SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant[X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2)
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c)
or Rule 14a-12
GOLDEN ISLES FINANCIAL HOLDINGS, INC.
(Name of Registrant as Specified in Its Charter)
Name of Person(s) Filing Proxy Statement, if other
than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules
14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which
transaction applies:
(2) Aggregate number of securities to which transaction
applies:
(3) Per unit price or other underlying value of
transaction computed pursuant to Exchange Act Rule 0-11
(Set forth the amount on which the filing fee is
calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided
by Exchange Act Rule 0-11(a)(2) and identify the filing
for which the offsetting fee was paid previously.
Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
GOLDEN ISLES FINANCIAL HOLDINGS, INC.
Notice is hereby given that a special meeting of
shareholders of Golden Isles Financial Holdings, Inc. (the
"Company") will be held on Tuesday, March 11, 1997, at 10:00 a.m.,
local time, at the Embassy Suites Hotel, 500 Mall Boulevard,
Brunswick, Georgia 31520, pursuant to a demand delivered to the
Secretary of the Company by more than 25% of the shareholders of
the Company for the purpose of considering and voting on the
following matters, all of which are described in the attached
proxy statement:
1. BOARD OF DIRECTORS. To consider and vote upon
Proposal A, summarized below and if Proposal A is not adopted in
its entirety, to consider and vote upon Proposal B, summarized
below.
PROPOSAL A:
1. That the number of members constituting the full
Board of Directors be fixed at six (a decrease of two
members);
2. That each of J. Thomas Whelchel, Michael D. Hodges,
C. Kermit Keenum and L. McRee Harden be removed as
members of the Board of Directors;
3. That Article 3, Section 3.6 of the bylaws of the
Company be amended to state that the shareholders of
the Company shall have the right to fill a vacancy on
the Board of Directors (created by the removal of a
director) at a special meeting or an annual meeting;
and
4. That two persons nominated by Gregory S. Junkin,
Paul D. Lockyer and Scott A. Junkin be elected to
fill the two vacancies on the Board of Directors.
PROPOSAL B:
5. That the number of members constituting the full
Board of Directors be fixed at 13 (an increase of
five members); and
6. That five persons nominated by Gregory S. Junkin,
Paul D. Lockyer and Scott A. Junkin be elected to
fill the five vacancies on the Board of Directors
resulting from the increase in the number of
directors.
<PAGE>
2. OTHER BUSINESS. Such other matters as may properly
come before the meeting and any adjournment thereof.
Only shareholders of record at the close of business on
Wednesday, January 29, 1997, shall be entitled to notice of and to
vote at the meeting and any adjournment thereof.
The Board of Directors would like to have as many
shareholders as possible represented at the special meeting.
Accordingly, you are asked to sign and return the enclosed ORANGE
proxy card at your earliest convenience. You may change or
withdraw your proxy at any time prior to the voting at the
meeting, including if you attend the meeting and wish to vote in
person.
By order of the Board of Directors and Jimmy D. Veal,
Secretary.
GOLDEN ISLES FINANCIAL HOLDINGS, INC.
By: /S/ Jimmy D. Veal,
Jimmy D. Veal, Secretary
St. Simons Island, GA
February 17, 1997<PAGE>
PROXY STATEMENT
OF
THE BOARD OF DIRECTORS
OF
GOLDEN ISLES FINANCIAL HOLDINGS, INC.
FEBRUARY 17, 1997
This Proxy Statement is furnished in connection with two
alternative proposals (Proposal A and Proposal B) to be voted upon
by shareholders of Golden Isles Financial Holdings, Inc. (the
"Company") at a special meeting of the shareholders of the Company
on March 11, 1997. Under both proposals, persons nominated by Mr.
Gregory S. Junkin ("Mr. Junkin"), Mr. Paul D. Lockyer ("Mr.
Lockyer") and Mr. Scott A. Junkin (collectively, the "Junkin
Group") would be elected to fill vacancies on the Board of
Directors of the Company created by adoption of either of those
proposals. Mr. Junkin and Mr. Lockyer both served as executive
officers of the Company prior to their dismissal on October 17,
1996, at which time their employment was terminated by the Board
of Directors of the Company for reasons more particularly
discussed below (see "Dismissal of Mr. Junkin and Mr. Lockyer").
THE EFFECT OF EITHER PROPOSAL, IF ADOPTED BY THE SHAREHOLDERS OF
THE COMPANY, WOULD BE TO ENABLE MR. JUNKIN AND MR. LOCKYER TO
REGAIN CONTROL OF MANAGEMENT OF THE COMPANY.
