998 1997
---- ----
<S> <C> <C>
Interest Income:
Loans, Including fees $2,362,252 $2,107,522
Interest on deposits in financial institutions 1,205
Federal Funds Sold 17,726 38,892
Investment securities:
Taxable 264,529 268,076
Nontaxable 64,229 60,471
---------- ----------
Total interest income 2,708,736 2,476,166
---------- ----------
Interest Expense:
Deposits 1,243,116 1,161,856
Other borrowings 94,153 28,277
---------- ----------
Total Interest Expense 1,337,269 1,190,133
---------- ----------
Net interest income 1,371,467 1,286,033
Provision for possible loan losses 32,332 41,000
---------- ----------
Net interest income after provision for possible loan losses 1,339,135 1,245,033
---------- ----------
Noninterest income:
Service Charges 185,251 192,916
Referral Fees Mortgages 163,218 92,836
Net realized gain (loss) on available for sale securities 913 1,293
Other Income 92,278 42,373
---------- ----------
Total noninterest income 441,660 329,418
---------- ----------
Noninterest expense:
Salaries and employee benefits 606,232 554,858
Net occupancy and equipment expense 146,406 152,366
Other operating expense 487,978 443,190
---------- ----------
Total noninterest expenses 1,240,616 1,150,414
---------- ----------
Income before income taxes 540,179 424,037
Income taxes 171,342 144,722
---------- ----------
Net income $ 368,837 $ 279,315
---------- ----------
Other comprehensive income (loss), net of tax:
Unrealized gains (losses) on securities:
Unrealized holding gains (losses) arising during the period (6,034) 4,923
Less reclassification adjustment for gains (losses) included in net (350) (500)
income ---------- ----------
Other comprehensive income (loss) (6,384) 4,423
---------- ----------
Comprehensive income $ 362,453 $ 283,738
========== ==========
Basic earnings per share $0.42 $0.32
========== ==========
Diluted earnings per share $0.40 $0.30
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements
F-23
<PAGE>
EAGLE BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six months ended June 30,
------------------------------------------
1998 1997
-------------------- -------------------
<S> <C> <C>
Cash Flows from operating activities:
Net Income $ 368,837 $ 279,315
Adjustments to reconcile net income to cash provided (used) by operating activities:
Provisions for possible loan losses 32,332 41,000
Depreciation 81,112 87,028
Securities gains (losses) 913 1,294
Amortization (accretion), net (3,316) 5,954
Accretion of loan fees - (60,625)
Loan fees, net - 19,625
Increase in other assets (234,553) (259,080)
Decrease in other liabilities (362,625) (54,864)
----------- -----------
Net cash provided (used) by operating activities (117,301) 59,647
----------- -----------
Cash Flows from investing activities:
Increase in loans (1,370,606) (5,611,249)
Purchase of Investment Securities:
Available for sale (3,490,000) (1,495,259)
Held to maturity - (1,247,895)
Purchase of premises and equipment (41,841) (105,815)
Proceeds from:
Maturities of interest earning deposits in
Financial institutions - 1,000,000
Proceeds from:
Maturities/called of investment securities held to maturity 500,000
sales/called/maturities of investment securities
Available for sale 2,088,306 1,297,641
----------- -----------
Net cash used by investing activities (2,314,141) (6,162,577)
----------- -----------
Cash Flow From Financing Activities
Increase in Deposits 547,800 2,164,365
FHLB Advances 1,802,659 970,500
Proceeds from reverse repurchases - 983,000
Cash dividends (139,820) (431,423)
----------- -----------
Net cash provided by financing activities 2,210,639 3,686,442
----------- -----------
</TABLE>
See accompanying notes to consolidated financial statements
F-24
<PAGE>
EAGLE BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six months ended June 30,
---------------------------
1998 1997
------------- ------------
<S> <C> <C>
Net Increase (Decrease) in Cash and Cash Equivalents (220,803) (2,416,488)
Cash And Cash Equivalents At Beginning of Period 2,957,651 3,537,822
---------- -----------
Cash And Cash Equivalents At End of Period $2,736,848 $ 1,121,334
========== ===========
Supplemental disclosures of cash paid during period for:
Interest $1,513,925 $ 1,441,740
========== ===========
Income taxes $ 239,040 $ 131,942
========== ===========
</TABLE>
See accompanying notes to consolidated financial statements
F-25
<PAGE>
EAGLE BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(1) Basis of Presentation
The unaudited consolidated financial statements include the accounts of Eagle
Bancorp, Inc. ("Eagle") and its wholly owned subsidiary, Eagle Bank and
Trust. The accompanying unaudited consolidated financial statements do not
include all information and notes necessary for a fair presentation of financial
position, results of operations, and cash flows in conformity with generally
accepted accounting principles. All adjustments consisting of normal recurring
accruals which, in the opinion of management, are necessary to a fair statement
of the financial position and results of operations for the periods covered by
this report have been included.
(2) Earnings Per Share
Earnings per share has been calculated in accordance with the provisions of
Statement of Financial Accounting Standards Board. SFAS No. 128 requires
presentation of earnings per share on a basic computation and a diluted
computation. The basic computation divides net income by only the weighted
average number of common shares outstanding for the year and the diluted
computation gives effect to all diluted common shares that were outstanding
during the year.
Earnings per share amounts for the year 1997 have been restated to give effect
to the application of this new standard.
The following data shows the amounts used in computing earnings per share and
the effect on income and the weighted average number of shares of dilutive
potential common stock.
<TABLE>
<CAPTION>
Three Months ended March 31, Six Months ended June 30,
---------------------------- -------------------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Income available to common stockholders:
Used in basic earnings per share $200,032 $128,382 $368,837 $ 279,315
======== ======== ======== =========
Used in diluted earnings per share 200,032 128,382 368,837 2 79,315
======== ======== ======== =========
Weighted average number of common shares used
in basic earnings per share 873,875 862,845 873,875 862,845
Effect of dilutive securities:
Stock options 19,912 19,622 51,088 44,118
-------- -------- -------- ---------
Weighted average number of common and dilutive
Potential common shares used in diluted earnings
per share 893,787 882,467 924,963 906,963
======== ======== ======== =========
</TABLE>
F-26
<PAGE>
APPENDIX A
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is made and
entered into as of June 30, 1998, by and between Eagle Bancorp, Inc. ("Eagle"),
a corporation organized and existing under the laws of the State of Georgia,
with its principal office located in Statesboro, Georgia, and PAB Bankshares,
Inc. ("PAB"), a corporation organized and existing under the laws of the State
of Georgia, with its principal office located in Valdosta, Georgia.
PREAMBLE
The Boards of Directors of Eagle and PAB are of the opinion that the
transaction described herein is in the best interest of the parties and their
respective shareholders. This Agreement provides for the merger of Eagle with
and into PAB (the "Merger"). At the effective time of the Merger, the
outstanding shares of the capital stock of Eagle shall be converted into the
right to receive shares of the common stock of PAB (except as provided herein).
As a result, shareholders of Eagle shall become shareholders of PAB. The
transaction described in this Agreement is subject to the approvals of the
shareholders of Eagle, the Board of Governors of the Federal Reserve System and
the Department of Banking and Finance of the State of Georgia, and the
satisfaction of certain other conditions described in this Agreement. It is the
intention of the parties to this Agreement that the Merger (i) for federal
income tax purposes shall qualify as a "reorganization" within the meaning of
Section 368(a) of the Internal Revenue Code, and (ii) for accounting purposes
shall qualify for treatment as a "pooling of interests".
Immediately following the Closing of the Merger, Eagle Bank and Trust
("Bank"), a financial institution organized under the laws of the State of
Georgia and a wholly-owned subsidiary of Eagle, with its main office located in
Statesboro, Georgia, will remain in existence under its Articles of
Incorporation and Bylaws, as in effect immediately prior to the Effective Time,
as a wholly-owned subsidiary of PAB.
Certain terms used in this Agreement are defined in Section 11.1 of
this Agreement.
NOW, THEREFORE, in consideration of the above and the mutual
warranties, representations, covenants and agreements set forth herein, the
parties agree as follows:
ARTICLE I
TRANSACTION AND TERMS OF MERGER
1.1 Merger. Subject to the terms and conditions of this Agreement, at the
Effective Time, Eagle shall be merged with and into PAB 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. PAB shall be the Surviving Corporation resulting
from the Merger, and the separate existence of Eagle shall cease. 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 Eagle and PAB.
1.2 Time and Place of Closing. The Closing will take place at 9:30 a.m. on
the date that the Effective Time occurs (or the immediately preceding day if the
Effective Time is earlier than 9:30 a.m.), or at such other time as the Parties,
acting through their Chief Executive Officers, may mutually agree. The place of
Closing shall be at the offices of Troutman Sanders LLP, Atlanta, Georgia, or
such other place as may be mutually agreed upon by the Parties.
1.3 Effective Time. The Merger contemplated by this Agreement shall become
effective on the date and at the time the Articles of Merger reflecting the
Merger shall become effective with the Secretary of State of the State of
Georgia. Subject to the terms and conditions hereof, unless otherwise mutually
agreed upon in writing by
<PAGE>
the Chief Executive Officers of each Party, the Parties shall use their
reasonable efforts to cause the Effective Time to occur on 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, (ii) the date on which the shareholders of Eagle approve
this Agreement, or (iii) such later date as may be mutually agreed upon in
writing by the Chief Executive Officers of each Party.
1.4 Execution of Support and Non Competition Agreements. Immediately prior
to the execution of this Agreement and as a condition hereto, each of the
executive officers and directors of Eagle and Bank listed in Exhibit D is
executing and delivering to PAB a Support Agreement and Non Competition
Agreement in substantially the form as attached hereto as Exhibit A.
ARTICLE 2
TERMS OF MERGER
2.1 Articles of Incorporation. The Articles of Incorporation of PAB 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 PAB in effect immediately prior to the Effective
Time shall be the Bylaws of the Surviving Corporation until otherwise amended or
repealed.
2.3 Directors of PAB. The directors of PAB in office immediately prior to
the Effective Time, together with two (2) additional persons who previously
served on the Board of Directors of Eagle who will be appointed to serve as
directors of PAB, shall serve as the directors of the Surviving Corporation from
and after the Effective Time in accordance with the Bylaws of the Surviving
Corporation. Such additional PAB directors will be nominated by the Board of
Directors of Eagle subject to approval by PAB, which such approval shall not be
unreasonably withheld. At the first annual meeting of PAB shareholders
following the Closing, PAB will nominate one (1) such Eagle nominee to serve for
a two (2) year term and one such Eagle nominee to serve for a three (3) year
term and will recommend that PAB shareholders vote in favor of their respective
elections. Each newly-elected Eagle nominee shall serve and refrains from
conduct that would constitute "cause" for removal under PAB's Articles of
Incorporation or Bylaws. Each Eagle nominee who has attained the age of 60 as
of the date of this Agreement will be exempt from any mandatory retirement
provisions applicable to such PAB directors.
2.4 Directors of Eagle and Bank. The directors of Eagle and Bank in office
prior to the Effective Time anticipate serving as directors of Bank for at least
two (2) years after the Closing.
2.5 Officers of PAB. The officers of PAB in office immediately prior to
the Effective Time, together with such additional persons as may thereafter be
elected, shall serve as the officers of PAB from and after the Effective Time in
accordance with the Bylaws of PAB.
ARTICLE 3
MANNER OF CONVERTING SHARES AND OPTIONS
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 the constituent corporations shall be
converted as follows:
(a) Each share of PAB Common Stock issued and outstanding immediately
prior to the Effective Time shall remain issued and outstanding from and after
the Effective Time; and
(b) Subject to adjustment as outlined below and the conditions set
forth herein, each share of Eagle Common Stock issued and outstanding at the
Effective Time shall be converted into one share of PAB
A-2
<PAGE>
Common Stock for a total of 873,875 shares of PAB Common Stock (the "Merger
Consideration"); provided, however, that if (i) the Deemed Market Value of PAB
-------- -------
Common Stock is less than $18.00 per share, than either Party may terminate the
Agreement in its sole discretion by delivery of written notice to the other
Party within three (3) calendar days prior to the Effective Time; or (ii) the
Deemed Market Value of the PAB Common Stock is greater than $28.50, then the
Merger Consideration shall be reduced by an amount equal to the product of (A)
the Merger Consideration multiplied by (B) the ratio formed by the difference
between the Deemed Market Value less $28.50, divided by the Deemed Market Value.
The following table provides examples showing the Merger Consideration and
the number of shares of PAB Common Stock into which each share of Eagle Common
Stock would be exchanged based upon various assumed Deemed Market Values:
<TABLE>
<CAPTION>
Number of shares of PAB Number of shares of
Common Stock comprising the PAB Common Stock to
Deemed Market Value of Merger Consideration be received for each share
PAB Common Stock (excluding options) of Eagle Common Stock
---------------- ------------------- -----------------------
<S> <C> <C>
$18.00 873,875 1.00000
20.00 873,875 1.00000
22.00 873,875 1.00000
24.00 873,875 1.00000
26.00 873,875 1.00000
28.00 873,875 1.00000
30.00 830,181 .95000
32.00 778,295 .89063
34.00 732,513 .83824
</TABLE>
(c) Each share of Eagle Common Stock (excluding shares held by PAB or
any of its Subsidiaries or by Eagle, in each case other than in a fiduciary
capacity or as a result of debts previously contracted, and excluding shares
held by Eagle shareholders who perfect their dissenters' rights of appraisal as
provided in Section 3.4 of this Agreement) issued and outstanding at the
Effective Time shall cease to be outstanding and shall be converted into and
exchanged for the right to receive the Merger Consideration; and
(d) The Merger Consideration shall be reduced by the sum of all amounts
in excess of $150,000 paid or to be paid by either Eagle or Bank or both for the
fees and expenses of Elaine H. Demarest, C.P.A., P.C., consultants, attorneys,
accountants and the like in connection with the Merger and the due diligence
conducted by Eagle in regard to the Merger. In the event of an adjustment
pursuant to this Section 3.1(d), the Merger Consideration shall be reduced by
that number of whole shares of PAB Common Stock equal to the dollar amount
determined in accordance with Section 3.1(d) divided by $21.00, and such
resulting number of shares of PAB Common Stock shall be substituted for 873,875
in the formulae set forth in Section 3.1(b) of this Agreement.
3.2 Anti-Dilution Provisions. In the event Eagle or PAB changes the number
of shares of Eagle Common Stock or PAB Common Stock, respectively, issued and
outstanding prior to the Effective Time as a result of a stock split, stock
dividend or similar recapitalization with respect to such stock and the record
date therefor (in the case of a stock dividend) or the effective date therefor
(in the case of a stock split or similar recapitalization) shall be prior to the
Effective Time, the Merger Consideration shall be proportionately adjusted.
3.3 Shares Held by Eagle or PAB. Each of the shares of Eagle Common Stock
held by Eagle or by any PAB Companies, 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.
A-3
<PAGE>
3.4 Dissenting Shareholders. Any holder of shares of Eagle Common Stock who
perfects his dissenters' rights of appraisal in accordance with and as
contemplated by Sections 14-2-1301 et seq. of the GBCC shall be entitled to
receive the value of such shares in cash as determined pursuant to such
provision of Law; provided, however, that no such payment shall be made to any
-------- -------
dissenting shareholder unless and until such dissenting shareholder has complied
with the applicable provisions of the GBCC and surrendered to Eagle the
certificate or certificates representing the shares for which payment is being
made. In the event that after the Effective Time a dissenting shareholder of
Eagle fails to perfect, or effectively withdraws or loses, his right to
appraisal and of payment for his shares, Eagle shall issue and deliver the
consideration to which such holder of shares of Eagle Common Stock is entitled
under this Article 3 (without interest) upon surrender by such holder of the
certificate or certificates representing the shares of Eagle Common Stock held
by him.
3.5 Fractional Shares. Notwithstanding any other provision of this
Agreement, each holder of shares of Eagle Common Stock exchanged pursuant to the
Merger, who would otherwise have been entitled to receive a fraction of a share
of PAB 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 Eagle Common Stock multiplied
by the market value of one share of PAB Common Stock at the Effective Time. The
market value of one share of PAB Common Stock at the Effective Time shall be the
last sales price of the PAB Common Stock on Amex on the last business day
preceding the Effective Time. No such holder will be entitled to dividends,
voting rights or any other rights as a shareholder in respect of any fractional
shares.
3.6 Conversion of Stock Options.
(a) At the Effective Time, all rights with respect to Eagle Common Stock
pursuant to stock options (the "Eagle Options") granted by Eagle under the Eagle
1990 Employee Stock Option Plan (the "Eagle Option Plan"), which are outstanding
at the Effective Time, whether or not exercisable, shall be converted into and
become rights with respect to PAB Common Stock, and PAB shall assume each Eagle
Option in accordance with the terms of the Eagle Option Plan and the stock
option agreement by which it is evidenced. From and after the Effective Time,
(i) each Eagle Option assumed by PAB may be exercised solely for shares of PAB
Common Stock, (ii) the number of shares of PAB Common Stock subject to such
Eagle Option shall be equal to the product of the number of shares of Eagle
Common Stock subject to such Eagle Option immediately prior to the Effective
Time multiplied by the Exchange Ratio, and (iii) the per share exercise price
under each such Eagle Option shall be adjusted by dividing the per share
exercise price under each such Eagle Option by the Exchange Ratio and rounding
down to the nearest cent. Eagle agrees to take all necessary steps to effectuate
the foregoing provisions of this Section 3.6.
(b) All restrictions or limitations on transfer with respect to Eagle
Common Stock awarded under the Eagle Option Plan or any other plan, program or
arrangement of Eagle or Bank, to the extent that such restrictions or
limitations shall not have already lapsed, and except as otherwise expressly
provided in such plan, program or arrangement, shall remain in full force and
effect with respect to shares of PAB Common Stock into which such restricted
stock is converted pursuant to Section 3.1 of this Agreement.
(c) In the event any holder of an Eagle Option recognizes a gain on a
disposition of such option of the PAB Common Stock received on exercise of the
Eagle Option and such gain is treated as ordinary income as a result of action
taken by PAB, PAB shall reimburse such Eagle Option holder the difference
between the ordinary income tax paid by such holder and the tax that would have
been due had the transaction been treated as the sale of a capital asset held
more than 18 months based on appropriate tax rates in effect as of the date of
this Agreement.
ARTICLE 4
EXCHANGE OF SHARES
4.1 Exchange Procedures. Within 20 days after the Effective Time, PAB shall,
as exchange agent, mail to the former shareholders of Eagle appropriate
transmittal materials (which shall specify that delivery shall be
A-4
<PAGE>
effected, and risk of loss and title to the certificates theretofore
representing shares of Eagle Common Stock shall pass, only upon proper delivery
of such certificates to PAB). After the Effective Time, each holder of shares of
Eagle Common Stock (other than shares to be canceled pursuant to Section 3.3 of
this Agreement or as to which dissenters' rights of appraisal have been
perfected as provided in Section 3.4 of this Agreement) issued and outstanding
at the Effective Time shall surrender the certificate or certificates
representing such shares to PAB and shall within 20 days after surrender thereof
receive in exchange therefor the consideration provided in Section 3.1 of this
Agreement, together with all undelivered dividends or distributions in respect
of such shares (without interest thereon) pursuant to Section 4.2 of this
Agreement. To the extent required by Section 3.5 of this Agreement, each holder
of shares of Eagle Common Stock issued and outstanding at the Effective Time
also shall receive, upon surrender of the certificate or certificates
representing such shares, cash in lieu of any fractional share of PAB Common
Stock to which such holder may be otherwise entitled (without interest). PAB
shall not be obligated to deliver the consideration to which any former holder
of Eagle Common Stock is entitled as a result of the Merger until such holder
surrenders his certificate or certificates representing the shares of Eagle
Common Stock for exchange as provided in this Section 4.1. The certificate or
certificates of Eagle Common Stock so surrendered shall be duly endorsed as PAB
may require. Any other provision of this Agreement notwithstanding, PAB shall
not be liable to a holder of Eagle Common Stock for any amounts paid or property
delivered in good faith to a public official pursuant to any applicable
abandoned property Law.
4.2 Rights of Former Shareholders. At the Effective Time, the stock
transfer books of Eagle shall be closed as to holders of Eagle Common Stock
immediately prior to the Effective Time, and no transfer of Eagle Common Stock
by any such holder shall thereafter be made or recognized. Until surrendered
for exchange in accordance with the provisions of Section 4.1 of this Agreement,
each certificate theretofore representing shares of Eagle Common Stock (other
than shares to be canceled pursuant to Sections 3.3 and 3.4 of this Agreement)
shall from and after the Effective Time represent for all purposes only the
right to receive the consideration provided in Sections 3.1 and 3.5 of this
Agreement in exchange therefor. To the extent permitted by Law, former
shareholders of record of Eagle shall be entitled to vote after the Effective
Time at any meeting of PAB shareholders the number of whole shares of PAB Common
Stock into which their respective shares of Eagle Common Stock are converted,
regardless of whether such holders have exchanged their certificates
representing Eagle Common Stock for certificates representing PAB Common Stock
in accordance with the provisions of this Agreement. Whenever a dividend or
other distribution is declared by PAB on the PAB 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 PAB Common Stock as of any time subsequent to the Effective Time shall
be delivered to the holder of any certificate representing shares of Eagle
Common Stock issued and outstanding at the Effective Time until such holder
surrenders such certificate for exchange as provided in Section 4.1 of this
Agreement. However, upon surrender of such Eagle Common Stock certificate, both
the PAB 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.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF EAGLE
Eagle hereby represents and warrants to PAB as follows:
5.1 Organization, Standing and Power. Eagle 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.
Eagle has the corporate power and authority to carry on its business as now
conducted and to own, lease and operate its Assets. Neither Eagle nor Bank owns
any property or conducts any business outside of the State of Georgia which
would require either of them to be qualified as a foreign corporation in any
jurisdiction.
5.2 Authority; No Breach By Agreement.
(a) Eagle 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,
A-5
<PAGE>
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 Eagle, subject to the approval of this Agreement by the holders of at
least a majority of the outstanding shares of Eagle Common Stock, which is the
only shareholder vote required for approval of this Agreement and consummation
of the Merger by Eagle. Subject to such requisite shareholder approval and
Consents of Regulatory Authorities, this Agreement represents a legal, valid and
binding obligation of Eagle, enforceable against Eagle 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) Except as Previously Disclosed, neither the execution and delivery
of this Agreement by Eagle nor the consummation by Eagle of the transactions
contemplated hereby, nor compliance by Eagle with any of the provisions hereof,
will (i) conflict with or result in a breach of any provision of Eagle'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 either Eagle or Bank or both under, any Contract or Permit of either Eagle or
Bank or both, 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 Eagle, or (iii) subject to receipt of the requisite approvals
referred to in Section 9.1(a) and (b) of this Agreement, violate any Law or
Order applicable to either Eagle or Bank or both or any of their respective
Assets.
(c) Other than in connection or compliance with the provisions of the
Securities Laws, applicable state corporate and securities Laws and rules of the
NASD, and other than Consents required from Regulatory Authorities, and other
than notices to or filings with the IRS or the Pension Benefit Guaranty
Corporation with respect to any employee benefit plans, or under the HSR Act 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 Eagle no notice to, filing with or Consent of, any public body
or authority is necessary for the consummation by Eagle of the Merger and the
other transactions contemplated in this Agreement.
5.3 Capital Stock and Other Securities.
(a) The authorized capital stock of Eagle consists of 10,000,000 shares
of Eagle Common Stock. As of the date of this Agreement, there are (i) 873,875
shares of Eagle Common Stock issued and outstanding and (ii) 51,088 shares of
Eagle Common Stock reserved for issuance upon the exercise of issued and
outstanding stock options under the Eagle Option Plan. No more than 873,875
shares of Eagle Common Stock (assuming that none of the Eagle Options are
exercised prior to the Effective Time) and 51,088 Eagle Options will be issued
and outstanding at the Effective Time. All of the issued and outstanding shares
of capital stock of Eagle 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 Eagle has been issued in violation of any preemptive rights of
the current or past shareholders of Eagle.
(b) Except as set forth in Section 5.3(a) of this Agreement or provided
pursuant to the Eagle Options as Previously Disclosed, there are no shares of
capital stock or other equity securities of Eagle 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 Eagle or contracts,
commitments, understandings or arrangements by which Eagle 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 Eagle's Subsidiaries. Other than Bank, Eagle has no subsidiaries.
5.5 SEC Filings; Financial Statements.
(a) Eagle has filed and made available to PAB all forms, reports and
documents required to
A-6
<PAGE>
be filed by Eagle with the SEC since December 31, 1993 (collectively, the "Eagle
SEC Reports"). The Eagle SEC Reports (i) at the time filed, complied in all
Material respects with the applicable requirements of the 1933 Act and the 1934
Act, as the case may be, and (ii) did not at the time they were filed (or if
amended or superseded by a filing prior to the date of this Agreement, then on
the date of such filing) contain any untrue statement of a Material fact or omit
to state a Material fact required to be stated in such Eagle SEC Reports or
necessary in order to make the statements in such Eagle SEC Reports, in light of
the circumstances under which they were made, not misleading. Except for Eagle
Subsidiaries that are registered as a broker, dealer or investment advisor or
filings due to fiduciary holdings of the Eagle Subsidiaries, none of the Eagle
Subsidiaries is required to file any forms, reports or other documents with the
SEC;
(b) Eagle has Previously Disclosed, and delivered to PAB prior to
the execution of this Agreement, copies of all Eagle Financial Statements for
periods ended prior to the date hereof and will deliver to PAB copies of all
Eagle Financial Statements prepared subsequent to the date hereof. The Eagle
Financial Statements (as of the dates thereof and for the periods covered
thereby) (i) are or will be, if dated after the date of this Agreement, in
accordance with the books and records of Eagle, which are or will be, materially
complete and correct and which have been or will have been maintained in
accordance with good business practices, and (ii) present or will present fairly
the financial position of Eagle as of the dates indicated and the results of
operations, changes in shareholders' equity and cash flows of Eagle for the
periods indicated, in accordance with GAAP (subject to any exceptions as to
consistency specified therein or as may be indicated in the notes thereto or, in
the case of interim financial statements, to normal recurring year-end
adjustments that are not Material).
5.6 Absence of Undisclosed Liabilities. Neither Eagle nor Bank has any
Liabilities that are reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on either Eagle or Bank, except Liabilities
which are accrued or reserved against in the consolidated balance sheets of
Eagle as of December 31, 1997 and March 31, 1998 included in the Eagle Financial
Statements or reflected in the notes thereto. Neither Eagle nor Bank has
incurred or paid any Liability since March 31, 1998, 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 Eagle.
5.7 Absence of Certain Changes or Events. Since March 31, 1998, (i) 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
Eagle, (ii) neither Eagle nor Bank has 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 Eagle provided in Article
7 of this Agreement, and (iii) Eagle and Bank have conducted their respective
businesses in the ordinary and usual course (excluding the incurrence of
expenses in connection with this Agreement and the transactions contemplated
hereby).
5.8 Tax Matters.
(a) All Tax returns required to be filed by or on behalf of Eagle or
Bank 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, 1997,
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 Eagle, and all returns filed are complete and accurate in all Material
respects to the Knowledge of Eagle. All Taxes shown on filed returns have been
paid as of the date of this Agreement, and 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 Eagle, except as reserved against in the
Eagle 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) Neither Eagle nor Bank 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 Eagle or Bank, which deficiency is reasonably likely
to have, individually or in the aggregate, a Material Adverse Effect on Eagle.
A-7
<PAGE>
(c) Adequate provision for any Taxes due or to become due by Eagle or
Bank for the period or periods through and including the date of the respective
Eagle Financial Statements has been made and is reflected on such Eagle
Financial Statements.
(d) Deferred Taxes of Eagle or Bank have been provided for in
accordance with GAAP. Effective January 1, 1993, Eagle adopted Financial
Accounting Standards Board Statement 109, "Accounting for Income Taxes."
(e) Eagle and Bank are in compliance with, and their respective 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 Eagle.
(f) Neither Eagle nor Bank has made any payments, is obligated to make
any payments or is a party to any contract, agreement or other arrangement that
could obligate it to make any payments that would be disallowed as a deduction
under Section 280G or 162(m) of the Internal Revenue Code.
(g) There are no Material Liens with respect to Taxes upon any of the
Assets of either Eagle or Bank.
(h) There has not been an ownership change, as defined in Internal
Revenue Code Section 382(g), of either Eagle or Bank that occurred during or
after any Taxable Period in which either Eagle or Bank incurred a net operating
loss that carries over to any Taxable Period ending after December 31, 1996.
(i) Neither Eagle nor Bank has filed any consent under Section 341(f)
of the Internal Revenue Code concerning collapsible corporations.
(j) After the date of this Agreement, no Material election with respect
to Taxes will be made without the prior consent of PAB, which consent will not
be unreasonably withheld.
(k) Neither Eagle nor Bank has or has had a permanent establishment in
any foreign country, as defined in any applicable tax treaty or convention
between the United States and such foreign country.
5.9 Allowance. The Allowance shown on the consolidated balance sheets of
Eagle included in the most recent Eagle Financial Statements dated prior to the
date of this Agreement was, and the Allowance shown on the consolidated balance
sheets of Eagle included in the Eagle 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 Bank and other extensions
of credit (including letters of credit and commitments to make loans or extend
credit) by Bank as of the dates thereof, except where the failure of such
Allowance to be so adequate is not reasonably likely to have a Material Adverse
Effect on Eagle.
5.10 Assets. Except as Previously Disclosed or as disclosed or reserved
against in the Eagle Financial Statements, Eagle and Bank each has good and
marketable title, free and clear of all Liens, to all of their respective
Assets. All Material tangible properties used in the business of Eagle and Bank
are in good condition, reasonable wear and tear excepted, and are usable in the
ordinary course of business consistent with Eagle and Bank's past practices.
All Assets which are Material to Eagle's and Bank's respective businesses held
under leases or subleases by either Eagle or Bank, 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
A-8
<PAGE>
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 either Eagle or Bank provide adequate coverage
under current industry practices against loss or Liability, and the fidelity and
blanket bonds in effect as to which Bank is a named insured are reasonably
sufficient. Neither Eagle nor Bank has received notice from any insurance
carrier that (i) such insurance will be canceled or that coverage thereunder
will be reduced or eliminated or (ii) premium costs with respect to such
policies of insurance will be substantially increased. The Assets of Bank
include all assets required to operate the business of Bank as presently
conducted.
5.11 Environmental Matters.
(a) To the Knowledge of Eagle, Eagle, Bank, their respective
Participation Facilities and Loan Properties are, and have been, in full
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 Eagle or on Bank.
(b) There is no Litigation pending or, to the Knowledge of Eagle,
pending or threatened before any court, governmental agency, board, authority or
other forum in which either Eagle or Bank or any of their respective
Participation Facilities and Loan Properties 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, whether or not occurring at, on, under or involving a site
owned, leased or operated by either Eagle or Bank or any of their respective
Participation Facilities and Loan Properties, except for such Litigation pending
or threatened which is not likely to have, individually or in the aggregate, a
Material Adverse Effect on Eagle or on Bank.
(c) To the Knowledge of Eagle, there is no reasonable basis for any
Litigation of a type described in subsection (b), except such as is not likely
to have, individually or in the aggregate, a Material Adverse Effect on either
Eagle or Bank.
(d) To the Knowledge of Eagle, there have been no releases, spills or
discharges of Hazardous Material or other conditions involving Hazardous
Materials in, on, under or affecting any Participation Facility or Loan
Property, except such as are not likely to have, individually or in the
aggregate, a Material Adverse Effect on either Eagle or Bank.
5.12 Compliance with Laws. Eagle is duly registered as a bank holding
company under the BHC Act. Bank is duly registered as a bank under the FICG.
Bank 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 likely to have, individually or in the aggregate, a
Material Adverse Effect on Eagle, 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 Eagle. Neither
Eagle nor Bank:
(a) is in violation of any Laws, Environmental Laws, Orders or Permits
applicable to its business or employees conducting its business, except for
violations which are not likely to have, individually or in the aggregate, a
Material Adverse Effect on Eagle; and
(b) except as Previously Disclosed, 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 (i) asserting that
either Eagle or Bank is not in compliance with any of the Laws, Environmental
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 either Eagle or Bank, (ii)
threatening to revoke any Permits, the revocation of which is reasonably likely
to have, individually or in the aggregate, a Material Adverse Effect on either
Eagle or Bank, or (iii) requiring Eagle or Bank 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 businesses, or in any
manner relates to their respective capital adequacy, credit or reserve policies,
management or the payment of dividends.
A-9
<PAGE>
5.13 Labor Relations. Neither Eagle nor Bank is the subject of any
Litigation asserting that either of them has committed an unfair labor practice
(within the meaning of the National Labor Relations Act or comparable state law)
or seeking to compel Eagle or Bank to bargain with any labor organization as to
wages or conditions of employment, nor is Eagle or Bank a party to or bound by
any collective bargaining agreement, Contract or other agreement or
understanding with a labor union or labor organization, nor is there any strike
or other labor dispute involving either of them, pending or threatened, nor to
their respective Knowledge, is there any activity involving Eagle's or Bank's
employees seeking to certify a collective bargaining unit or engaging in any
other organization activity.
5.14 Employee Benefit Plans.
(a) Eagle has Previously Disclosed, and delivered or made available to
PAB prior to the execution of this Agreement, correct and complete 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 Eagle or any Affiliate thereof for the benefit
of employees, retirees, dependents, spouses, directors, independent contractors
or other beneficiaries and under which such persons are eligible to participate
(collectively, the "Eagle Benefit Plans"). Any of the Eagle Benefit Plans which
is an "employee welfare benefit plan," as that term is defined in Section 3(l)
of ERISA, or an "employee pension benefit plan," as that term is defined in
Section 3(2) of ERISA, is referred to herein as a "Eagle ERISA Plan." Each
Eagle ERISA Plan which is also a "defined benefit plan" (as defined in Section
414(j) of the Internal Revenue Code or Section 3(35) of ERISA) is referred to
herein as a "Eagle Pension Plan". No Eagle Pension Plan is or has been a
"multi-employer plan" within the meaning of Section 3(37) of ERISA. Eagle does
not, and may not ever, participate in either a multi-employer plan or a multiple
employer plan.
(b) Eagle has delivered or made available to PAB prior to the execution
of this Agreement correct and complete copies of the following documents: (i)
all trust agreements or other funding arrangements for such Eagle Benefit Plans
(including insurance contracts), and all amendments thereto, (ii) with respect
to any such Eagle Benefit Plans or amendments, all determination letters,
Material rulings, Material opinion letters, Material information letters or
Material advisory opinions issued by the IRS, the United States Department of
Labor or the Pension Benefit Guaranty Corporation after December 31, 1994, (iii)
annual reports or returns, audited or unaudited financial statements, actuarial
valuations and reports and summary annual reports prepared for any Eagle Benefit
Plan with respect to the most recent plan year, and (iv) the most recent summary
plan descriptions and any Material modifications thereto.
(c) All Eagle 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 Eagle. Each Eagle 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 Eagle is not aware
of any circumstances will or could reasonably result in revocation of any such
favorable determination letter or failure of an Eagle ERISA Plan intended to
satisfy Internal Revenue Code Section 401 to satisfy the Tax qualification
provisions of the Internal Revenue Code applicable thereto. Neither Eagle nor
Bank has engaged in a transaction with respect to any Eagle Benefit Plan that,
assuming the Taxable Period of such transaction expired as of the date hereof,
would subject Eagle or Bank to a Material 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 Eagle.