THE BOARD OF DIRECTORS OF THE COMPANY, EXCEPTING ONLY
MESSRS. JUNKIN AND LOCKYER, OPPOSES BOTH OF THE PROPOSALS AND
RECOMMENDS YOU VOTE AGAINST ALL PARTS OF PROPOSAL A AND PROPOSAL B
AND SIGN, DATE AND RETURN THE ENCLOSED ORANGE PROXY CARD TO MR.
JIMMY D. VEAL IN THE POSTAGE PREPAID ENVELOPE PROVIDED.
INTRODUCTION
This Proxy Statement is furnished in connection with the
solicitation of proxies by the Board of Directors of Golden Isles
Financial Holdings, Inc. (the "Company") for use at the special
meeting of the shareholders of the Company (the "Special Meeting")
to be held on Tuesday, March 11, 1997, at 10:00 a.m. at the
Embassy Suites Hotel, 500 Mall Boulevard, Brunswick, Georgia
31525, and any adjournment thereof, for the purposes set forth in
the accompanying notice of the meeting.
The meeting is being called pursuant to the written demand
of approximately 28% of the shareholders of the Company, at the
request of the Junkin Group delivered to the Company on January
17, 1997. The accompanying notice was previously sent to you by
Mr. Junkin, designated in the request as Officer of Persons
Calling the Meeting. The Special Meeting has subsequently been
called by the Board of Directors of the Company at a duly called
board meeting on January 29, 1997. Accordingly, the Company is
sending you an additional notice of the Special Meeting of the
shareholders.
At the Special Meeting, shareholders of the Company will be
asked to vote on alternative Proposals A and B, more particularly
set forth hereinafter. The Junkin Group is soliciting proxies
from shareholders in support of Proposals A and/or B. THE
ENCLOSED ORANGE PROXY CARD IS SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS OF THE COMPANY IN OPPOSITION TO PROPOSALS A AND B. At
the January 31, 1997, Board of Directors meeting, where the
solicitation of this proxy was authorized, the directors voted
five to two (with Mr. Russell C. Jacobs, Jr. absent) to solicit
proxies of shareholders to vote AGAINST Proposal A and Proposal B.
At the meeting, all present directors except Messrs. Junkin and
Lockyer voted to oppose Proposals A and B. The Board of Directors
of the Company, excepting only Messrs. Junkin and Lockyer,
recommends a vote AGAINST Proposal A and Proposal B.
It is important that you complete your proxy card so that
your shares are represented at the Special Meeting. Only
shareholders of record at the close of business on January 29,
1997, or their duly appointed representatives, are entitled to
vote at the special meeting or any adjournment thereof. As of
that date, the Company had outstanding and entitled to vote
2,344,302 shares of its no par value common stock. Each
shareholder is entitled to one vote per share owned.
Any proxy given pursuant to this solicitation may be revoked
by any shareholder who attends the Special Meeting and gives
notice of his or her election to vote in person, without complying
with any other formalities. In addition, any proxy given pursuant
to this solicitation may be revoked prior to the meeting by
delivering an instrument revoking it, or a duly executed proxy
card bearing a later date, to the Secretary of the Company. If
the proxy is properly completed and returned by the shareholder
and is not revoked, it will be voted at the Special Meeting in the
manner specified therein. If the proxy card is returned without
any choice being specified, it will be voted AGAINST all the
Proposals presented at the Special Meeting, and in the proxy-holder's
discretion with regard to any other matters that may
properly come before the meeting.
In addition to solicitation by mail, directors L. McRee
Harden, Michael D. Hodges, Russell C. Jacobs, Jr., C. Kermit
Keenum, Jimmy D. Veal, and J. Thomas Whelchel (collectively, the
"Soliciting Directors") and regular employees of the Company and
its subsidiaries, The First Bank of Brunswick, First Bank Mortgage
Corporation and First Credit Service Corporation may solicit
proxies. In addition, other persons that may be engaged by the
Soliciting Directors and management of the Company and its
subsidiaries to solicit proxies include, but are not limited to,
other shareholders who have indicated a desire to aid the present
management of the Company. Such individuals may solicit proxies
in person or by telephone or telecopy from shareholders who have
been provided prior to such solicitation with a copy of this Proxy
Statement.
The expense of this solicitation, including the cost of
preparing and mailing this Proxy Statement, will be paid by the
Company. The Company estimates that total expenditures for this
solicitation will be $ 70,000, of which approximately $50,000 has
been spent to date. The Company requests that banks, brokerage
houses and other custodians, nominees and fiduciaries forward all
of the solicitation materials to the beneficial owners of the
shares they hold of record. The Company will reimburse these
record holders normal handling charges for such forwarding
service.