(d) No Eagle 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, and the fair market
value of the assets of any such plan exceeds the plan's "benefit liabilities,"
as that term is defined in Section 4001(a)(16) of ERISA, when determined under
actuarial factors that would apply if the plan terminated in accordance with all
applicable legal requirements. Since the date of the most recent actuarial
A-10
<PAGE>
valuation, there has been (i) no Material change in the financial position or
funded status of any Eagle Pension Plan, (ii) no change in the actuarial
assumptions with respect to any Eagle Pension Plan, and (iii) no increase in
benefits under any Eagle Pension Plan as a result of plan amendments or changes
in applicable Law, any of which is reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on Eagle or materially affect the
funding status of any such plan. Neither any Eagle Pension Plan nor any
"single-employer plan," within the meaning of Section 4001(a)(15) of ERISA,
currently or formerly maintained by Eagle, or the single-employer plan of any
entity which is considered one employer with Eagle 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 Eagle.
Eagle has not provided, and is not required to provide, security to a Eagle
Pension Plan or to any single-employer plan of an ERISA Affiliate pursuant to
Section 401(a)(29) of the Internal Revenue Code. All premiums required to be
paid under ERISA Section 4006 have been timely paid by Eagle, except to the
extent any failure to do so would not have a Material Adverse Effect on Eagle.
(e) Within the six-year period preceding the Effective Time, no
Liability under Subtitle C or D of Title IV of ERISA has been or is expected to
be incurred by Eagle 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 Eagle.
Except as Previously Disclosed, Eagle has not incurred any withdrawal Liability
with respect to a multi-employer plan under Subtitle B of Title IV of ERISA
(regardless of whether based on contributions of an ERISA Affiliate), which
Liability is reasonably likely to have a Material Adverse Effect on Eagle. 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 Eagle Pension Plan or by any ERISA Affiliate within the 12-
month period ending on the date hereof.
(f) Except as required under Title I, Part 6 of ERISA and Internal
Revenue Code Section 4980 B, neither Eagle nor Bank has any obligations to
provide health and life benefits under any of the Eagle Benefit Plans to former
employees, and there are no restrictions on the rights of Eagle to amend or
terminate any such plan without incurring any Liability thereunder, which
Liability is reasonably likely to have a Material Adverse Effect on Eagle.
(g) 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
officer, director or any employee of Eagle from Eagle or Bank under any Eagle
Benefit Plan or otherwise, (ii) increase any benefits otherwise payable under
any Eagle Benefit Plan, or (iii) result in any acceleration of the time of
payment or vesting of any such benefit.
(h) 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 Eagle and its 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 Eagle Financial Statements to the extent
required by and in accordance with GAAP.
5.15 Material Contracts. Except as Previously Disclosed or otherwise
reflected in the Eagle Financial Statements, neither Eagle, Bank nor any of
their respective Assets, businesses or operations, is a party to, or is bound or
affected by, or receives benefits under, (i) any employment, severance,
termination, consulting or retirement Contract providing for aggregate payments
to any Person in any calendar year in excess of $50,000, (ii) any Contract
relating to the borrowing of money by Eagle or Bank or the guarantee by Eagle or
Bank 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 (iii) any other Contract or amendment thereto
would be required to be filed as an exhibit to a Form 10-KSB filed by Eagle with
the SEC as of the date of this Agreement that has not been filed by Eagle with
the
A-11
<PAGE>
SEC as an exhibit to Eagle's Annual Report on Form 10-KSB for the fiscal year
ended December 31, 1997 (together with all Contracts referred to in Sections
5.10 and 5.14(a) of this Agreement, the "Eagle Contracts"). With respect to each
Eagle Contract, (i) the Contract is in full force and effect, (ii) neither Eagle
nor Bank is in Default thereunder, other than Defaults which are not reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
Eagle, (iii) neither Eagle nor Bank has repudiated or waived any material
provision of any such Contract, and (iv) no other party to any such Contract is,
to the knowledge of Eagle, in Default in any respect, other than Defaults which
are not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on Eagle, or has repudiated or waived any Material provision
thereunder. Except as Previously Disclosed, all of the indebtedness of Eagle or
Bank for money borrowed is prepayable at any time by Eagle or Bank without
penalty or premium.
5.16 Legal Proceedings. There is no Litigation pending, or, to the
Knowledge of Eagle, threatened against either Eagle or Bank, or against any of
their Assets, employee benefit plans, interests or rights that is reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
Eagle, nor are there any Orders of any Regulatory Authorities, other
governmental authorities or arbitrators outstanding against either Eagle or
Bank, that are reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on Eagle.
5.17 Reports. Eagle and Bank have timely filed all reports and statements,
together with any amendments required to be made with respect thereto, that they
were required to file with Regulatory Authorities and any applicable state
securities or banking authorities, except failures to file which are not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on Eagle. As of their respective dates, each of such reports and
documents, including the financial statements, exhibits and schedules thereto,
complied in all material respects with all applicable Laws. As of their
respective dates, each such report and document did not contain any untrue
statement of a Material fact or omit 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.
5.18 Statements True and Correct. No statement, certificate, instrument or
other writing furnished or to be furnished by Eagle or Bank or any Affiliate
thereof to PAB 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 Eagle or
Bank or any Affiliate thereof for inclusion in the Registration Statement to be
filed by PAB 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 Eagle or Bank or any
Affiliate thereof for inclusion in the Proxy Statement to be mailed to Eagle's
shareholders in connection with the Eagle Meeting, and any other documents to be
filed by Eagle 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 Eagle, 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 Eagle 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 Eagle Meeting. All
documents that Eagle 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.
5.19 Accounting, Tax and Regulatory Matters. Neither Eagle, Bank nor any
Affiliate thereof has taken any action or has any Knowledge of any fact or
circumstance that is reasonably likely to (i) prevent the Merger from qualifying
for pooling-of-interests accounting treatment or as a reorganization within the
meaning of Section 368(a) of the Internal Revenue Code, or (ii) materially
impede or delay receipt of any Consents of Regulatory Authorities referred to in
Section 9.1(b) of this Agreement or result in the imposition of a condition or
restriction of the type referred to in the second sentence of such Section. To
the Knowledge of Eagle, there exists no fact, circumstance or
A-12
<PAGE>
reason why the requisite Consents referred to in Section 9.1(b) of this
Agreement cannot be received in a timely manner without the imposition of any
condition or restriction of the type described in the second sentence of such
Section 9.1(b) other than with respect to anti-trust or competitive effects
issues.
5.20 State Takeover Laws. Eagle has taken all necessary action to exempt the
transactions contemplated by this Agreement from any applicable "moratorium,"
"control share," "fair price," "business combination" or other state takeover
Law.
5.21 Articles of Incorporation Provisions. Eagle has taken all actions so
that the entering into of this Agreement and the consummation of the Merger
contemplated hereby 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 Eagle (other than voting, dissenters' rights of appraisal or
other similar rights) or restrict or impair the ability of PAB or any of its
Subsidiaries to vote, or otherwise to exercise the rights of a shareholder with
respect to, shares of Eagle Common Stock that may be acquired or controlled by
it.
5.22 Derivatives. All interest rate swaps, caps, floors, option agreements,
futures and forward contracts and other similar risk management arrangements,
whether entered into for Eagle's own account, or for the account of Bank or its
customers, were entered into (i) in accordance with prudent business practices
and all applicable Laws, and (ii) with counterparties believed to be financially
responsible.
5.23 Year 2000. Eagle has disclosed to PAB a complete and accurate copy of
Eagle's plan, including an estimate of anticipated associated costs, for
implementing modifications to Eagle's hardware, software and computer systems,
chips and microprocessors, to ensure proper execution and accurate processing of
all date-related data, whether from years in the same century or in different
centuries. Between the date of this Agreement and the Effective Time, Eagle
shall endeavor to continue its efforts to implement such plan.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF PAB
PAB hereby represents and warrants to Eagle as follows:
6.1 Organization, Standing and Power. PAB 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. PAB has the
corporate power and authority to carry on its business as now conducted and to
own, lease and operate its Assets. PAB 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 PAB.
6.2 Authority, No Breach By Agreement.
(a) PAB 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 PAB. Subject to the Consents
of Regulatory Authorities, this Agreement represents a legal, valid, and binding
obligation of PAB, enforceable against PAB 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 PAB, nor
the consummation by PAB
A-13
<PAGE>
of the transactions contemplated hereby, nor compliance by PAB with any of the
provisions hereof, will (i) conflict with or result in a breach of any provision
of PAB'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 PAB Companies under, any Contract or Permit of any
PAB Companies, 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 PAB, or (iii) subject to receipt of the requisite
approvals referred to in Section 9.1(b) of this Agreement, violate any Law or
Order applicable to any PAB Companies or any of their respective Assets.
(c) No notice to, filing with or Consent of any public body or
authority is necessary for the consummation by PAB of the Merger and the other
transactions contemplated in this Agreement other than (i) in connection or
compliance with the provisions of the Securities Laws, applicable state
corporate and securities Laws and rules of the NASD, (ii) Consents required from
Regulatory Authorities, (iii) notices to or filings with the IRS or the Pension
Benefit Guaranty Corporation with respect to any employee benefit plans, (iv)
under the HSR Act, and (v) 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 PAB.
6.3 Capital Stock.
(a) The authorized capital stock of PAB consists of 15,000,000 shares
of PAB Common Stock. As of June 26, 1998, there were 7,372,635 shares of PAB
Common Stock issued and outstanding. PAB is authorized to issue one or more
series of preferred stock with such powers, preferences and rights as may be
established by PAB's Board of Directors. As of the date of this Agreement, no
preferred stock has been issued. As of June 26, 1998, 400,000 shares of PAB
Common Stock were reserved for issuance upon the exercise of issued and
outstanding stock options under the 1994 Employee Stock Option Plan (the "PAB
Option Plan") and 53,588 shares were reserved pursuant to options granted to PAB
directors under the Directors Deferred Stock Purchase Plan (the "PAB Director
Plan"). All of the issued and outstanding shares of PAB Common Stock are, and
all of the shares of PAB Common Stock to be issued in exchange for shares of
Eagle 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 PAB Common Stock has been, and none of the shares of PAB
Common Stock to be issued in exchange for shares of Eagle Common Stock upon
consummation of the Merger will be, issued in violation of any preemptive rights
of the current or past shareholders of PAB.
(b) Except as set forth in Section 6.3(a) of this Agreement, or as
provided pursuant to the PAB Option Plan, the PAB Director Plan or as Previously
Disclosed, as of the date of this Agreement, there are no shares of capital
stock or other equity securities of PAB 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 PAB or contracts, commitments,
understandings or arrangements by which PAB 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.
6.4 SEC Filings; Financial Statements.
(a) PAB has filed and made available to Eagle all forms, reports and
documents required to be filed by PAB with the SEC since December 31, 1993
(collectively, the "PAB SEC Reports"). The PAB SEC Reports (i) at the time
filed, complied in all Material respects with the applicable requirements of the
1933 Act and the 1934 Act, as the case may be, and (ii) did not at the time they
were filed (or if amended or superseded by a filing prior to the date of this
Agreement, then on the date of such filing) contain any untrue statement of a
Material fact or omit to state a Material fact required to be stated in such PAB
SEC Reports or necessary in order to make the statements in such PAB SEC
Reports, in light of the circumstances under which they were made, not
misleading. Except for PAB Subsidiaries that are registered as a broker, dealer
or investment advisor or filings due to fiduciary holdings of the PAB
Subsidiaries, none of the PAB Subsidiaries is required to file any forms,
reports or other documents with the SEC;
A-14
<PAGE>
(b) PAB has Previously Disclosed and delivered to Eagle prior to the
execution of this Agreement copies of all PAB Financial Statements for periods
ended prior to the date hereof and will deliver to Eagle copies of all PAB
Financial Statements prepared subsequent to the date hereof. The PAB Financial
Statements (as of the dates thereof and the periods covered thereby) (i) are or,
if dated after the date of this Agreement, will be in accordance with the books
and records of the PAB Companies, which are or will be, materially complete and
correct and which have been or will have been, maintained in accordance with
good business practices, and (ii) present or will present fairly the
consolidated financial position of the PAB Companies as of the dates indicated
and the consolidated results of operations, changes in shareholders' equity and
cash flows of the PAB 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).
6.5 Absence of Undisclosed Liabilities. No PAB Companies have any
Liabilities that are reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on PAB, except Liabilities which are
accrued or reserved against in the consolidated balance sheets of PAB as of
December 31, 1997 and March 31, 1998 included in the PAB Financial Statements or
reflected in the notes thereto. No PAB Companies have incurred or paid any
Liability since March 31, 1998, 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 PAB.
6.6 Absence of Certain Changes or Events. Since March 31, 1998, except as
Previously Disclosed, (i) 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 PAB, and (ii) the PAB 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 PAB provided in Article 7 of this Agreement.
6.7 Compliance with Laws. PAB is duly registered as a bank holding company
under the BHC Act. Each of the PAB Companies has in effect all permits
necessary to own, lease or operate their Assets and to carry on their 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 PAB, 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 PAB. None of the PAB Companies:
(a) 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 PAB; and
(b) except as Previously Disclosed, 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 (i) asserting that
any of the PAB Companies are 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 PAB, (ii) threatening to revoke any Permits, the
revocation of which is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on PAB, or (iii) requiring any PAB
Companies 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.
6.8 Legal Proceedings. There is no Litigation instituted or pending, or,
to the Knowledge of PAB, threatened against any PAB Companies, 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 PAB, nor are
there any Orders of any Regulatory Authorities, other governmental authorities
or arbitrators outstanding against any PAB Companies, that are reasonably likely
to have, individually or in the aggregate, a Material Adverse Effect on PAB.
A-15
<PAGE>
6.9 Statements True and Correct. No statement, certificate, instrument or
other writing furnished or to be furnished by any PAB Companies or any Affiliate
thereof to Eagle 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 PAB
Companies or any Affiliate thereof for inclusion in the Registration Statement
to be filed by PAB 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 PAB Companies or any
Affiliate thereof for inclusion in the Proxy Statement to be mailed to Eagle
shareholders in connection with the Eagle Meeting, and any other documents to be
filed by any PAB Companies 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 Eagle, 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 Eagle 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 Eagle Meeting. All
documents that any PAB Companies 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.
6.10 Accounting, Tax and Regulatory Matters. No PAB Company or any
Affiliate thereof has taken any action or has any Knowledge of any fact or
circumstance that is reasonably likely to (i) prevent the Merger from qualifying
for pooling-of-interests accounting treatment or as a reorganization within the
meaning of Section 368(a) of the Internal Revenue Code, or (ii) materially
impede or delay receipt of any Consents of Regulatory Authorities referred to in
Section 9.1(b) of this Agreement or result in the imposition of a condition or
restriction of the type referred to in the second sentence of such Section
9.1(b). To the Knowledge of PAB, there exists no fact, circumstance or reason
why the requisite Consents referred to in Section 9.1(b) of this Agreement
cannot be received in a timely manner without the imposition of any condition or
restriction of the type described in the second sentence of such Section 9.1(b)
other than with respect to anti-trust or competitive effects issues.
6.11 Year 2000. PAB has disclosed to Eagle a complete and accurate copy of
PAB's plan, including an estimate of anticipated associated costs, for
implementing modifications to PAB's hardware, software and computer systems,
chips and microprocessors, to ensure proper execution and accurate processing of
all date-related data, whether from years in the same century or in different
centuries. Between the date of this Agreement and the Effective Time, PAB shall
endeavor to continue its efforts to implement such plan.
6.12 Allowance. The Allowance shown on the consolidated balance sheets of
PAB included in the most recent PAB Financial Statements dated prior to the date
of this Agreement was, and the Allowance shown on the consolidated balance
sheets of PAB included in the PAB 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 PAB's subsidiary banks
and other extensions of credit (including letters of credit and commitments to
make loans or extend credit) by PAB's subsidiary banks as of the dates thereof,
except where the failure of such Allowance to be so adequate is not reasonably
likely to have a Material Adverse Effect on PAB.
6.13 Environmental Matters.
(a) To the Knowledge of PAB, PAB and its subsidiary banks, their
respective Participation Facilities and Loan Properties are, and have been, in
full 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 PAB.
A-16
<PAGE>
(b) There is no Litigation pending or, to the Knowledge of PAB, pending
or threatened before any court, governmental agency, board, authority or other
forum in which either PAB or its subsidiary banks or any of their respective
Participation Facilities and Loan Properties 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, whether or not occurring at, on, under or involving a site
owned, leased or operated by either PAB or its subsidiary banks or any of their
respective Participation Facilities and Loan Properties, except for such
Litigation pending or threatened which is not likely to have, individually or in
the aggregate, a Material Adverse Effect on PAB.
(c) To the Knowledge of PAB, there is no reasonable basis for any
Litigation of a type described in subsection (b), except such as is not likely
to have, individually or in the aggregate, a Material Adverse Effect on PAB.
(d) To the Knowledge of PAB, there have been no releases, spills or
discharges of Hazardous Material or other conditions involving Hazardous
Materials in, on, under or affecting any Participation Facility or Loan
Property, except such as are not likely to have, individually or in the
aggregate, a Material Adverse Effect on PAB.
ARTICLE 7
CONDUCT OF BUSINESS PENDING CONSUMMATION
7.1 Affirmative Covenants of Eagle. From the date of this Agreement until
the earlier of the Effective Time or the termination of this Agreement unless
the prior written consent of PAB shall have been obtained, and except as
otherwise contemplated herein, Eagle agrees: (i) to operate its business and
cause Bank to operate its business in the usual, regular and ordinary course;
(ii) to preserve intact its business organizations and Assets and maintain its
rights and franchises; (iii) to use its reasonable efforts to cause its
representations and warranties to be correct at all times; and (iv) to take no
action which would (a) 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 last sentence of
Section9.1(b) of this Agreement or (b) adversely affect in any Material respect
the ability of either Party to perform its covenants and agreements under this
Agreement.
7.2 Negative Covenants of Eagle. From the date of this Agreement until the
earlier of the Effective Time or the termination of this Agreement, Eagle
covenants and agrees that it and Bank will not do or agree or commit to do, any
of the following without the prior written consent of the Chief Executive
Officer of PAB, which consent shall not be unreasonably withheld:
(a) amend the Articles of Incorporation, Bylaws or other governing
instruments of Eagle or the Charter, Bylaws or other governing instruments of
Bank; or
(b) incur any additional debt obligation or other obligation for
borrowed money in excess of an aggregate of $50,000 except in the ordinary
course of the business of Eagle and Bank consistent with past practices (which
shall include creation of deposit liabilities, purchases of federal funds and
entry into repurchase agreements fully secured by U.S. government or agency
securities), or impose, or suffer the imposition, on any share of stock of Bank
held by Eagle 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 Eagle, or declare or pay any dividend or make any other
distribution in respect of Eagle capital stock provided that Eagle may, in its
sole discretion (to the extent legally and contractually permitted to do so),
but shall not be obligated to, declare and pay a cash dividend of sixteen cents
($0.16) per share to stockholders of record on June 30, 1998 payable on July 15,
1998, and thereafter at a rate not to exceed eight cents ($.08) per share to
shareholders of record at the end of such calendar quarter on the fifteenth
(15th) day of the
A-17
<PAGE>
following month up to the Effective Time; or
(d) except for this Agreement, or as Previously Disclosed, or in
connection with the exercise of any Eagle Options, issue or sell, pledge,
encumber, authorize the issuance of, enter into any Contract to issue, sell,
pledge, encumber or authorize the issuance of, or otherwise permit to become
outstanding, any additional shares of Eagle Common Stock, or any stock
appreciation rights, or any option, warrant, conversion or other right to
acquire any such stock; or
(e) adjust, split, combine or reclassify any capital stock of Eagle or
issue or authorize the issuance of any other securities in respect of or in
substitution for shares of either Eagle Common Stock or Bank's common stock or
sell, lease, mortgage or otherwise dispose of or otherwise encumber any Asset
having a book value in excess of $25,000 other than in the ordinary course of
business for reasonable and adequate consideration; or
(f) acquire direct or indirect control over any real property, other
than in connection with (i) foreclosures in the ordinary course of business, or
(ii) acquisitions of control by Eagle in its fiduciary capacity; or
(g) except for purchases of U.S. Treasury securities or U.S. Government
agency securities, which in either case have maturities of three years or less,
purchase of investment grade bonds issued by municipalities located within the
State of Georgia with a maturity of five years or less, purchase any securities
or make any Material investment, either by purchase of stock or securities,
contributions to capital, Asset transfers or purchase of any Assets, in any
Person other than Bank, or otherwise acquire direct or indirect control over any
Person, other than in connection with (i) foreclosures in the ordinary course of
business, (ii) acquisitions of control by a depository institution Subsidiary in
its fiduciary capacity, or (iii) the creation of new, wholly-owned Subsidiaries
organized to conduct or continue activities otherwise permitted by this
Agreement; or
(h) grant any increase in compensation or benefits to the employees or
officers of Eagle or Bank (including such discretionary increases as may be
contemplated by existing employment agreements) exceeding five percent (5%)
individually or in the aggregate on an annual basis, except in accordance with
past practice Previously Disclosed or as required by Law, pay any bonus except
in accordance with past practice Previously Disclosed or the provisions of any
applicable program or plan adopted by its Board of Directors prior to the date
of this Agreement, enter into or amend any severance agreements with officers of
either Eagle or Bank, grant any increase in fees or other increases in
compensation or other benefits to directors of either Eagle or Bank except in
accordance with past practice Previously Disclosed; or
(i) enter into or amend any employment Contract between Eagle or Bank
and any Person (unless such amendment is required by Law) that Eagle or Bank, as
the case may be, 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
(j) adopt any new employee benefit plan of Eagle or Bank or make any
Material change in or to any existing employee benefit plans of Eagle or Bank
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
(k) make any significant change in any Tax or accounting methods or
systems of internal accounting controls, except as may be appropriate to conform
to changes in regulatory accounting requirements or GAAP; or
(l) commence any Litigation other than in accordance with past
practice, settle any Litigation involving any Liability of Eagle or Bank for
money damages in excess of $25,000 or Material restrictions upon the operations
of Eagle or Bank; or
(m) 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.
A-18
<PAGE>
7.3 Covenants of PAB. From the date of this Agreement until the earlier of
the Effective Time or the termination of this Agreement, unless the prior
written consent of Eagle shall have been obtained, PAB covenants and agrees that
it shall (i) 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 PAB Common Stock and the business prospects of the PAB
Companies, (ii) to the extent consistent therewith, use all reasonable efforts
to preserve intact the PAB Companies' core businesses and goodwill with their
respective employees and the communities they serve, (iii) use its reasonable
efforts to cause its representations and warranties to be correct at all times,
(iv) take no action which would (a) adversely affect the ability of any Party to
obtain any Consents required for the transaction contemplated hereby without
imposition of a condition or restriction of the type referred to in the last
sentence of Section 9.1(b) of this Agreement, or (b) adversely affect in any
Material respect the ability of either Party to perform its covenants and
agreements under this Agreement, and (v) not repurchase, redeem or otherwise
acquire or exchange (other than exchanges in the ordinary course under employee
benefit plans or purchases in the open market to fund its dividend reinvestment
plan), directly or indirectly, any shares or any securities convertible into any
shares, of the capital stock of PAB.
7.4 Adverse Changes in Condition. Each Party agrees to give written notice
promptly to the other Party upon becoming aware of the occurrence or impending
occurrence of any event or circumstance relating to it or any of its
Subsidiaries which (i) is reasonably likely to have, 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 to use its reasonable efforts to prevent or
promptly to remedy the same.
7.5 Reports. Each Party and its Subsidiaries shall file all reports
required to be filed by it with Regulatory Authorities between the date of this
Agreement and the Effective Time and shall deliver to the other Party copies of
all such reports promptly after the same are filed. If financial statements are
contained in any such reports filed with the SEC, such financial statements will
fairly present the consolidated financial position of the entity filing such
statements as of the dates indicated and the consolidated results of operations,
changes in shareholders' equity and cash flows for the periods then ended in
accordance with GAAP (subject in the case of interim financial statements to
normal recurring year-end adjustments that are not Material). As of their
respective dates, such reports filed with the SEC will comply in all Material
respects with the Securities Laws and will not contain any untrue statement of a
Material fact or omit to state a Material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading. Any financial statements contained
in any other reports to another Regulatory Authority shall be prepared in
accordance with Laws applicable to such reports.
ARTICLE 8
ADDITIONAL AGREEMENTS
8.1 Shareholder Approval. Eagle shall take, in accordance with applicable
law and its Articles of Incorporation and Bylaws, all action necessary to
convene the Eagle Meeting to consider and vote upon the approval of this
Agreement and any other matters required to be approved by Eagle shareholders
for consummation of the Merger (including any adjournment), as promptly as
practicable after the Registration Statement is declared effective. The Board of
Directors of Eagle shall (subject to compliance with its fiduciary duties as
advised by counsel) recommend such approval, and Eagle (subject to the direction
of the Eagle Board acting in compliance with its fiduciary duties as advised by
counsel) shall take all reasonable lawful action to solicit such approval by its
shareholders.
8.2 Registration Statement.
(a) Each of PAB and Eagle agrees to cooperate in the preparation of a
Registration Statement to be filed by PAB with the SEC in connection with the
issuance of PAB Common Stock in the Merger (including the Proxy Statement and
all related documents). Provided Eagle has cooperated as required above, PAB
agrees to file the Registration Statement with the SEC as promptly as
practicable, but in no event later than 60 days after the date of this
Agreement. Each of Eagle and PAB agrees to use all reasonable efforts to cause
the Registration Statement
A-19
<PAGE>
to be declared effective under the 1933 Act as promptly as reasonably
practicable after filing thereof. PAB also agrees to use all reasonable efforts
to obtain all necessary state securities law or "Blue Sky" permits and approvals
required to carry out the transactions contemplated by this Agreement. Eagle
agrees to furnish PAB all information concerning Eagle, Bank and their
respective officers, directors and shareholders as may be reasonably requested
in connection with the foregoing.
(b) Each of Eagle and PAB agrees, as to itself and its Subsidiaries,
that none of the information supplied or to be supplied by it for inclusion or
incorporation by reference in (i) the Registration Statement will, at the time
the Registration Statement and each amendment or supplement thereto, if any,
becomes effective under the 1933 Act, contain any untrue statement of a Material
fact or omit to state any Material fact required to be stated therein or
necessary to make the statements therein not misleading, and (ii) the Proxy
Statement and any amendment or supplement thereto will, at the date of mailing
to Eagle shareholders and at the time of the Eagle Meeting, contain any untrue
statement of a Material fact or omit to state any Material fact required to be
stated therein or necessary to make the statements therein not misleading with
respect to any Material fact, or which will omit to state any Material fact
necessary in order to make the statements therein not false or misleading or
necessary to correct any statement in any earlier statement in the Proxy
Statement or any amendment or supplement thereto. Each of Eagle and PAB further
agrees that if it shall become aware prior to the Effective Date of any
information that would cause any of the statements in the Proxy Statement to be
false or misleading with respect to any Material fact, or to omit to state any
Material fact necessary to make the statements therein not false or misleading,
to promptly inform the other Party thereof and to take the necessary steps to
correct the Proxy Statement.
(c) In the case of PAB, PAB will advise Eagle, promptly after PAB
receives notice thereof, of the time when the Registration Statement has become
effective or any supplement or amendment has been filed, or of the issuance of
any stop order or the suspension of the qualification of the PAB Common Stock
for offering or sale in any jurisdiction, of the initiation or threat of any
proceeding for any such purpose, or of any request by the SEC for the amendment
or supplement of the Registration Statement or for additional information.
(d) Nothing in this Section 8.2 or elsewhere in this Agreement shall
prohibit accurate disclosure by Eagle of information that is required to be
disclosed in the Registration Statement of the Proxy Statement or in any other
document required to be filed with the SEC (including, without limitation, a
Solicitation/Recommendation Statement on Schedule 14D-9) or otherwise required
to be publicly disclosed by applicable Law or the regulations and rules of the
NASD.
8.3 Applications. PAB shall promptly prepare and file, Eagle and Bank
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. PAB
shall permit Eagle and Bank to review (and approve with respect to information
relating to Eagle) such applications prior to filing same.
8.4 Filings with State Office. Upon the terms and subject to the
conditions of this Agreement, PAB shall execute and file the Articles of Merger
with the Secretary of State of the State of Georgia in connection with the
Closing.
8.5 Agreement as to Efforts to Consummate. Subject to the terms and
conditions of this Agreement, each Party agrees to use its reasonable efforts to
take all actions, and to do 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 PAB in connection with the PAB Common Stock to be issued in
the Merger or a resolicitation of proxies as a consequence of an acquisition
agreement by PAB or any of its Subsidiaries shall not violate this covenant),
including, without limitation, using its reasonable 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; provided, that nothing herein shall preclude either
Party from exercising its rights under this Agreement. Each Party shall use,
and shall cause each of its Subsidiaries to use, its reasonable efforts to
obtain all
A-20
<PAGE>
Consents necessary or desirable for the consummation of the transactions
contemplated by this Agreement.
8.6 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 transaction 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) Each Party shall, and shall cause its advisers and agents to,
maintain the confidentiality of all confidential information furnished to it by
any other Party concerning its and its Subsidiaries' businesses, operations and
financial condition except in furtherance of the transactions contemplated by
this Agreement. In the event that a Party is required by applicable Law or
valid court process to disclose any such confidential information, then such
Party shall provide the other Party with prompt written notice of any such
requirement so that the other Party may seek a protective order or other
appropriate remedy and/or waive compliance with this Section 8.6. If in the
absence of a protective order or other remedy or the receipt of a waiver by the
other Party, a Party is nonetheless, in the written opinion of counsel, legally
compelled to disclose any such confidential information to any tribunal or else
stand liable for contempt or suffer other censure or penalty, a Party may,
without liability hereunder, disclose to such tribunal only that portion of the
confidential information which such counsel advises such Party is legally
required to be disclosed; provided that such disclosing Party use its best
efforts to preserve the confidentiality of such confidential information,
including without limitation, by cooperating with the other Party to obtain an
appropriate protective order or other reliable assurance that confidential
treatment will be accorded such confidential information by such tribunal. 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.
(d) Neither Party nor any of their respective Subsidiaries shall be
required to provide access to or to disclose information where such access or
disclosure would violate or prejudice the rights of its customers, jeopardize
the attorney-client or similar privilege with respect to such information or
contravene any Law, rule, regulation, Order, judgment, decree, fiduciary duty or
agreement entered into prior to the date of this Agreement. The Parties will
use their reasonable efforts to make appropriate substitute disclosure
arrangements, to the extent practicable, in circumstances in which the
restrictions of the preceding sentence apply.
8.7 Press Releases. Prior to the Effective Time, Eagle and PAB 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
--------- -------
8.7 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.
8.8 Certain Actions. Except with respect to this Agreement and the
transactions contemplated hereby, neither Eagle nor any Affiliate thereof nor
any investment banker, attorney, accountant or other representative
(collectively, the "Representatives") retained by Eagle or Bank shall directly
or indirectly solicit or engage in negotiations concerning any Acquisition
Proposal by any Person, or provide any confidential information or assistance
to, or have any discussions with, any Person with respect to an Acquisition
Proposal. Except to the extent necessary to comply with the fiduciary duties of
Eagle Board of Directors as determined by the Eagle Board of Directors after
consulting with and considering the advice of counsel, neither Eagle nor any
Affiliate or
A-21
<PAGE>
Representative thereof shall furnish any non-public information that it is not
legally obligated to furnish, negotiate with respect to, or enter into any
Contract with respect to, any Acquisition Proposal, but Eagle may communicate
information about such an Acquisition Proposal to its shareholders if and to the
extent that it is required to do so in order to comply with its legal
obligations as advised by counsel; provided that Eagle shall promptly advise
--------
PAB verbally and in writing following the receipt of any Acquisition Proposal
and the Material details thereof. Eagle shall (i) immediately cease and cause to
be terminated any existing activities, discussions or negotiations with any
Persons conducted heretofore with respect to any of the foregoing and (ii)
direct and use its reasonable efforts to cause all of its Representatives not to
engage in any of the foregoing.
8.9 Accounting and 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 pooling-of-interests accounting
treatment and treatment as a "reorganization" within the meaning of Section
368(a) of the Internal Revenue Code for federal income tax purposes.
8.10 State Takeover Laws. Eagle and Bank shall take all reasonable steps to
exempt the transactions contemplated by this Agreement from, or if necessary
challenge the validity or applicability of, any applicable state takeover Law.
8.11 Articles of Incorporation Provisions. Eagle and Bank shall take all
necessary action to ensure that the entering into of this Agreement and the
consummation of the Merger does not and will not result in the grant of any
rights to any Person under the Articles, Bylaws or other governing instruments
of Eagle or Bank (other than voting, dissenters' rights of appraisal or other
similar rights) or restrict or impair the ability of PAB or any of its
Subsidiaries to vote, or otherwise to exercise the rights of a shareholder with
respect to, shares of Eagle or Bank that may be acquired or controlled by it.
8.12 Agreement of Affiliates. Eagle has Previously Disclosed all Persons
whom it reasonably believes is an "affiliate" of Eagle for purposes of Rule 145
under the 1933 Act. Eagle shall use its reasonable efforts to cause each such
Person to deliver to PAB not later than 30 days after the date of this
Agreement, a written agreement, substantially in the form of Exhibit B,
providing that such Person will not sell, pledge, transfer or otherwise dispose
of the shares of Eagle 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 PAB 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 and until
such time as the financial results covering at least 30 days of combined
operations of PAB and Eagle have been published within the meaning of Section
201.01 of the SEC's Codification of Financial Reporting Policies. If the Merger
will qualify for pooling-of-interests accounting treatment, (i) shares of PAB
Common Stock issued to such affiliates of Eagle in exchange for shares of Eagle
Common Stock and (ii) shares of PAB Common Stock held by affiliates of PAB shall
not be transferable until such time as financial results referred to in this
Section 8.12 have been published as set forth in this Section 8.12, regardless
of whether each such affiliate has provided the written agreement referred to in
this Section 8.12 (and PAB shall be entitled to place restrictive legends upon
certificates for shares of PAB Common Stock issued to affiliates of Eagle
pursuant to this Agreement to enforce the provisions of this Section 8.12);
provided, further that no affiliate either of PAB or Eagle may dispose of or
reduce the risks of ownership in their respective shares of PAB Common Stock or
Eagle Common Stock within 30 days prior to the Effective Time. PAB shall not be
required to maintain the effectiveness of the Registration Statement under the
1933 Act for the purposes of resale of PAB Common Stock by such affiliates.
8.13 Employee Benefits and Contracts. Following the Effective Time, PAB
shall provide generally to officers and employees of Eagle, who at or after the
Effective Time become employees of a PAB Company, employee benefits under
employee benefit plans (other than stock option or other plans involving the
potential issuance of PAB Common Stock except as set forth in this Section 8.13)
on terms and conditions which when taken as a whole are substantially similar to
those currently provided by the PAB Companies to their similarly situated
officers and employees; provided, that, for a period of 12 months after the
Effective Time, PAB shall provide generally to officers and employees of Eagle
and Bank severance benefits in accordance with the policies of either (i) Eagle
as Previously Disclosed pursuant to this Section 8.13, or (ii) PAB, whichever of
(i) or (ii) will provide the
A-22
<PAGE>
greater benefit to the officer or employee. PAB shall waive any pre-existing
condition exclusion under any employee health plan for which any employees
and/or officers and dependents covered by Eagle Benefit Plans as of Closing
shall become eligible by virtue of the preceding sentence, to the extent (i)
such pre-existing condition was covered under the Eagle Benefit Plans and (ii)
the individual affected by the pre-existing condition was covered by the Eagle
Entity's corresponding plan on the date which immediately precedes the Effective
Time. For purposes of participation, vesting and benefit accrual under all
qualified benefit plans, the service of the employees of Eagle or Bank prior to
the Effective Time shall be treated as service with the PAB Companies
participating in all qualified benefit plans. PAB also shall honor in accordance
with their terms all employment, severance, consulting and other compensation
Contracts Previously Disclosed to PAB between Eagle or Bank 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 Eagle Benefit Plans. PAB and Bank will enter into mutually acceptable
employment contracts with Andrew M. Williams, III and Gary L. Johnson as of the
date of Closing to the extent such persons are available and agree to such
employment. For calendar year 1998, such employee benefit plans, salaries, bonus
plans, profit sharing plan contributions and other compensation plans will be
based on existing Eagle plans.