BACKGROUND OF SPECIAL MEETING
Golden Isles Financial Holdings, Inc. (the "Company") was
incorporated under the laws of the State of Georgia on September
8, 1987. Mr. Junkin was the first Chairman of the Company's Board
of Directors. The Company conducted only organizational
activities until its initial public offering closed on January 31,
1990. The Company used the proceeds of the offering to capitalize
and acquire all of the capital stock of The First Bank of
Brunswick, Brunswick, Georgia (the "Bank"), a state bank organized
under the laws of the State of Georgia. The Bank opened for
business on July 2, 1990, to engage in a general commercial
banking business in Glynn County, Georgia. Mr. Lockyer was the
first President of the Bank and continued as President and Chief
Executive Officer of the Bank until October 17, 1996.
In September of 1993, the Company received approval to
establish and operate First Bank Mortgage Corporation ("FBMC") as
a wholly-owned subsidiary of the Company to engage in originating,
making, acquiring and servicing mortgage loans. Also, in
September of 1993, the Company received approval to establish and
operate First Credit Service Corporation ("FCC") as a wholly-owned
subsidiary of the Company to engage in the making of consumer
loans.
The Soliciting Directors are of the opinion that when FBMC
was organized in 1993 as a wholly-owned mortgage banking
subsidiary of the Company, it was organized to act as a
correspondent lender, originating or purchasing, processing, and
closing mortgage loans. It was contemplated that the loans would
be originated at FBMC locations, and would be funded at closing by
company funds, a wholesaler, or through a warehouse line of credit
which is repaid upon purchase of the loan by the wholesaler. FCC
was organized in 1993 for the purpose of engaging in the consumer
loan business in Southeast Georgia and presently has offices in
Brunswick, Kingsland, Savannah, Waycross, and Martinez, Georgia.
As indicated above, Mr. Junkin became the Chairman of the
Company's Board of Directors after the Company was incorporated in
1987. Under the Company's bylaws, the Chairman serves as Chief
Executive Officer of the Company. Prior to June 6, 1994, Mr.
Junkin, albeit CEO, did not serve the traditional "day-to-day"
role normally associated with that of a chief executive officer.
The day-to-day affairs of the Company were managed by the
Presidents of its subsidiaries: Mr. Lockyer at the Bank, Mr. Paul
Sanders at FBMC, and Mr. James Layman at FCC. The Company did not
provide Mr. Junkin an office or pay him a salary or other cash
compensation. Mr. Junkin served the Company in a manner similar
to other members of the Board and was not regarded by the
Soliciting Directors as an employee of the Company or as having
operational authority. He was not treated as an employee for
federal income tax purposes until June 6, 1994. On June 6, 1994,
Mr. Junkin became the full-time salaried Chief Executive Officer
of the Company, FBMC and FCC. At such time, he undertook the
traditional active role and assumed the operational authority
normally associated with a chief executive officer.
DISMISSAL OF MR. JUNKIN AND MR. LOCKYER
On October 17, 1996, the Board of Directors, by a vote of
six to two, removed Messrs. Junkin and Lockyer as officers of the
Company and subsidiaries and removed Messrs. Junkin and Lockyer as
directors of all the subsidiary companies. The decision to
terminate Messrs. Junkin and Lockyer was based primarily upon
excessive losses and expenses under the leadership of Messrs.
Junkin and Lockyer, continuing losses of FBMC and excessive costs
incurred in furnishing new office space. Other important factors
leading to the Board's decision were: (a) imprudent use of company
funds, (b) failure to consult with or obtain Board approval before
taking significant action, (c) expending significant company
monies without Board approval, (d) exposing the Company to
substantial risks of loss and (e) failing to exercise what the
Board considers to be sound management practices.
Mr. Lockyer had an employment contract with the Bank which
provided that in the event of his termination, he would receive
severance pay of one year's salary. Immediately following his
termination, Mr. Lockyer demanded payment and the Bank paid him
$145,000 in fulfillment of its obligations under the employment
contract.
Mr. J. Thomas Whelchel ("Mr. Whelchel") was elected Acting
Chairman of the Board and Chief Executive Officer of the Company.
Mr. Michael D. Hodges ("Mr. Hodges") was elected Acting President
and Chief Executive Officer of the Bank.
LOSSES AND EXPENSES UNDER THE LEADERSHIP OF MESSRS. JUNKIN AND
LOCKYER
Before Mr. Junkin became a full-time salaried employee of
the Company on June 6, 1994, the Company's subsidiaries reported
directly to the subsidiary's Board of Directors. As indicated
above, prior to June 6, 1994, the day-to-day affairs of the
Company were managed by the Presidents of its subsidiaries: Mr.