8.14 Exchange Listing. PAB shall use its reasonable efforts to list, prior
to the Effective Time, on the Amex, subject to official notice of issuance, the
shares of PAB Common Stock to be issued to the holders of Eagle Common Stock
pursuant to the Merger.
8.15 D&O Coverage. At the Effective Time, PAB will provide directors and
officers insurance coverage for Eagle's directors and officers either, at PAB's
election, (i) by purchasing continuation coverage under Eagle's current policy
for directors and officers for a period not less than three (3) years after the
Effective Time, or (ii) obtain coverage under PAB's current directors' and
officers' policy to provide coverage for Eagle's directors and officers on a
prior acts basis for a period not less than three (3) years prior to the
Effective Time.
ARTICLE 9
CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE
9.1 Conditions to Obligations of Each Party. The respective obligations of
each Party to perform this Agreement and to consummate the Merger are subject to
the satisfaction of the following conditions, unless waived by both Parties
pursuant to Section 11.6 of this Agreement:
(a) Shareholder Approval. The shareholders of Eagle shall have
--------------------
approved this Agreement and the consummation of the Merger as and to the extent
required by Law and by the provisions of any of its governing instruments and by
the rules of the NASD.
(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 or deposits) which in the
reasonable judgment of the Board of Directors of PAB 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.
(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 9.1(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. No Consent obtained which is necessary to consummate the
transactions contemplated hereby shall be conditioned or restricted in a manner
which in the reasonable judgment of the Board of Directors of PAB would so
materially adversely impact the economic or business benefits of the
transactions contemplated by this Agreement so as to render inadvisable the
consummation
A-23
<PAGE>
of the Merger.
(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, restricts or makes illegal
consummation of the transactions contemplated by this Agreement.
(e) Registration Statement. The Registration Statement shall be
----------------------
effective under the 1933 Act, no stop orders suspending the effectiveness of the
Registration Statement shall have been issued, no action, suit, proceeding or
investigation by the SEC to suspend the effectiveness thereof shall have been
initiated and be continuing, and all necessary approvals under state securities
Laws or the 1933 Act or 1934 Act relating to the issuance or trading of the
shares of PAB Common Stock issuable pursuant to the Merger shall have been
received.
(f) Pooling Letters. Each of the Parties shall have received a letter,
---------------
dated as of the Effective Time, in form and substance reasonably acceptable to
such Party, from Stewart, Fowler & Stalvey, P.C. to the effect that the Merger
will qualify for pooling-of-interests accounting treatment.
(g) Tax Matters. Eagle and PAB shall have received a written opinion
-----------
of counsel from Troutman Sanders LLP in form reasonably satisfactory to each of
them (the "Tax Opinion"), substantially to the effect that for federal income
tax purposes (i) the Merger will constitute a reorganization within the meaning
of Section 368(a) of the Internal Revenue Code, (ii) the exchange in the Merger
of Eagle Common Stock for PAB Common Stock will not give rise to gain or loss to
the shareholders of Eagle with respect to such exchange (except to the extent of
any cash received in lieu of a fractional share interest in PAB Common Stock),
and (iii) neither of Eagle nor PAB will recognize gain or loss as a consequence
of the Merger except for income and deferred gain recognized pursuant to
Treasury regulations issued under Section 1502 of the Internal Revenue Code. In
rendering such Tax Opinion, Troutman Sanders LLP shall be entitled to rely upon
representations of officers of Eagle and PAB reasonably satisfactory in form and
substance to such counsel.
(h) Employment Agreements. PAB and Bank shall have offered to each of
---------------------
Andrew M. Williams, III and Gary L. Johnson the employment agreements in
substantially the form set forth in Exhibit C to this Agreement. If such
employment agreements are not accepted by such officers, then such officers will
have modified their respective current employment agreements to (i) conform
their bonus provisions to those utilized by PAB for similarly situated
subsidiary bank officers for years after 1998 and (ii) to exempt the Merger from
the change in control provisions of their respective agreements. The existing
employment agreement between Bank and W. Earl Green shall remain in effect after
the Effective Time.
9.2 Conditions to Obligations of PAB. The obligations of PAB to perform
this Agreement and to consummate the Merger and the other transactions
contemplated hereby are subject to the satisfaction of the following conditions,
unless waived by PAB pursuant to Section 11.6(a) of this Agreement:
(a) Representations and Warranties. The representations and warranties
------------------------------
of Eagle set forth or referred to in this Agreement shall be true and correct in
all material 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 and correct in
all Material 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 Eagle.
(b) Performance of Agreements and Covenants. Each and all of the
---------------------------------------
agreements and covenants of Eagle 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.
A-24
<PAGE>
(c) Certificates. Eagle shall have delivered to PAB (i) a certificate,
------------
dated as of the Effective Time and signed on its behalf by its Chief Executive
Officer and Chief Financial Officer, to the effect that the conditions of its
obligations set forth in Section 9.2(a) and 9.2(b) of this Agreement have been
satisfied, and (ii) certified copies of resolutions duly adopted by the Eagle
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 PAB and its counsel shall request.
(d) Opinion of Counsel. PAB shall have received a written opinion from
------------------
Martin, Snow, Grant & Napier, LLP, counsel to Eagle, dated as of the Closing, in
form reasonably satisfactory to PAB, as to the matters set forth in Exhibit E
hereto.
(e) Accountant's Letters. PAB shall have received from Stewart, Fowler
--------------------
& Stalvey, P.C. 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 Eagle and Bank, in form and substance reasonably
satisfactory to PAB, which letters shall be based upon customary specified
procedures undertaken by such firm. If such letters are not delivered within
the five (5) day time limits above, this condition shall be waived by PAB.
(f) Affiliate Agreements. PAB shall have received from each affiliate
--------------------
of Eagle the affiliate agreement referred to in Section 8.12 hereof, in
substantially the form attached hereto as Exhibit B, to the extent necessary to
assure in the reasonable judgment of PAB that the transaction contemplated
hereby will qualify for pooling-of-interests accounting treatment.
(g) Support Agreements. Each of the executive officers and directors
------------------
of Eagle listed in Exhibit D shall have executed and delivered to PAB a Support
Agreement in substantially the form attached hereto as Exhibit A, except the
words "two years" in paragraph 4 shall be changed to "18 months" for Andrew M.
Williams, III and W. Earl Green and changed to "12 months" for Gary L. Johnson.
9.3 Conditions to Obligations of Eagle. The obligations of Eagle 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 Eagle pursuant to Section 11.6(b) of this Agreement:
(a) Representations and Warranties. The representations and warranties
------------------------------
of PAB set forth or referred to in this Agreement shall be true and correct in
all Material 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 6.3 of this Agreement, which shall be true and correct in
all Material 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 PAB.
(b) Performance of Agreements and Covenants. Each and all of the
---------------------------------------
agreements and covenants of PAB 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. PAB shall have delivered to Eagle (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 9.3(a) and 9.3(b) of this Agreement have
been satisfied, and (ii) certified copies of resolutions duly adopted by PAB'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 Eagle and its counsel shall request.
(d) Opinion of Counsel. Eagle shall have received an opinion of
------------------
Troutman Sanders LLP, counsel to PAB, dated as of the Effective Time, in form
reasonably satisfactory to Eagle, as to matters set forth in Exhibit E
A-25
<PAGE>
hereto.
(e) Share Listing. The shares of PAB Common Stock issuable pursuant to
-------------
the Merger shall have been approved for listing on the Amex.
ARTICLE 10
TERMINATION
10.1 Termination. Notwithstanding any other provision of this Agreement,
and notwithstanding the approval of this Agreement by the shareholders of Eagle,
this Agreement may be terminated and the Merger abandoned at any time prior to
the Effective Time:
(a) By mutual consent of the respective Boards of Directors of PAB and
Eagle; 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 breach by the other Parties of any representation or warranty 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 and which breach
would provide the non-breaching party the ability to refuse to consummate the
Merger under the standard set forth in Section 9.2(a) of this Agreement in the
case of PAB and Section 9.3(a) of this Agreement in the case of Eagle; 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
(i) any Consent of any Regulatory Authority required for consummation of the
Merger shall have 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) the shareholders of Eagle fail to vote their approval of this
Agreement and the transaction contemplated hereby at the Eagle Meeting where the
transaction was presented to such shareholders for approval and voted upon; or
(d) By the Board of Directors of either Party in the event that the
Merger shall not have been consummated by December 31, 1998, but only if the
failure to consummate the transactions contemplated hereby on or before such
date is not caused by any breach of this Agreement by the Party electing to
terminate pursuant to this Section 10.1(d); or
(e) 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 10.1(d) of this Agreement; or
(f) By the Board of Directors of either Party in the event that the
Deemed Market Value of the PAB Common Stock is less than $18.00 per share upon
delivery of written notice at least three (3) days prior to the Closing to the
other Party; or
(g) By PAB in the event that the Board of Directors of Eagle shall have
failed to reaffirm, following a written request by PAB for such reaffirmation
after Eagle shall have received any inquiry or proposal with respect to an
Acquisition Proposal, its approval of the Merger (to the exclusion of any other
Acquisition Proposal), or shall have resolved not to reaffirm the Merger.
10.2 Effect of Termination. In the event of the termination and abandonment
of this Agreement pursuant to Section 10.1 of this Agreement, this Agreement
shall become void and have no effect, except that (i) the provisions of this
Section 10.2 and Article 11 and Section 8.6(b) of this Agreement shall survive
any such termination and abandonment, and (ii) a termination pursuant to
Sections 10.1(b) or 10.1(e) of this Agreement shall not relieve the breaching
Party from Liability for an uncured willful breach of a representation,
warranty, covenant
A-26
<PAGE>
or agreement giving rise to such termination; provided that such Liability shall
be determined solely in accordance with the effect of Section 11.2(b) of this
Agreement.
10.3 Non-Survival of Representations and Covenants. The respective
representations, warranties, obligations, covenants and agreements of the
Parties shall not survive the Effective Time except for this Section 10.3 and
Articles 2, 3, 4, and 11 and Section 8.12 of this Agreement.
ARTICLE 11
MISCELLANEOUS
11.1 Definitions. Except as otherwise provided herein, the capitalized
terms set forth below (in their singular and plural forms as applicable) shall
have the following meanings:
"ACQUISITION PROPOSAL" with respect to a Party shall mean any tender offer
or exchange offer or any proposal for a merger, acquisition of all of the stock
or Assets of, or other business combination involving such Party or any of its
Subsidiaries or the acquisition of a substantial equity interest in, or a
substantial portion of the Assets of, such Party or any of its Subsidiaries.
"AFFILIATE" of a Person shall mean: (i) any other Person directly, or
indirectly through one or more intermediaries, controlling, controlled by or
under common control with such Person, (ii) any officer, director, partner,
employer or direct or indirect beneficial owner of any 10% or greater equity or
voting interest of such Person or (iii) any other Person for which a Person
described in clause (ii) acts in any such capacity.
"AGREEMENT" shall mean this Agreement and Plan of Merger, including the
Exhibits delivered pursuant hereto and incorporated herein by reference.
"ALLOWANCE" shall mean the allowance for possible loan or credit losses
for the periods set forth in Section 5.9 of this Agreement.
"AMEX" shall mean the American Stock Exchange.
"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.
"BANK" shall have the meaning set forth in the Preamble of this Agreement.
"BHC ACT" shall mean the federal Bank Holding Company Act of 1956, as
amended.
"CLOSING" shall mean the closing of the transaction contemplated hereby,
as described in Section 1.2 of this Agreement.
"CONSENT" shall mean any consent, approval, authorization, clearance,
exemption, waiver or similar affirmation by any Person pursuant to any Contract,
Law, Order or Permit.
"CONTRACT" shall mean any written or oral agreement, arrangement,
authorization, commitment, contract, indenture, instrument, lease, obligation,
plan, practice, restriction, understanding or undertaking of any kind or
character or other document to which any Person is a party or that is binding on
any Person or its capital stock, Assets or business.
"DEEMED MARKET VALUE" shall mean the arithmetic average of the closing
price for PAB Common Stock as reported on Amex for the 20 consecutive trading
days immediately preceding the date which is five calendar days
A-27
<PAGE>
prior to the Effective Time.
"DEFAULT" shall mean (i) any breach or violation of or default under any
Contract, Order or Permit, (ii) any occurrence of any event that with the
passage of time or the giving of control or both would constitute a breach or
violation of or default under any Contract, Order or Permit, or (iii) any
occurrence of any event that with or without the passage of time 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.
"EAGLE BENEFIT PLANS" shall have the meaning set forth in Section 5.14 of
this Agreement.
"EAGLE COMMON STOCK" shall mean the $1.00 par value common stock of Eagle.
"EAGLE FINANCIAL STATEMENTS" shall mean (i) the consolidated balance
sheets (including related notes and schedules, if any) of Eagle as of March 31,
1998, and as of December 31, 1997, 1996, 1995 and 1994, 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, 1998,
and for each of the four fiscal years ended December 31, 1997, 1996, 1995 and
1994, and (ii) the consolidated balance sheets of Eagle (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, 1998, with related
prior year comparable financial statements.
"EAGLE MEETING" shall mean the special meeting of the shareholders of
Eagle or any adjournment thereof to vote on the matters set forth in the Proxy
Statement.
"EAGLE OPTIONS" shall mean those options issued under the Eagle Option
Plan.
"EAGLE OPTION PLAN" shall mean the Eagle 1990 Employee Stock Option Plan.
"EFFECTIVE TIME" shall mean the date and time at which the Articles of
Merger reflecting the Merger shall become effective with the Secretary of State
of the State of Georgia.
"ENVIRONMENTAL LAWS" shall mean all federal, state, municipal and local
laws, statutes, orders, regulations, decrees, resolutions, proclamations,
permits, licenses, approvals, authorizations, consents, judgments, judicial
decisions and other governmental requirements, limitations and standards
relating to the environment, health and safety issues, including, without
limitation, the manufacture, generation, use, processing, treatment, recycling,
storage, handling, "Release" (as hereinafter defined), investigation, removal,
remediation and cleanup of or other corrective action for "Hazardous Materials"
(as hereinafter defined), exposure to Hazardous Materials and personal injury,
natural resource damage, property damage and interference with the use of
property caused by or resulting from Hazardous Materials.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA AFFILIATE" shall have the meaning provided in Section 5.14 of this
Agreement.
"ERISA PLAN" shall have the meaning provided in Section 5.14 of this
Agreement.
"EXCHANGE RATIO" shall mean the ratio formed by the number of shares of
PAB Common Stock Eagle shareholders will receive for each share of Eagle Common
Stock as set forth herein to one.
"EXHIBITS" A through F, 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.
A-28
<PAGE>
"FICG" shall mean the Financial Institutions Code of Georgia.
"GAAP" shall mean generally accepted accounting principles, consistently
applied during the periods involved.
"GBCC" shall mean the Georgia Business Corporation Code.
"GEORGIA ARTICLES OF MERGER" shall mean the Articles of Merger to be
executed by PAB and Eagle and filed with the Secretary of State of the State of
Georgia relating to the Merger as contemplated by Section 1.1 of this Agreement.
"HAZARDOUS MATERIALS" shall mean all hazardous, toxic, explosive,
corrosive, flammable, infectious, radioactive, carcinogenic, mutagenic and
volatile substances, materials, compounds, chemicals and waste, and all other
industrial waste, sanitary waste, pollutants and contaminants, and all
constituents thereof, including, without limitation, petroleum hydrocarbons,
asbestos-containing materials, lead-based paints and all substances, materials,
wastes, chemicals, compounds, contaminants and pollutants regulated or addressed
by Environmental Laws.
"HSR ACT" shall mean Section 7A of the Clayton Act, as added by the Title
II of the Hart-Scott-Rodino Antitrust Improvement Act of 1976, as amended, and
the rules and regulations promulgated thereunder.
"IRS" shall mean the Internal Revenue Service.
"INTERNAL REVENUE CODE" shall mean the Internal Revenue Code of 1986, as
amended, and the rules and regulations promulgated thereunder.
"KNOWLEDGE" as used with respect to a Person shall mean the knowledge,
after all appropriate due inquiry, of the Chairman, President, Chief Financial
Officer, Chief Accounting Officer, Chief Credit Officer, General Counsel, any
Assistant or Deputy General Counsel or any Senior or Executive Vice President or
Manager of such Person.
"LAW" shall mean any code, law, ordinance, regulation, reporting or
licensing requirement, rule or statute and all Environmental Laws applicable to
a Person or its Assets, Liabilities or business, including, without limitation,
those promulgated, interpreted or enforced by any of the Regulatory Authorities.