Lockyer at the Bank, Mr. Paul Sanders at FBMC, and Mr. James
Layman at FCC. The Company was profitable before June 1994 when
Mr. Junkin became a full-time salaried, active Chief Executive
Officer. For the six month period ending June 30, 1994, the six
month period immediately preceding Mr. Junkin becoming the
Company's full-time salaried Chief Executive Officer, the
Company's net income was $105,431. Indeed, the Company was
profitable in the first six months of Mr. Junkin's active
leadership, and for the year ended December 31, 1994, the
Company's net income was $246,222. However, for the year ending
December 31, 1995, Mr. Junkin's first full year as salaried Chief
Executive Officer, the Company's net income fell to $12,898, or
only $.01 per share.
This downward trend has continued during 1996.
Specifically, for the quarter ending March 31, 1996, the Company
had an unaudited net loss of $76,578 or a loss of $.03 per share;
for the quarter ending June 30, 1996, the Company had an unaudited
net loss of $69,745 or a loss of $.03 per share; and for the
quarter ending September 30, 1996, the Company had an unaudited
net loss of $280,442 or a loss of $.12 a share.
The recent deterioration of the Company's financial
condition is attributable in significant part to the losses
incurred at FBMC. For the nine months ended September 30, 1996,
FBMC has incurred a net operating loss of $541,945 (unaudited).
This includes provisions of $50,000 for loan losses and
approximately $65,000 in restructuring costs. With respect to
the reserves, to the extent mortgage loans are sold, the reserves
(and therefore the losses) may be reduced. While FBMC activities
contributed approximately $300,000 (unaudited) of interest income
to the Bank through September 30, 1996, with respect to loans the
Bank made in furtherance of FBMC's activities, it is the opinion
of the Soliciting Directors that additional write-offs may have to
be taken with respect to some of these loans. To the extent such
write-offs are taken, such interest income will be reduced or
eliminated.
In the aggregate, since its inception in 1993, through
September 30, 1996, FBMC has lost $1,060,895 (unaudited). After
the termination of Mr. Junkin and Mr. Lockyer, the Soliciting
Directors investigated the nature of the losses at FBMC. After a
careful review of the overall operations of FBMC, the Soliciting
Directors concluded that the FBMC losses are not short-term and
will continue indefinitely unless the business is restructured.
The Soliciting Directors believe that FBMC had failed to generate
sufficient revenue to support its fixed expenses and that FBMC
could not reasonably be expected to increase its revenue base to
support such expenses in the foreseeable future. Furthermore, as
discussed below, the Soliciting Directors concluded that the loans
that had been generated by FBMC were riskier than anticipated and
would lead to continuing losses. Overall, it is the view of the
Soliciting Directors that on its former path, FBMC would not "turn
the corner" and be profitable unless its operations were
dramatically restructured.
The financial condition of the Company has also been
adversely impacted by excessive expenses (in light of overall
Company results) incurred by the Company at the holding company
level. Holding company expenses include among other things,
$174,435 of expenses incurred in 1995 - 1996 relating to the
redecoration of holding company offices at 200 Plantation Chase.
The Soliciting Directors were not aware of the magnitude of these
expenses while they were being incurred. Total operating expenses
at the holding company through September 30, 1996, were $650,729
(unaudited), which the Soliciting Directors regard to be
inordinately high. The Company received no income to offset those
expenses other than from intercompany income.
The Company has not declared a cash dividend since it
commenced operations in July 1990.
FBMC ACTIVITIES
When FBMC commenced operations, it engaged in a typical
mortgage banking business. Specifically, FBMC acted as a
"correspondent" lender - a lender who originates or purchases,
processes, and closes the mortgage loans to borrowers - and then
sells the loans to a wholesaler or investor, with FBMC receiving
income from the sale of the mortgages. Typically, when a loan is
closed, the loan is funded either by a wholesaler itself (who buys
the loan from FBMC) or by FBMC itself, through a "warehouse" line
of credit which FBMC repays when the wholesaler purchases the
loan. It is the view of the Soliciting Directors that FBMC was
intended to be in the business of making and purchasing (and
quick selling) of mortgage loans as opposed to the holding of
loans. In other words, the Soliciting Directors' understanding
was that FBMC was only, and should only, be making and purchasing
loans that could be sold in a relatively short period. By so
doing, FBMC (or the Company) was not exposed to the risk the loans
themselves would not be paid ("credit risk"), or the risk related
to changing interest rates ("interest rate risk") generally
associated with holding loans over the long term until their
maturity or early repayment.
Beginning in or about September 1995, FBMC activities
expanded and FBMC became a warehouse lender. This was done with
the knowledge of the Soliciting Directors. As a warehouse lender,
FBMC would provide the funding to other mortgage lenders who would
actually lend money to individual consumers. Although FBMC would
take the notes and security deed instruments (the underlying
"paper") given by the underlying borrower as collateral, it was
FBMC's intent to sell these loans over a relatively short period
so that FBMC would not be subject to long-term credit risk (of
both the other mortgage lender and the underlying borrower) or
interest rate risk.
Because FBMC itself did not have capital to finance these
loans, the Bank provided such funding to the borrower (i.e., the
other mortgage lender who was closing the loan with the ultimate
borrower). FBMC and the Bank would enter into an agreement
whereby FBMC would agree to later repurchase the loan from the
Bank (a "Repurchase Agreement"). Even though the Bank itself had
advanced its funds - - the Bank did not record it on its books as
a loan, but rather as a Repurchase Agreement from FBMC. Such
loans were approved under the auspices of the "Commitment
Committee" composed of Mr. Lockyer, Soliciting Directors Mr. Jimmy
D. Veal and Mr. L. McRee Harden, and several employees of the
Company. The Commitment Committee was established for the purpose
of approving warehouse lending relationships initiated by FBMC but
funded by the Bank. Once the Commitment Committee had approved a
warehouse lending arrangement with a particular mortgage lender,
the Bank's President or a Senior Vice President of Lending could
approve advances of Bank funds for up to $250,000 each; any
advances in excess of $250,000 would still require the approval of
the Bank's loan committee. The Board of Directors (including the
Soliciting Directors) unanimously voted to approve the creation of
the Commitment Committee. Under the plan explained to the
Soliciting Directors by Messrs. Junkin and Lockyer, each loan was
secured by a proper assignment of the "paper" associated with such
loan, and at the time FBMC funded a loan, FBMC had a forward
commitment in place from a buyer to purchase that loan.
In June, 1996, at a meeting of the loan committee of the
Bank, Mr. Whelchel (a Soliciting Director) asked about past-due
loans of $2.5 million recorded on the Bank's books. Mr. Lockyer
explained that these were loans made through an Arkansas mortgage
lender (with Repurchase Agreements from FBMC) and that such
mortgage lender was unable to repay the loans. The warehouse
lending arrangement with the Arkansas mortgage lender (the
"Arkansas Warehouse Lending Arrangement") had been approved by the
Commitment Committee. It is the recollection of Mr. Veal and Mr.
Harden, the Soliciting Directors who were members of the
Commitment Committee, that the Arkansas Warehouse Lending
Arrangement had been approved with the understanding that the
Arkansas mortgage lender had what is known as "delegated
underwriting authority." When a mortgage company has delegated
underwriting authority, the actual individual mortgages it has
closed are generally readily saleable-- usually within 45 days--
to large institutional purchasers such as "FREDDIE MAC" or "FANNIE
MAE." Loans closed by a mortgage lender lacking delegated
underwriting authority are still saleable, but are generally more
difficult to sell because there are fewer buyers.
During the June, 1996, loan committee meeting, Mr. Whelchel
learned that the Arkansas mortgage lender had not received
delegated underwriting authority and had not been able to sell the
mortgage loans it had originated. As a result, the Arkansas
mortgage lender could not repay the funds the Bank had advanced
to it as quickly as had originally been contemplated. In
addition, the Soliciting Directors learned that proper collateral
loan documents had not been assigned to the Bank. The consequence
of this was that there was no way for the Bank to enforce payment.
This situation essentially created unsecured loans by the Bank.
Although these loans were arranged by FBMC, the Bank actually
advanced the money to the Arkansas mortgage lender, and the
advance was booked by the Bank as a repurchase agreement with
FBMC. As a result, to the extent the Arkansas mortgage lender was
not able to promptly sell the underlying mortgage loans because it
did not have delegated underwriting authority, repayment of the
indebtedness became dependent upon the financial condition of the
Arkansas mortgage lender. The Soliciting Directors learned that
the amount of the loans outstanding to this borrower had been as
high as $4.3 million. Through efforts of Bank personnel, a
substantial portion of these loans has been collected, and there
now remains approximately $610,000 unpaid. FBMC has also since
purchased the loans from the Bank. The underlying mortgage loans
funded by the Bank are being serviced by the Arkansas lender, but
regular payments of principal and interest are not currently being
paid to FBMC. It is hoped but is uncertain that these loans will
be repaid. The Soliciting Directors anticipate a charge against
the earnings of FBMC and for the Company to maintain an
appropriate reserve against possible nonpayment of FBMC loans.
FBMC also became involved in a business known as "BC&D
Paper." The business of BC&D Paper involves the making or
purchasing of loans at high interest rates to individuals who
could not qualify under the credit standards of the Bank. Some
of these loans were originated by FBMC and assigned to the Bank
under a repurchase warehouse line of credit. In essence, the
Soliciting Directors believe the Bank's money was being lent for
substandard credits which the Bank itself would not lend. These
loans were never presented to the Bank's loan committee and were
never approved by the Bank's Board of Directors.