"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, (iii) Liens which are not reasonably likely to have, individually or
in the aggregate, a Material Adverse Effect on a Party; and (iv) Liens which
have been Previously Disclosed.
"LITIGATION" shall mean any action, arbitration, cause of action, claim,
complaint, criminal prosecution, demand letter, governmental or other
examination or investigation, request for information, 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
A-29
<PAGE>
examinations of depository institutions and their Affiliates by Regulatory
Authorities.
"LOAN PROPERTY" shall mean any property owned, leased or operated by the
Party in question or by any of its Subsidiaries or in which such Party or
Subsidiary holds a security or other interest (including an interest in a
fiduciary capacity), 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,
condition or occurrence which has a Material adverse impact on (i) the financial
position, business or results of operations of such Party and its Subsidiaries,
taken as a whole, or (ii) 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 Effect" 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 and (y) changes in GAAP or regulatory accounting principles
generally applicable to banks and their holding companies.
"MERGER" shall mean the merger of Eagle with and into PAB referred to in
the Preamble of this Agreement.
"MERGER CONSIDERATION" shall mean the aggregate consideration to be
received for all of the shares of Eagle Common Stock.
"NASD" shall mean the National Association of Securities Dealers, Inc.
"1933 ACT" shall mean the Securities Act of 1933, as amended.
"1934 ACT" shall mean the Securities Exchange Act of 1934, as amended.
"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.
"PAB COMMON STOCK" shall mean the no par value common stock of PAB.
"PAB COMPANIES" shall mean, collectively, PAB and all PAB Subsidiaries.
"PAB FINANCIAL STATEMENTS" shall mean (i) the consolidated statements of
condition (including related notes and schedules, if any) of PAB as of March 31,
1998, and as of December 31, 1997, 1996, 1995 and 1994, 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, 1998,
and for each of the four years ended December 31, 1997, 1996, 1995 and 1994, as
filed by PAB in SEC Documents and (ii) the consolidated statements of condition
of PAB (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 December 31, 1997.
"PAB SUBSIDIARIES" shall mean the subsidiaries of PAB.
"PARTICIPATION FACILITY" shall mean any facility or property in which the
Party in question or any of its Subsidiaries participates in the management
(including, but not limited to, 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.
A-30
<PAGE>
"PARTY" shall mean either Eagle or PAB, and "PARTIES" shall mean Eagle and
PAB.
"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 delivered in writing prior
to the date specified in Section 10.1(h) of this Agreement in the manner and to
the Party or counsel or both described in Section 11.8 of this Agreement and
entitled "Previously Disclosed Information Delivered Pursuant to the Agreement
and Plan of Merger" describing in reasonable detail the matters contained
therein or identifying the information disclosed; 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.
"PROXY STATEMENT" shall mean the proxy statement used by Eagle to solicit
the approval of its shareholders of the transactions contemplated by this
Agreement and shall include the prospectus of PAB relating to shares of PAB
Common Stock to be issued to the shareholders of Eagle and other proxy
solicitation materials of Eagle consisting of a part thereof.
"REGISTRATION STATEMENT" shall mean the Registration Statement on Form S-
4, or other appropriate form, including any pre-effective or post-effective
amendments or supplements thereto, filed with the SEC by PAB 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 Department of Banking and Finance, the
Federal Deposit Insurance Corporation, all state regulatory agencies having
jurisdiction over the Parties and their respective Subsidiaries, the Amex, the
NASD and the SEC.
"RELEASE" shall mean any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping, abandonment or
disposing into or migration within the environment.
"REPRESENTATIVES" shall have the meaning set forth in Section 8.8.
"SEC" shall mean the Securities and Exchange Commission.
"SEC DOCUMENTS" shall mean all forms, proxy statements, reports,
registration statements, schedules and other documents 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, and the rules and
regulations of any Regulatory Authority promulgated thereunder.
"SUBSIDIARIES" shall mean all those corporations, banks, association, or
other entities of which the entity in question owns or controls 5% or more of
the outstanding equity securities either directly or through an unbroken chain
of entities as to each of which 5% or more of the outstanding equity securities
is owned directly or indirectly by its parent; provided, however, there shall
-------- -------
not be included any such entity acquired through foreclosure or any such entity
the equity securities of which are owned or controlled in a fiduciary capacity.
"SURVIVING CORPORATION" shall mean PAB as the surviving corporation
resulting from the Merger.
A-31
<PAGE>
"TAX" OR "TAXES" shall mean all federal, state, county, local and foreign
taxes, charges, fees, levies, imposts, duties or other assessments, including
income, gross receipts, excise, employment, sales, use, transfer, license,
payroll, franchise, severance, stamp, occupation, windfall profits,
environmental, federal highway use, commercial rent, customs duties, capital
stock, paid-up capital, profits, withholding, Social Security, single business
and unemployment, disability, real property, personal property, registration, ad
valorem, value added, alternative or add-on minimum, estimated or other tax or
governmental fee of any kind whatsoever, imposed or required to be withheld by
the United States or any state, local, or foreign government or subdivision or
agency thereof, including interest and penalties thereon or additions with
respect thereto.
"TAXABLE PERIOD" shall mean any period prescribed by any governmental
authority, including the United States or any state, local or foreign government
or subdivision or agency thereof for which a Tax Return required to be filed or
Tax is required to be paid.
"TAX RETURN" shall mean any report, return or other information required
to be supplied to a taxing authority in connection with Taxes, including any
return of an affiliated or combined or unitary group that includes a Party or
its Subsidiaries.
11.2 Expenses.
(a) General. Except as otherwise provided in this Section 11.2, 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 except that PAB shall bear and pay the filing fees
payable in connection with the Registration Statement and the Proxy Statement
and one-half of the printing costs incurred in connection with the printing of
the Registration Statement and the Proxy Statement.
(b) Breach by either Party. In addition to the foregoing, if prior to
----------------------
the Effective Time, this Agreement is terminated by either Party as a result of
the other Party's breach of such party's representations, warranties or
agreements set forth herein of this Agreement, such Party shall pay to the non-
breaching Party as its sole and exclusive remedy resulting from such
termination, an amount in cash equal to the sum of:
(i) the reasonable direct costs and expenses incurred by or on
behalf of the non-breaching Party in connection with the
transactions contemplated by this Agreement, plus
----
(ii) the sum of $50,000,
which sum represents compensation for the non-breaching Party's loss as the
result of the transactions contemplated by this Agreement not being consummated.
11.3 Brokers and Finders. Eagle 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 except Eagle has engaged
Elaine H. Demarest, C.P.A., P.C. to render financial advisory services. In the
event of a claim by any broker or finder based upon his or its representing or
being retained by or allegedly representing or being retained by Eagle, Eagle
shall indemnify and hold PAB harmless of and from any Liability in respect of
any such claim and reduce the Merger Consideration by an amount equal to such
claim as determined by PAB.
11.4 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
transaction contemplated hereunder and supersedes all prior arrangements or
understandings with respect thereto, written or oral. 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
A-32
<PAGE>
reason of this Agreement.
11.5 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; whether before or after
shareholder approval of the Merger has been obtained provided, however, that
-------- -------
after any such approval by the holders of Eagle Common Stock, there shall be
made no amendment decreasing the consideration to be received by Eagle
shareholders without the further approval of such shareholders.
11.6 Waivers.
(a) Prior to or at the Effective Time, PAB, 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
Eagle, to waive or extend the time for the compliance or fulfillment by Eagle of
any and all of its obligations under this Agreement and to waive any or all of
the conditions precedent to the obligations of PAB 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 PAB.
(b) Prior to or at the Effective Time, Eagle, acting through its Board
of Directors, shall have the right to waive any Default in the performance of
any term of this Agreement by PAB, to waive or extend the time for the
compliance or fulfillment by PAB of any and all of its obligations under this
Agreement and to waive any or all of the conditions precedent to the obligations
of Eagle 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 Eagle.
(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.
11.7 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 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.
11.8 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:
PAB: PAB Bankshares, Inc.
3102 North Oak Street Ext.
Valdosta, Georgia 31602
912/241-2774 - FAX
Attn: R. Bradford Burnette, President
Copy to Counsel: Coleman, Talley, Newbern, Kurrie, Preston &
Holland
910 N. Patterson Street
Valdosta, Georgia 31601
912/333-0885 - FAX
Attn: Thompson Kurrie, Jr., Esquire
A-33
<PAGE>
Troutman Sanders LLP
600 Peachtree Street, N.E., Suite 5200
Atlanta, Georgia 30308-2218
404/885-3995 - FAX
Attn: Thomas O. Powell, Esquire
Eagle and Bank: Eagle Bancorp, Inc.
Eagle Bank and Trust
355 South Main Street
Statesboro, Georgia 30454-0638
Attn: James B. Lanier, Jr., Chairman
Copy to Counsel: Martin, Snow, Grant & Napier, LLP
240 Third Street
P.O. Box 1606
Macon, Georgia 31202-1606
Attn: Edward J. Harrell, Esq.
11.9 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.
11.10 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.
11.11 Captions. The captions contained in this Agreement are for reference
purposes only and are not part of this Agreement.
11.12 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.
11.13 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 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.
11.14 Interpretation of Agreement. The Parties hereto acknowledge and agree
that each Party has participated in the drafting of this Agreement and that this
document has been reviewed, negotiated and accepted by all parties and their
respective counsel, and the normal rule of construction to the effect that any
ambiguities are to be resolved against the drafting party shall not be applied
to the interpretation of this Agreement. No inference in favor, or against, any
party shall be drawn from the fact that one party has drafted any portion
hereof.
A-34
<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 officers thereunto as of the day and year first above written.
"EAGLE"
ATTEST:
EAGLE BANCORP, INC.
/s/ W. Dale Parker
- ------------------------------ /s/ James B. Lanier, Jr.
W. Dale Parker, Secretary -------------------------------------
James B. Lanier, Jr., Chairman
(CORPORATE SEAL)
"PAB"
ATTEST:
PAB BANKSHARES, INC.
/s/ Denise McKenzie /s/ R. Bradford Burnette
- ------------------------------ -------------------------------------
Denise McKenzie, Secretary R. Bradford Burnette, President
and Chief Executive Officer
(CORPORATE SEAL)
A-35
<PAGE>
WAIVER AND AMENDMENT NO. 1
This WAIVER AND AMENDMENT NO. 1 (this "Amendment") is made and entered into
as of September 29, 1998, by and between PAB Bankshares, Inc., a Georgia
corporation ("PAB"), and Eagle Bancorp, Inc., a Georgia corporation ("Eagle").
WHEREAS, PAB and Eagle have entered into an Agreement and Plan of Merger,
dated as of June 30, 1998 (the "Merger Agreement"); and
WHEREAS, PAB and Eagle wish to amend the Merger Agreement, and PAB wishes
to waive certain Defaults, more specifically identified herein, in the
performance of terms under the Merger Agreement by Eagle.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements contained herein, the parties agree as follows:
I. AMENDMENTS.
1. Section 3.6(c) is hereby deleted in its entirety.
2. Section 8.13 is hereby deleted in its entirety and replaced with the
following:
8.13 Employee Benefits and Contracts. Following the Effective
Time, PAB shall provide generally to officers and employees of Eagle,
who at or after the Effective Time become employees of a PAB Company,
employee benefits under employee benefit plans (other than stock
option or other plans involving the potential issuance of PAB Common
Stock except as set forth in this Section 8.13) on terms and
conditions which when taken as a whole are substantially similar to
those currently provided by the PAB Companies to their similarly
situated officers and employees; provided, that, for a period of 12
months after the Effective Time, PAB shall provide generally to
officers and employees of Eagle and Bank severance benefits in
accordance with the policies of either (i) Eagle as Previously
Disclosed pursuant to this Section 8.13, or (ii) PAB, whichever of (i)
or (ii) will provide the greater benefit to the officer or employee.
PAB shall waive any pre-existing condition exclusion under any
employee health plan for which any employees and/or officers and
dependents covered by Eagle Benefit Plans as of Closing shall become
eligible by virtue of the preceding sentence, to the extent (i) such
pre-existing condition was covered under the Eagle Benefit Plans and
(ii) the individual affected by the pre-existing condition was covered
by the Eagle Entity's corresponding plan on the date which immediately
precedes the Effective Time. For purposes of participation, vesting
and benefit accrual under all qualified benefit plans, the service of
the employees of Eagle or Bank prior to the Effective Time shall be
treated as service with the PAB Companies participating in all
qualified benefit plans. PAB also shall honor in accordance with
their terms all employment, severance, consulting and other
compensation Contracts Previously Disclosed to PAB between Eagle or
Bank and any current or former director,
A-36
<PAGE>
officer or employee thereof, and all provisions for vested benefits or
other vested amounts earned or accrued through the Effective Time
under the Eagle Benefit Plans. Bank will enter into the employment
contract with Gary L. Johnson as set forth in Exhibit A to this
Agreement as of the date of this Amendment. For calendar year 1998,
such employee benefit plans, salaries, bonus plans, profit sharing
plan contributions and other compensation plans will be based on
existing Eagle plans.
3. Section 9.1(h) is hereby deleted in its entirety and replaced with the
following:
(h) Employment Agreements. PAB and Bank shall have entered
---------------------
into Gary L. Johnson the employment agreement as set forth in Exhibit C
to this Agreement. The existing employment agreement between Bank and
W. Earl Green shall remain in effect after the Effective Time.
4. Section 9.2(g) is hereby deleted in its entirety and replaced with the
following:
(g) Support Agreements. Each of the executive officers and
------------------
directors of Eagle listed in Exhibit D shall have executed and
delivered to PAB a Support Agreement in substantially the form attached
hereto as Exhibit A, except the words "two years" in paragraph 4 shall
be changed to "18 months" for Andrew M. Williams, III and W. Earl Green
and changed to "twelve months" for Gary L. Johnson.
II. WAIVER.
1. Pursuant to Section 11.6(a) of the Merger Agreement, PAB hereby waives
any Default of Eagle under the Merger Agreement arising solely out of (i) the
resignation of Andrew M. Williams, III, President of Eagle and Eagle Bank &
Trust ("EBT"), and (ii) the negotiation of a new employment contract with Gary
L. Johnson, the newly-designated President of Eagle and EBT.
III. MISCELLANEOUS.
1. Except as expressly amended, or consented to, by this Waiver and
Amendment No. 1, all of the terms and provisions of the Merger Agreement shall
remain unchanged and continue in full force and effect and the parties hereto
shall be entitled to all of the applicable benefits thereof and shall be
responsible for all of their respective obligations thereunder.
2. This Waiver and Amendment No. 1 may be executed in any number of
counterparts, and each such counterpart shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
agreement. This Waiver and Amendment No. 1 shall become effective when one or
more counterparts have been signed by each of the parties and delivered to the
other parties, it being understood that the parties need not sign the same
counterpart.
A-37
<PAGE>
3. Capitalized terms used herein and not otherwise defined shall have the
meanings ascribed to such terms in the Merger Agreement, to the extent defined
therein.
4. THIS WAIVER AND AMENDMENT NO. 1 SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF GEORGIA (WITHOUT REGARD TO ANY
APPLICABLE CONFLICTS OF LAW PROVISIONS THEREOF).
IN WITNESS WHEREOF, each of the parties hereto has caused this Waiver and
Amendment No. 1 to be executed and delivered by its respective duly authorized
officers, all as of the date first above written.
ATTEST: "PAB"
PAB BANKSHARES, INC.
/s/ Denise McKenzie /s/ R. Bradford Burnette
- ------------------------------ ---------------------------
Denise McKenzie, Secretary R. Bradford Burnette
President and Chief Executive
Officer
(CORPORATE SEAL)
ATTEST: "EAGLE"
EAGLE BANCORP, INC.
/s/ W. Dale Parker /s/ James B. Lanier, Jr.
- ------------------------------ ---------------------------
W. Dale Parker, Secretary James B. Lanier, Jr.
Chairman
(CORPORATE SEAL)
A-38
<PAGE>
APPENDIX B
August 18, 1998
Board of Directors
Eagle Bancorp, Inc.
P. O. Box 638
Statesboro, Georgia 30458
Dear Board Members:
You have requested our opinion as to the fairness, from a financial point of
view, to the shareholders of Eagle Bancorp, Inc. ("Eagle") of the consideration
to be received in connection with its proposed merger with PAB Bankshares, Inc.
("PAB") (the "Merger") pursuant to and in accordance with the terms of that
certain Agreement and Plan of Merger (the "Agreement") entered into by and
between Eagle and PAB. Capitalized terms used herein and not otherwise defined
shall have the meanings ascribed to them in the Agreement.
You have advised us that, pursuant to the Agreement, each share of Eagle's
Common Stock issued and outstanding at the Effective Time shall be converted
into one share of PAB Common Stock, subject to adjustments as set forth in the
Agreement.
Elaine H. Demarest, CPA, P.C. ("EHD"), as part of its practice in providing
management advisory services to financial institutions, has been regularly
engaged since 1984 as a financial advisor to either buyer or seller in
connection with merger and acquisitions, competitive biddings and valuations for
various purposes. We have been retained by the Board of Directors of Eagle for
the purpose of, and will receive a fee for, rendering this opinion. We have not
advised any party in connection with the Merger other than Eagle.
In connection with our opinion, we have (1) reviewed the Agreement; (2) held
discussions with various members of management and representatives of Eagle and
PAB concerning each company's historical and current operations; (3) reviewed
historical consolidated financial and operating data that was publicly available
or furnished to us by Eagle and PAB; (4) reviewed internal financial analyses,
financial and operating forecasts, reports and other information prepared by
officers and representatives of Eagle; (5) reviewed certain publicly available
information with respect to certain other companies that we believe to be
comparable to Eagle and PAB and the trading markets for such other companies'
securities; (6) reviewed certain publicly available information concerning the
terms of certain other transactions that we deemed relevant to our inquiry; (7)
considered the relative contributions of Eagle and PAB to the combined company;
and (8) conducted such other financial studies, analyses and investigations as
we deemed appropriate for the purpose of this opinion.