It is the view of the Soliciting Directors that FBMC was
overstaffed for its size. FBMC had employed a large number of
employees, as high as 43. This was done in anticipation of a
growth in business, rather than employing the personnel needed to
service its present business level and adding to its staff only as
business grew. The business did not grow as anticipated, and the
losses mounted. As stated above, planning for FBMC's growth
appears to have been erroneous. FBMC failed to meet the budget
submitted to its Board of Directors for the nine months ended
September 30, 1996, by approximately $600,000.
The Soliciting Directors have investigated the nature of the
losses at FBMC. After a careful review of the overall operations
of the mortgage company, it is the opinion of the Soliciting
Directors that the losses were caused by expenses in excess of
actual and reasonably anticipated revenue. Furthermore, the
Soliciting Directors believe that the losses will continue
indefinitely unless the mortgage business is restructured and
carried out within the Bank. Based on a preliminary study,
assuming several revenue levels and adequate staffing, the
Soliciting Directors believe that if conducted within the Bank
such an operation would "break even" even under very modest volume
assumptions.
COSTS INCURRED IN ACQUIRING AND FURNISHING NEW OFFICES
In May 1996, at the direction of Mr. Junkin, FBMC entered
into a lease in the First Federal Building in Brunswick, Georgia,
without the Board's knowledge or approval of the Company's Board
of Directors. The effect of this was to move FBMC from its
quarters in the St. Simons Island branch of the Bank, where it was
housed at no cost to the Company, to leased space having an annual
rental cost to the Company of $95,350. The leased space was then
redecorated and furnished at a cost of approximately $186,724.
These expenditures were made without the knowledge or approval of
the Board.
In late 1995, Mr. Lockyer initiated discussions with the
Board regarding the purchase of an office building located at 200
Plantation Chase, St. Simons Island, Georgia. This office
building was owned by a partnership consisting of Mr. Junkin and
two other individuals. After receiving a third party appraisal
of $355,000, the Board approved and closed the purchase of 200
Plantation Chase for $350,000. Subsequent to the approved
purchase, Mr. Junkin and/or Mr. Lockyer had 200 Plantation Chase
redecorated and refurnished at a cost of $174,535 to the Company.
Such additional redecorating and refurnishing expenses, amounting
to approximately 50% of the cost of the building itself, was
incurred without the knowledge or approval of the full Board of
Directors.
EVENTS AFTER TERMINATION OF MESSRS. JUNKIN AND LOCKYER
On October 18, 1996, after the dismissal of Messrs. Junkin
and Lockyer from their management positions, the Board of
Directors, through the new executive officers, began independently
reviewing the high expenses of the holding company and the FBMC
losses. The Board of Directors also engaged Arthur Andersen, LLP
("Arthur Andersen"), a national accounting firm, to investigate
these matters and to assist in evaluating possible solutions.
Arthur Andersen's procedures generally consisted of interviewing
current management and other employees and reviewing certain
accounting records, reports and other financial documents
generated by the Company. In connection with these limited
procedures, certain matters came to the attention of Arthur
Andersen. Arthur Andersen has consented to the disclosure of
their engagement and use of the following synopsis of matters that
came to their attention. The following summarizes the most
significant findings of Arthur Andersen, except where the
Soliciting Directors findings or views are specifically noted:
1. Arthur Andersen reported that Mr. James Shirley, the
Company's internal auditor, indicated to it that on several
occasions Mr. Junkin attempted to limit the scope of his internal
audit function. Specifically, Mr. Shirley indicated that on
several occasions, in response to inquiries from members of the
Board's Audit Committee, Mr. Junkin denied Mr. Shirley access to
records that would have enabled him to respond to Audit Committee
inquiries regarding payments to Concepts Designs, Inc., the
company to whom payments were made for office furniture, fixtures,
etc. (See below).
2. Arthur Andersen found that during 1995 - 1996 the
Company and its subsidiaries paid $846,391 to Concept Designs,
Inc. Most of such funds were spent on furniture and interior
decorating costs. To the extent funds were expended for
structural work, such expenditures are minimal. In two of the
locations that were redecorated, structural work was paid
separately, and at a third location, the landlord made structural
changes as tenant improvements. The Board was not presented with
competitive bids, alternative proposals from other firms, a
projected budget, or any other means to independently review the
nature and propriety of such substantial expenditures. It is the
view of the Soliciting Directors that the expenditure of such
large amounts was beyond Mr. Junkin's incidental authority and
that such discretionary expenditures should have been presented to
the full Board for review and approval.
3. The Soliciting Directors found that in May of 1996,
FBMC signed a two-year lease to occupy (beginning in September
1996) office space on the third floor of the First Federal Plaza
in Brunswick, Georgia, at a cost of $7,946 a month, and $186,724
was spent on decorating expenses. FBMC moved from the St. Simons
Island branch of the Bank, where it was housed at no cost to the
company and the space in the St. Simons branch was left vacant.
The move, the lease and the decorating expenses were not approved
by the Board of Directors.
4. Arthur Andersen found that prior to the time Mr.
Junkin became an employee of the Company, he directed the
Company's accountant to add him, his family, and his personal
secretary (none of whom were employed by the Company) to the
Company's group health insurance plan, and directed that the
Company pay their entire premium. This practice was criticized by
Mauldin & Jenkins, the Company's external auditors at the time,
and the Board of Directors of the Company in June 1993 obtained
Mr. Junkin's assurance this practice would stop. In fact, the
Soliciting Directors learned he continued this practice until his
employment on June 6, 1994. After he became an employee of the
Company, Mr. Junkin was eligible for coverage under the Company
policy whereby the Company would pay part of the premium, with the
remainder to be paid by him. Mr. Junkin directed the Company's
accountant to pay the entire premium for him, his family, and his
secretary. All other employees of the Company pay their share of
health insurance premiums for themselves and their families.
Based on information from the Company's insurance providers,
Arthur Andersen found that insurance premiums totaling
approximately $9,140 in excess of Company policy were paid on Mr.
Junkin's behalf. It is the clear belief of the Soliciting
Directors that prior to Mr. Junkin's becoming a full-time employee
on June 6, 1994, he was a non-employee and served with the same
duties and compensation as all other directors.
5. Arthur Andersen reported that in March, 1996, in
conjunction with the purchase of 200 Plantation Chase, the Company
purchased from Mr. Junkin and his partner certain furniture at a
cost of $14,000. This was done with the consent of the Board of
Directors. Had the Soliciting Directors known of Mr. Junkin's
plans to decorate the offices (at a cost of approximately
$174,536), the Board may not have approved such purchase.
6. Arthur Andersen noted that Mr. Junkin and Mr. Lockyer
were approving each other's expense accounts. In 1995 and through
the date of his removal from office, the Company had reimbursed
Mr. Junkin, in addition to his salary, in excess of $30,000,
mostly for meals and travel. This included nine trips to Phoenix,
Arizona, which were identified only as "meeting with
shareholders," "meetings with market-makers," or "GIFH business."
The Soliciting Directors found that Company records show only
four shareholders of record in Arizona out of approximately 1,000
total shareholders. The Soliciting Directors know of no Company
business in Arizona, and are aware of no market-makers of the
Company's common stock in Arizona. The Soliciting Directors
believe that use of Company funds in this manner and the practice
of Company officials approving each other's personal expense
reimbursements is poor management practice and leads to abuses.
In addition to investigating the source of the high expenses
of the Company and FBMC, the Board of Directors asked Arthur
Andersen to study the strategic direction of FBMC and to make
recommendations on how FBMC should be structured. Andersen
Consulting, through its mortgage consultant, recommended that
FBMC cease its high risk business of nationwide wholesale "BC&D"
mortgage lending and focus on originating or brokering retail
mortgage loans in the local market and wholesale lending
activities confined to the Company market area in which it has
some personal knowledge of the market. Also, Arthur Andersen
recommended that the mortgage company, as a separate business, be
discontinued and that the mortgage operation be moved back into
and become a part of the Bank. Management would be under the
Bank, and duplication of certain expenses, including some
personnel and occupancy expenses, would be eliminated.
REGULATORY REVIEW AND COMPANY RESPONSE
The Federal Reserve Bank of Atlanta originally was scheduled
to perform an examination of the Company in early 1997. The
Georgia Department of Banking and Finance requested an
acceleration of that audit to November 4, 1996. After
approximately two weeks of examination, the Georgia Department of
Banking and Finance and the Federal Reserve Bank suspended their
exam so that Arthur Andersen could commence work.