In our review and analysis and in arriving at our opinion, we have assumed and
relied upon the accuracy and completeness of all of the financial and other
information provided to us or publicly available and have assumed and relied
upon the representations and warranties of Eagle and PAB contained in the
Agreement. We have not been engaged to, and have not independently attempted
to, verify any of such information. We have also relied upon the managements of
Eagle and PAB as to the reasonableness and achievability of the financial and
operating projections and the assumptions and bases therefore provided to us,
and we have assumed that such projections reflect the best currently available
estimates and judgments of such respective managements of Eagle and PAB and that
such projections and forecasts will be realized in the amounts and time periods
currently estimated by the managements of Eagle and PAB. We have not been
engaged to assess the achievability of such projections or the assumptions on
which they were based and express no view as to such projections or assumptions.
B-1
<PAGE>
We have not conducted a physical inspection or appraisal of any of the assets,
properties or facilities of either Eagle or PAB, no have we been furnished with
any such evaluation or appraisal. We were not asked to consider, and this
opinion does not address, the relative merits of the Merger as compared to any
alternative business strategies that might exist for Eagle or the effect of any
other transaction in which Eagle might engage. We have assumed that the
conditions to the Merger would be consummated on a timely basis in the manner
contemplated in the Agreement. We have also assumed, with the consent of the
Board of Directors of Eagle, that the Merger will be accounted for as a pooling
of interests in accordance with generally accepted accounting principles and as
a tax-free reorganization for federal income tax purposes.
Our opinion is based upon analyses of the foregoing factors in light of our
assessment of general economic, financial and market conditions as they exist
and can be evaluated by us as of the date hereof. We express no opinion as to
the price or trading range at which shares of PAB Common Stock will trade
following the date hereof, or the price or trading range at which PAB's Common
Stock will trade upon completion of the Merger.
EHD has previously provided other fee-compensated management advisory services
to Eagle and its wholly-owned subsidiary, Eagle Bank and Trust, including
service as financial advisor on this Merger, strategic planning, and various
other projects. EHD has previously provided fee-compensated management advisory
services to PAB and its bank subsidiaries, including strategic planning and
branching projects. Neither EHD nor the firm's principal owner or their related
interests own Common Stock in either Eagle or PAB.
It is understood that this opinion may be included in its entirety in any
communication by Eagle or the Eagle Board of Directors to the shareholders of
Eagle. The opinion may not, however, be summarized, excerpted from or otherwise
publicly referred to without our prior written consent. EHD has granted its
consent to the inclusion of this opinion letter and to references to the letter
and our firm in the Registration Statement on Form S-4 of PAB concerning the
Merger.
Based upon and subject to the foregoing and based upon such other matters as we
consider relevant, it is our opinion that, as of the date hereof, the
consideration to be received in the proposed Merger is fair, from a financial
point of view, to Eagle's shareholders.
Yours very truly,
/s/ Elaine H. Demarest, CPA, P.C.
ELAINE H. DEMAREST, CPA, P.C.
B-2
<PAGE>
APPENDIX C
ARTICLE 13
GEORGIA DISSENTERS' RIGHTS STATUTE
14-2-1301. DEFINITIONS.
As used in this article, the term:
(1) "Beneficial shareholder" means the person who is a beneficial owner of
shares held in a voting trust or by a nominee as the record shareholder.
(2) "Corporate action" means the transaction or other action by the
corporation that creates dissenters' rights under Code Section 14-2-1302.
(3) "Corporation" means the issuer of shares held by a dissenter before the
corporate action, or the surviving or acquiring corporation by merger or share
exchange of that issuer.
(4) "Dissenter" means a shareholder who is entitled to dissent from corporate
action under Code Section 14-2-1302 and who exercises that right when and in the
manner required by Code Sections 14-2-1320 through 14-2-1327.
(5) "Fair value," with respect to a Dissenters' shares, means the value of
the shares immediately before the effectuation of the corporate action to which
the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action.
(6) "Interest" means interest from the effective date of the corporate action
until the date of payment, at a rate that is fair and equitable under all the
circumstances.
(7) "Record shareholder" means the person in whose name shares are registered
in the records of a corporation or the beneficial owner of shares to the extent
of the rights granted by a nominee certificate on file with a corporation.
(8) "Shareholder" means the record shareholder or the beneficial shareholder.
(Code 1981, (S) 14-2-1301, enacted by Ga. L. 1988, p. 1070, l; Ga. L. 1993, p.
1231, (S) 6.)
14-2-1302. Right to dissent.
(a) A record shareholder of the corporation is entitled to dissent from,
and obtain payment of the fair value of his shares in the event of, any of the
following corporate actions:
1. Consummation of a plan of merger to which the corporation is a party;
a. If approval of the shareholders of the corporation is required for
the merger by Code Section 14-2-1103 or the articles of incorporation and
the shareholder is entitled to vote on the merger; or
b. If the corporation is a subsidiary that is merged with its parent
under Code Section 14-2-1104;
2. Consummation of a plan of share exchange to which the corporation is a
party as the corporation whose shares will be acquired, if the shareholder
is entitled to vote on the plan;
C-1
<PAGE>
3. Consummation of a sale or exchange of all or substantially all of the
property of the corporation if a shareholder vote is required on the sale or
exchange pursuant to Code Section 14-2-1202, but not including a sale
pursuant to court order or a sale for cash pursuant to a plan by which all or
substantially all of the net proceeds of the sale will be distributed to the
shareholders within one year after the date of sale;
4. An amendment of the articles of incorporation that materially and
adversely affects rights in respect of a Dissenters' shares because it:
a. Alters or abolishes a preferential right of the shares;
b. Creates, alters, or abolishes a right in respect of redemption,
including a provision respecting a sinking fund for the redemption or
repurchase, of the shares;
c. Alters or abolishes a preemptive right of the holder of the shares to
acquire shares or other securities;
d. Excludes or limits the right of the shares to vote on any matter, or
to cumulate votes, other than a limitation by dilution through issuance of
shares or other securities with similar voting rights;
e. Reduces the number of shares owned by the shareholder to a fraction
of a share if the fractional share so created is to be acquired for cash
under Code Section 14-2-604; or
f. Cancels, redeems, or repurchases all or part of the shares of the
class; or
5. Any corporate action taken pursuant to a shareholder vote to the extent
that Article 9 of this chapter, the articles of incorporation, bylaws, or a
resolution of the board of directors provides that voting or nonvoting
shareholders are entitled to dissent and obtain payment for their shares.
(b) A shareholder entitled to dissent and obtain payment for his shares
under this article may not challenge the corporate action creating his
entitlement unless the corporate action fails to comply with procedural
requirements of this chapter or the articles of incorporation or bylaws of the
corporation or the vote required to obtain approval of the corporate action was
obtained by fraudulent and deceptive means, regardless of whether the
shareholder has exercised Dissenters' rights.
(c) Notwithstanding any other provision of this article, there shall be no
right of dissent in favor of the holder of shares of any class or series which,
at the record date fixed to determine the shareholders entitled to receive
notice of and to vote at a meeting at which a plan of merger or share exchange
or a sale or exchange of property or an amendment of the articles of
incorporation is to be acted on, were either listed on a national securities
exchange or held of record by more than 2,000 shareholders, unless:
(1) In the case of a plan of merger or share exchange, the holders of
shares of the class or series are required under the plan of merger or share
exchange to accept for their shares anything except shares of the surviving
corporation or another publicly held corporation which at the effective date
of the merger or share exchange are either listed on a national securities
exchange or held of record by more than 2,000 shareholders, except for scrip
or cash payments in lieu of fractional shares; or
(2) The articles of incorporation or a resolution of the board of directors
approving the transaction provides otherwise. (Code 1981, (S) 14-2-1302,
enacted by Ga. L. 1988, p. 1070, (S) 1; Ga. L. 1989, p. 946, (S) 58.)
14-2-1303. DISSENT BY NOMINEES AND BENEFICIAL OWNERS.
A record shareholder may assert dissenters' rights as to fewer than all the
shares registered in his name only if he dissents with respect to all shares
beneficially owned by any one beneficial shareholder and notifies the
C-2
<PAGE>
corporation in writing of the name and address of each person on whose behalf he
asserts dissenters' rights. The rights of a partial dissenter under this Code
section are determined as if the shares as to which he dissents and his other
shares were registered in the names of different shareholders. (Code 1981, (S)
14-2-1303, enacted by Ga. L. 1988, p. 1070, (S) 1.)
14-2-1320. NOTICE OF DISSENTERS' RIGHTS.
(a) If proposed corporate action creating dissenters' rights under Code
Section 14-2-1302 is submitted to a vote at a shareholders' meeting, the meeting
notice must state that shareholders are or may be entitled to assert dissenters'
rights under this article and be accompanied by a copy of this article.
(b) If corporate action creating dissenters' rights under Code Section 14-2-
1302 is taken without a vote of shareholders, the corporation shall notify in
writing all shareholders entitled to assert dissenters' rights that the action
was taken and send them the dissenters' notice described in Code Section 14-2-
1322 no later than ten days after the corporate action was taken. (Code 1981,
(S) 14-2-1320, enacted by Ga. L. 1988, p. 1070, (S) 1; Ga. L. 1993, p. 1231, (S)
17.)
14-2-1321. NOTICE OF INTENT TO DEMAND PAYMENT.
(a) If proposed corporate action creating dissenters' rights under Code
Section 14-2-1302 is submitted to a vote at a shareholders' meeting, a record
shareholder who wishes to assert dissenters' rights:
(1) Must deliver to the corporation before the vote is taken written notice
of his intent to demand payment for his shares if the proposed action is
effectuated; and
(2) Must not vote his shares in favor of the proposed action.
(b) A record shareholder who does not satisfy the requirements of
subsection (a) of this Code section is not entitled to payment for his shares
under this article. (Code 1981, (S) 14-2-1321, enacted by Ga. L. 1988, p. 1070,
(S) 1.)
14-2-1322. DISSENTERS' NOTICE.
(a) If proposed corporate action creating dissenters' rights under Code
Section 14-2-1302 is authorized at a shareholders' meeting, the corporation
shall deliver a written dissenters' notice to all shareholders who satisfied the
requirements of Code Section 14-2-1321.
(b) The dissenters' notice must be sent no later than ten days after the
corporate action was taken and must:
(1) State where the payment demand must be sent and where and when
certificates for certified shares must be deposited;
(2) Inform holders of uncertificated shares to what extent transfer of the
shares will be restricted after the payment demand is received;
(3) Set a date by which the corporation must receive the payment demand,
which date may not be fewer than 30 nor more than 60 days after the date the
notice required in subsection (a) of this Code section is delivered; and
(4) Be accompanied by a copy of this article. (Code 1981, (S) 14-2-1322,
enacted by Ga. L. 1988, p. 1070, (S) 1.)
C-3
<PAGE>
14-2-1323. DUTY TO DEMAND PAYMENT.
(a) A record shareholder sent a dissenters' notice described in Code
Section 14-2-1322 must demand payment and deposit his certificates in accordance
with the terms of the notice.
(b) A record shareholder who demands payment and deposits his shares under
subsection (a) of this Code Section retains all other right of a shareholder
until these rights are canceled or modified by the taking of the proposed
corporate action.
(c) A record shareholder who does not demand payment or deposit his share
certificates where required, each by the date set in the dissenters' notice, is
not entitled to payment for his shares under this article. (Code 1981, (S) 14-
2-1323, enacted by Ga. L. 1988, p. 1070, (S) 1.)
14-2-1324. SHARE RESTRICTIONS.
(a) The corporation may restrict the transfer of uncertificated shares from
the date the demand for their payment is received until the proposed corporate
action is taken or the restrictions released under Code Section 14-2-1326.
(b) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.
(Code 1981, (S) 14-2-1324, enacted by Ga. L. 1988, p. 1070, (S) 1.)
14-2-1325. OFFER OF PAYMENT.
(a) Except as provided in code Section 14-2-1327, within ten days of the
later of the date the proposed corporate action is taken or receipt of a payment
demand, the corporation shall by notice to each dissenter who complied with Code
Section 14-2-1323 offer to pay to such dissenter the amount the corporation
estimates to be the fair market value of his or her shares, plus accrued
interest.
(b) The offer of payment must be accompanied by:
(1) The corporation's balance sheet as of the end of a fiscal year ending
not more than 16 months before the date of payment, an income statement for
that year, a statement of changes in shareholders' equity for that year, and
the latest available interim financial statements, if any:
(2) A statement of the corporation's estimate of the fair value of the
shares;
(3) An explanation of how the interest was calculated;
(4) A statement of the Dissenters' right to demand payment under Code
Section 14-2-1327; and
(5) A copy of this article.
(c) If the shareholder accepts the corporation's offer by written notice to
the corporation within 30 days after the corporation's offer or is deemed to
have accepted such offer by failure to respond within such 30 days, payment for
his or her shares shall be made within 60 days after the making of the offer or
the taking of the proposed corporate action, whichever is later. (Code 1981,
(S) 14-2-1325, enacted by Ga. L. 1988, p. 1070, (S) 1; Ga. L. 1989, p. 946, (S)
59; Ga. L. 1993, p. 1231, (S) 18.)
C-4
<PAGE>
14-2-1326. FAILURE TO TAKE ACTION.
(a) If the corporation does not take the proposed action within 60 days
after the date set for demanding payment and depositing share certificates, the
corporation shall return the deposited certificates and release the transfer
restrictions imposed on uncertificated shares.
(b) If, after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it must send a new
dissenters' notice under Code Section 14-2-1322 and repeat the payment demand
procedure. (Code 1981, (S) 14-2-1326, enacted by Ga. L. 1988, p. 1070, (S) 1;
Ga. L. 1990, p. 257, (S) 20.)
14-2-1327. PROCEDURES IF SHAREHOLDER DISSATISFIED WITH PAYMENT OR OFFER.
(a) A dissenter may notify the corporation in writing of his own estimate
of the fair value of his shares and amount of interest due, and demand payment
of his estimate of the fair value of his shares and interest due, if:
(1) The dissenter believes that the amount offered under Code Section 14-2-
1325 is less than the fair value of his shares or that the interest due is
incorrectly calculated; or
(2) The corporation, having failed to take the proposed action, does not
return the deposited certificates or release the transfer restrictions
imposed on uncertificated shares within 60 days after the day set for
demanding payment.
(b) A dissenter waives his or her right to demand payment under this Code
section and is deemed to have accepted the corporation's offer unless he or she
notifies the corporation of his or her demand in writing under subsection (a) of
this Code section within 30 days after the corporation offered payment for his
or her shares, as provided in Code Section 14-2-1325.
(c) If the corporation does not offer payment within the time set forth in
subsection (a) of Code Section 14-2-1325:
(1) The shareholder may demand the information required under subsection
(b) of Code Section 14-2-1325, and the corporation shall provide the
information to the shareholder within ten days after receipt of a written
demand for the information; and
(2) The shareholder may at any time, subject to the limitations period of
Code Section 14-2-1332, notify the corporation of his own estimate of the
fair value of his shares and the amount of interest due and demand payment of
his estimate of the fair value of his shares and interest due. (Code 1981,
(S) 14-2-1327, enacted by Ga. L. 1988, p. 1070, (S) 1; Ga. L. 1989, p. 946,
(S) 60; Ga. L. 1990, p. 257, (S) 21; Ga. L. 1993, p. 1231, (S) 19.)
14-2-1330. COURT ACTION.
(a) If a demand for payment under Code Section 14-2-1327 remains unsettled,
the corporation shall commence a proceeding within 60 days after receiving the
payment demand and petition the court to determine the fair value of the shares
and accrued interest. If the corporation does not commence the proceeding
within the 60 day period, it shall pay each dissenter whose demand remains
unsettled the amount demanded.
(b) The corporation will commence the proceeding, which shall be a non-jury
equitable valuation proceeding, in the superior court of the county where a
corporation's registered office is located. If the surviving corporation is a
foreign corporation without a registered office in this state, it shall commence
the proceeding in the county in this state where the registered office of the
domestic corporation merged with or whose shares were acquired by the foreign
corporation was located.
(c) The corporation will make all dissenters, whether or not residents of
this state, whose demands remain unsettled parties to the proceeding, which
shall have the effect of an action quasi in rem against their shares. The
C-5
<PAGE>
corporation shall serve a copy of the petition in the proceeding upon each
dissenting shareholder who is a resident of this state in the manner provided by
law for the service of a summons and complaint, and upon each nonresident
dissenting shareholder either by registered or certified mail or by publication,
or in any other manner permitted by law.
(d) The jurisdiction of the court in which the proceeding is commenced
under subsection (b) of this Code section is plenary and exclusive. The court
may appoint one or more persons as appraisers to receive evidence and recommend
decision on the question of fair value. The appraisers have the powers described
in the order appointing them or in any amendment to it. Except as otherwise
provided in this chapter, Chapter 11 of Title 9, known as the "Georgia Civil
Practice Act," applies to any proceeding with respect to dissenters' rights
under this chapter.
(e) Each dissenter made a party to the proceeding is entitled to judgment
for the amount which the court finds to be the fair value of his shares, plus
interest to the date of judgment. (Code 1981, (S) 14-2-1330, enacted by Ga. L.
1988, p. 1070, (S) 1; Ga. L. 1989, p. 946; (S) 61; Ga. L. 1993, p. 1231, (S)
20.)
14-2-1331. COURT COSTS AND COUNSEL FEES.
(a) The court in an appraisal proceeding commenced under Code Section 14-2-
1330 will determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court, but not
including fees and expenses of attorneys and experts for the respective parties.
The court shall assess the costs against the corporation, except that the court
may assess the costs against all or some of the dissenters, in amounts the court
finds equitable, to the extent the court finds the dissenters acted arbitrarily,
vexatiously, or not in good faith in demanding payment under code Section 14-2-
1327.
(b) The court may also assess the fees and expenses of attorneys and
experts for the respective parties, in amounts the court finds equitable;
(1) Against the corporation and in favor of any or all dissenters if the
courts find the corporation did not substantially comply with the
requirements of Code Sections 14-2-1320 through 14-2-1327; or
(2) Against either the corporation or a dissenter, in favor of any other
party, if the court finds that the party against whom the fees and expenses
are assessed acted arbitrarily, vexatiously, or not in good faith with
respect to the rights provided by this article.
(c) If the court finds that the services of attorneys for any dissenter
were of substantial benefit to other dissenters similarly situated, and that the
fees for those services should not be assessed against the corporation, the
court may award to these attorneys reasonable fees to be paid out of the amounts
awarded to the dissenters who were benefited. (Code 1981, (S) 14-2-1331, enacted
by Ga. L. 1988, p. 1070, (S) 1.)
14-2-1332. LIMITATION OF ACTIONS.
No action by any dissenter to enforce dissenters' rights will be brought more
than three years after the corporate action was taken, regardless of whether
notice of the corporate action and of the right to dissent was given by the
corporation in compliance with the provisions of Code Section 14-2-1320 and Code
Section 14-2-1322. (Code 1981, (S) 14-2-1332, enacted by Ga. L. 1988, p. 1070,
(S) 1.)
C-6
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The provisions of the Georgia Business Corporation Code and the
Registrant's Bylaws set forth the extent to which the Registrant's directors and
officers may be indemnified against liabilities they may incur while serving in
such capacities. Under these indemnification provisions, the Registrant is
required to indemnify any of its directors or officers against any reasonable
expenses (including attorneys' fees) incurred by such director or officer in
defense of any action, suit, or proceeding, whether civil, criminal,
administrative, or investigative, and whether formal or informal, to which such
director or officer was made a party, or in defense of any claim, issue or
matter therein, by reason of the fact that such director or officer is or was a
director or officer of the Registrant or who, while a director of the
Registrant, is or was serving at the Registrant's request as a director,
officer, partner, trustee, employee or agent of another corporation,
partnership, joint venture, trust, employee benefit plan, or other enterprise,
to the extent that such director or officer has been successful, on the merits
or otherwise, in such defense. The Registrant also must indemnify any of its
directors, and may indemnify any of its officers, against any liability incurred
in connection with any threatened, pending, or completed action, suit, or
proceeding, whether civil, criminal, administrative, or investigative, and
whether formal or informal, by reason of the fact that such director or officer
is or was a director or officer of the Registrant or who, while a director or
officer of the Registrant, is or was serving at the Registrant's request as a
director, officer, partner, trustee, employee, or agent of another corporation,
partnership, joint venture, trust, employee benefit plan, or other enterprise,
if such director or officer acted in a manner such director or officer believed
in good faith to be in, or not opposed to, the best interests of the Registrant,
or, with respect to any criminal proceeding, had no reasonable cause to believe
such director's or officer's conduct was unlawful, if a determination has been
made that the director or officer has met these standards of conduct. Such
indemnification in connection with a proceeding by or in the right of the
Registrant, however, is limited to reasonable expenses, including attorneys'
fees, incurred in connection with the proceeding. The Registrant may also
provide advancement of expenses incurred by a director or officer in defending
any such action, suit, or proceeding upon receipt of a written affirmation of
such officer or director that such director or officer has met certain standards
of conduct and an undertaking by or on behalf of such director or officer to
repay such advances unless it is ultimately determined that such director or
officer is entitled to indemnification by the Registrant.
The Registrant may not indemnify a director or officer in connection with a
proceeding by or in the right of the Registrant in which the director or officer
was adjudged liable to the Registrant, or in connection with a proceeding in
which he was adjudged liable on the basis that he improperly received a personal
benefit.
The Registrant's Articles of Incorporation contain a provision which
provides that, to the fullest extent permitted by the Business Corporation Code
of Georgia, directors of the Registrant shall not be personally liable to the
Registrant or its shareholders for monetary damages for breach of his duty of
care or any other duty as a director.
The Registrant maintains an insurance policy insuring the Registrant and
directors and officers of the Registrant against certain liabilities, including
liabilities under the Securities Act of 1933.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits (See exhibit index immediately preceding the exhibits for the
page number where each exhibit can be found)
II-1
<PAGE>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- -------------------------------------------------------------------------------
2(a) Agreement and Plan of Merger, dated as of June 30, 1998, and Waiver
and Amendment No. 1, dated as of September 29, 1998, by and
between PAB and Eagle (included as Appendix A to the Proxy
Statement/Prospectus and incorporated by reference herein)
3(a) Articles of Incorporation, as amended (included as Exhibits 3.2 and
3.3 to the Registrant's Registration Statement No. 33-27356-A on Form
S-18 previously filed with the Commission on March 8, 1989 and
incorporated by reference herein)
3(b) Bylaws, as amended (included as Exhibit 3.4 to the Registrant's
Registration Statement No. 33-27456-A on Form S-18, previously filed
with the Commission on March 8, 1989 and incorporated by reference
herein)
4(a) See Exhibits 3(a) and 3(b) for provisions of the Articles of
Incorporation and Bylaws of the Registrant defining rights of holders
of Common Stock of the Registrant
5 Securities Opinion of Troutman Sanders LLP
8* Tax Opinion of Troutman Sanders LLP
11 Statement regarding computation of per share earnings (included in
Pro Forma Financial Information in this Registration Statement)
23(a) Consent of Troutman Sanders LLP (included in Exhibit 5)
23(b) Consent of Stewart, Fowler & Stalvey, P.C.
23(c) Consent of Moore Stephens Tiller, LLC (formerly Tiller, Stewart &
Company, LLC)
23(d) Consent of KPMG Peat Marwick LLP
23(e) Consent of Elaine H. Demarest, C.P.A., P.C.
25 Power of Attorney (included in the signature page of page II-4 of
this Registration Statement)
99.1 Form of Eagle Proxy
___________________________
*To be filed by amendment.
(b) Financial Statement Schedules
Schedules are omitted because they are not required or are not applicable,
or the required information is shown in the financial statements or notes
thereto.
ITEM 22. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
II-2
<PAGE>
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate, represent
a fundamental change in the information set forth in the registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement; provided,
however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the
registration statement is on Form S-3 or Form S-8, and the information required
to be included in a post-effective amendment by those paragraphs is contained in
periodic reports filed by the registrant pursuant to section 13 or section 15(d)
of the Securities Exchange Act of 1934 that are incorporated by reference in the
registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the Registrant's Articles of Incorporation or Bylaws,
or otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
(d) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11, or 13 of Form S-4, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
(e) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and Eagle
being acquired involved therein, that was not the subject of and included in the
registration statement when it became effective.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Valdosta, State of
Georgia, on September 30, 1998.
PAB BANKSHARES, INC.
By: /s/ R. Bradford Burnette
------------------------
R. Bradford Burnette, President and
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below hereby constitutes and appoints jointly and severally, R. Bradford
Burnette and C. Larry Wilkinson, and each of them acting individually, their
respective attorney-in-fact, each with the power of substitution, for him in any
and all capacities, to sign any and all amendments to this Registration
Statement (including post-effective amendments), and to file the same, with
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
each of said attorneys-in-fact, or their respective substitute or substitutes,
may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ James L. Dewar, Sr. Chairman of the Board and Director September 30, 1998
- ------------------------------------------
James L. Dewar, Sr.
/s/ R. Bradford Burnett President/Chief Executive Officer and September 30,1998
- ------------------------------------------ Director (Principal Executive Officer)
R. Bradford Burnette
/s/ Walter W. Carroll, II Director September 30, 1998
- ------------------------------------------
Walter W. Carroll, II
/s/ William S. Cowart Director September 30, 1998
- ------------------------------------------
William S. Cowart
/s/ James L. Dewar, Jr. Director September 30, 1998
- ------------------------------------------
James L. Dewar, Jr.
Director
- ------------------------------------------
Tracy A. Dixon
Director
- ------------------------------------------
Bill J. Jones
Director
- ------------------------------------------
Thompson Kurrie, Jr.
/s/ F. Ferrell Scruggs Director September 30, 1998
- ------------------------------------------
F. Ferrell Scruggs
</TABLE>
II-4
<PAGE>
<TABLE>
<S> <C> <C>
Director
- ------------------------------------------
D. Ramsay Simmons, Jr.
Director
- ------------------------------------------
John M. Simmons
/s/ Joe P. Singletary Director September 30, 1998
- ------------------------------------------
Joe P. Singletary
/s/ C. Larry Wilkinson Executive Vice President and Director September 30, 1998
- ------------------------------------------ (Principal Financial Officer)
C. Larry Wilkinson
</TABLE>
II-5
<PAGE>
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- --------------------------------------------------------------------------------
2(a) Agreement and Plan of Merger, dated as of June 30, 1998, and Waiver
and Amendment No. 1, dated as of September 29, 1998, by and between
PAB and Eagle (included as Appendix A to the Proxy Statement/
Prospectus and incorporated by reference herein)
3(a) Articles of Incorporation, as amended (included as Exhibits 3.2 and
3.3 to the Registrant's Registration Statement No. 33-27356-A on Form
S-18 previously filed with the Commission on March 8, 1989 and
incorporated by reference herein)
3(b) Bylaws, as amended (included as Exhibit 3.4 to the Registrant's
Registration Statement No. 33-27456-A on Form S-18, previously filed
with the Commission on March 8, 1989 and incorporated by reference
herein)
4(a) See Exhibits 3(a) and 3(b) for provisions of the Articles of
Incorporation and Bylaws of the Registrant defining rights of holders
of Common Stock of the Registrant
5 Securities Opinion of Troutman Sanders LLP
8* Tax Opinion of Troutman Sanders LLP
11 Statement regarding computation of per share earnings (included in Pro
Forma Financial Information in this Registration Statement)
23(a) Consent of Troutman Sanders LLP (included in Exhibit 5)
23(b) Consent of Stewart, Fowler & Stalvey, P.C.
23(c) Consent of Moore Stephens Tiller, LLC (formerly Tiller, Stewart &
Company, LLC)
23(d) Consent of KPMG Peat Marwick LLP
23(e) Consent of Elaine H. Demarest, C.P.A., P.C.
25 Power of Attorney (included in the signature page of page II-4 of
this Registration Statement)
99.1 Form of Eagle Proxy
___________________________
*To be filed by amendment.
II-6
<PAGE>
EXHIBIT 5
TROUTMAN SANDERS LLP
ATTORNEYS AT LAW
A LIMITED LIABILITY PARTNERSHIP
NATIONSBANK PLAZA
600 PEACHTREE STREET, N.E. - SUITE 5200
ATLANTA, GEORGIA 30308-2216
TELEPHONE: 404-885-3000
FACSIMILE: 404-885-3995
___________, 1998
PAB Bankshares, Inc.
3102 North Oak Street Extension
Valdosta, Georgia 31602
Re: Merger of Eagle Bancorp, Inc. with and into PAB Bankshares, Inc.
Ladies and Gentlemen:
We have served as counsel to PAB Bankshares, Inc. ("PAB"), a Georgia
corporation, in connection with the execution and delivery of the Agreement and
Plan of Merger, dated June 30, 1998 and amended on September 29, 1998 (the
"Agreement"), by and between PAB and Eagle Bancorp, Inc. ("Eagle"), a Georgia
corporation, pursuant to which Eagle will merge with and into PAB (the
"Merger").
In rendering this opinion, we have examined (i) the corporate books and
records of PAB, (ii) the Registration Statement on Form S-4 filed by the PAB
with the Securities and Exchange Commission under the Securities Act of 1933, as
amended (the "Securities Act"), on September 30, 1998, in connection with the
registration of 873,875 shares of common stock, no par value per share (the
"Shares"), of PAB and (iii) the Agreement and made such other investigations as
we have deemed necessary. In such examinations, we have assumed the genuineness
of all signatures on all original documents, the conformity to the original
documents of all copies submitted to us and (except where our opinion expressly
addresses execution and delivery) the due execution and delivery of all
documents where due execution and delivery are prerequisite to the effectiveness
thereof.
As to questions of fact material to this opinion, we have relied solely
upon the representations and warranties as to factual matters contained in
certificates and statements of officers of PAB and certain public officials and
upon the accuracy and completeness of the representations and warranties of the
parties to the Agreement. We have made no independent investigations with
regard thereto, and, accordingly, we do not express any view or belief as to
matters that might have been disclosed by independent verification.
Based upon and subject to the foregoing, we are of the opinion that,
assuming (i) the Merger shall have been consummated in accordance with the
Agreement and the applicable provisions of the Georgia Business Corporation
Code, (ii) the pertinent provisions of the Securities Act and the Securities
Exchange Act of 1934, as amended, shall have been complied with, and (iii) the
applicable provisions of securities or "blue sky" laws of various states shall
have been complied with, when certificates evidencing the Shares have been duly
executed, countersigned, registered, issued and delivered by the proper officers
of PAB in compliance with the Agreement, the Shares will be duly and validly
issued and outstanding, fully paid and non-assessable shares of common stock of
PAB.
<PAGE>
We are admitted to practice law in the State of Georgia only and do not
hold ourselves out as being experts on the law of any other jurisdiction.
This opinion is limited to the matters expressly opined on herein, and no
opinion may be implied or inferred beyond those expressly stated. This opinion
is rendered as of the date hereof, and we make no undertaking and expressly
disclaim any duty to supplement or update such opinion, if, after the date
hereof, facts or circumstances come to our attention or changes in the law occur
which could affect such opinion.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to this firm under the heading
"Legal Matters" in the related Proxy Statement/Prospectus.
Sincerely,
-------------------------
TROUTMAN SANDERS LLP
TOP:llt
cc: R. Bradford Burnette, President
Edward J. Harrell, Esquire
2
<PAGE>
EXHIBIT 23(B)
ACCOUNTANTS' CONSENT
The Board of Directors
PAB Bankshares, Inc.
We consent to the use of our report incorporated herein by reference and to the
reference to our firm under the heading "Experts" in the Proxy
Statement/Prospectus.
/s/ STEWART, FOWLER & STALVEY, P.C.
STEWART, FOWLER & STALVEY, P.C.
Valdosta, Georgia
September 29, 1998
<PAGE>
EXHIBIT 23(C)
CONSENT OF MOORE STEPHENS TILLER, LLC
(formerly Tiller, Stewart & Company, LLC)
We hereby consent to the inclusion in this Registration Statement of our
report dated January 15, 1998 included in the annual report on Form 10-KSB of
Eagle Bancorp, Inc. for the year ended December 31, 1997 and to all references
to our firm included in this Registration Statement.
/s/ MOORE STEPHENS TILLER, LLC
MOORE STEPHENS TILLER, LLC
Savannah, Georgia
September 29, 1998
<PAGE>
EXHIBIT 23(D)
ACCOUNTANTS' CONSENT
The Board of Directors
Eagle Bancorp, Inc.:
We consent to the use of our report included herein and to the reference to our
firm under the heading "Experts" in the Proxy Statement/Prospectus.
/s/ KPMG PEAT MARWICK LLP
KPMG PEAT MARWICK LLP
Atlanta, Georgia
September 30, 1998
<PAGE>
EXHIBIT 23(E)
CONSENT OF ELAINE H. DEMAREST, C.P.A., P.C.
We hereby consent to the inclusion in this Registration Statement on Form S-
4 of PAB Bankshares, Inc. of the form of our letter to the Board of Directors of
Eagle Bancorp, Inc., included as Appendix B to the Proxy Statement/Prospectus
that is part of the Registration Statement and to the references to such letter
and to our firm in such Proxy Statement/Prospectus. In giving such consent, we
do not thereby admit that we come within the category of persons whose consent
is required under Section 7 of the Securities Act of 1933, as amended, or the
Rules and Regulations of the Securities and Exchange Commission thereunder.
/s/ ELAINE H. DEMAREST C.P.A., P.C.
ELAINE H. DEMAREST C.P.A., P.C.
Macon, Georgia
September 29, 1998
<PAGE>
EXHIBIT 99.1
EAGLE BANCORP, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints _________________ and _______________ as
Proxies, each with the power to appoint his substitute, and hereby authorizes
either one or both of them to represent and to vote, as designated below, all
the shares of common stock of Eagle Bancorp, Inc. ("Eagle"), par value $1.00 per
share (the "Eagle Common Stock"), held of record by the undersigned on ________
__, 1998, at the Special Meeting of Shareholders to be held at ___ p.m.,
Statesboro time, on ________ __, 1998, at the main office of Eagle located at
335 South Main Street, Statesboro, Georgia.
1. PROPOSAL TO: approve the Agreement and Plan of Merger, dated as of June
30, 1998 and amended on September 29, 1998 (the "Merger Agreement"), by and
between Eagle and PAB Bankshares, Inc. ("PAB"), pursuant to which, among other
matters, (a) Eagle will merge with and into PAB and (b) the shares of Eagle
Common Stock will be converted into the right to receive shares of PAB Common
Stock, as described in the Proxy Statement/Prospectus dated _______ __, 1998.
FOR [_] AGAINST [_] ABSTAIN [_]
2. In their discretion, to vote upon such other business as may properly
come before the Special Meeting or any adjournments thereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR PROPOSAL 1 ABOVE.
Please sign exactly as name appears below. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such.
If a corporation, please sign in full corporate name by President or other
authorized officer. If a partnership, please sign in partnership name by
authorized person.
DATED:______________________________, 1998
___________________________________________
Signature
__________________________________________
Signature if held jointly