Representatives of the Georgia Department of Banking & Finance,
the Federal Reserve Bank of Atlanta, and the Federal Deposit
Insurance Company asked for and attended a December 9, 1996,
meeting of the Board of Directors to discuss its findings on the
suspended examination. During the meeting, the regulators urged
the Board of Directors to commit the Company to address problems
determined during the examination process. In response, the Board
of Directors unanimously adopted a lengthy resolution (the "Board
Resolution"). This Board Resolution is attached in its entirety
as Schedule 1. In the Board Resolution, among other things, the
Board agreed to:
develop and submit to the supervisory authorities a
management plan for the parent company and each of
its subsidiaries, which will include, among other
things, the type and number of management positions
needed to manage the affairs of the parent and each
subsidiary and a description of the qualifications
required to perform present and anticipated duties of
each management position, including establishment and
enforcement of sound policies and practices;
review the results or recommendations from Arthur
Andersen regarding appropriate internal routine and
controls, accounting systems, policies and
procedures, internal loan review, internal audit and
any other areas and develop appropriate steps or
procedures to strengthen noted weaknesses and report
the results of the Board's review and the Board's
plans or procedures to strengthen noted weaknesses to
the supervisory authorities within 30 days;
review the scope and adequacy of the annual
independent audit as performed for the prior year
end, and as proposed for 1996, with particular
emphasis on the adequacy of the review of internal
routine and controls, take appropriate steps to
expand the scope of the proposed 1996 independent
audit if necessary to include any of the areas noted
by Arthur Andersen, and report the results of the
Board's review to the supervisory authorities within
60 days;
notify the external auditor in writing that his or
her responsibility is to the entire Board and then
any findings or recommendations should be made
directly to the entire Board;
develop a strategic plan for the parent and each
subsidiary covering a three to five year period;
the Company and bank subsidiary will not declare or
pay any cash or property dividend or any other form
of capital distribution without the prior written
consent of the supervisory authorities; and
the Company will not incur any additional debt after
this resolution is adopted without prior notification
to the supervisory authorities.
The Company has not asked, and the regulators have not taken a
position with regard to the control issues presented as Proposals
A and B.
PLAN OF BOARD OF DIRECTORS FOR THE FUTURE
It is the intent of the Soliciting Directors to proceed to
return the Company to profitability, while not subjecting the
Company's capital to extraordinary risks. The major tenets of
this restructuring effort will be as follows:
a. Through the strategic planning process outlined
earlier, the Soliciting Directors will re-examine its
systems of controls over the management of the Company and
each of its subsidiaries. The Soliciting Directors will
endeavor to strengthen appropriate checks and balances so
that previous management excesses are not repeated in the
future.
b. The mortgage company (FBMC) is in the process of
being closed as a separate entity. The mortgage company
employees and operations will be returned to and become a
part of the Bank. The wholesale national BC&D mortgage
business will be discontinued, and FBMC will focus on
originating or brokering retail mortgages in the local and
surrounding area and wholesale mortgage activities will be
conducted as market conditions warrant.
c. Most expenses of the holding company will be
eliminated, with only minimal and necessary functions
performed. Many functions will be delegated to employees of
the various subsidiaries of the holding company. The
holding company will retain some administrative staff, but
these responsibilities will be limited to functions which
are essential to the holding company's role.
d. The Bank made a pre-tax profit of approximately
$856,948 (unaudited) for the nine months ended September 30,
1996. The Soliciting Directors intend to focus on this
flagship subsidiary of the Company and continue efforts to
grow it as a profitable community bank serving the needs of
our local and surrounding communities. Ricki Helfer,
Chairman of the Federal Deposit Insurance Corporation, in
the Quarterly Banking Profile dated December 13, 1996,
stated through the third quarter of 1996, commercial banks
in the United States continued to enjoy "extraordinary
profitability." The J.C. Bradford & Co. Community Financial
Institutions Stock Price Index increased 15.36% during 1996.
The Board of Directors has determined that the Bank is the
foundation upon which profitability of the entire Company
can be built and thereby increase the price of the Company's
stock. As conditions warrant and the Company stabilizes,
the Soliciting Directors will look to other investment
opportunities, including acquisition of other banks.
e. FCC is continuing to grow. The Board of
Directors expects it to contribute to the profitability of
the Company in 1997. The Board plans to emphasize its
efforts and resources to continue the progress of FCC in the
consumer lending area.
IT IS THE OPINION OF THE MAJORITY OF YOUR BOARD OF DIRECTORS
THAT THE COMPANY HAS NOT MADE ADEQUATE PROGRESS UNDER THE
DIRECTION OF MR. JUNKIN AND MR. LOCKYER. Profits have eroded and
have resulted in larger and larger quarter-to-quarter losses. It
is also the opinion of the Soliciting Directors that excessive
risks have been incurred without proper understanding by previous
management of the exposure to loss, or appropriate explanation to
the Board. Mr. Junkin and Mr. Lockyer have not expended Company
funds in a manner the Soliciting Directors, the majority of the
Board, considers prudent or well planned. The Soliciting
Directors believe that as a direct result of Mr. Junkin's and Mr.
Lockyer's management, there has been an erosion of profitability
and loss of stock value. The Soliciting Directors believe the
Company has two strong core businesses which, if operated with
solid expense controls, can produce a profitable company and give
the shareholders a very good return on their investment. However,
it will take the Board of Directors some time to implement these
plans and reduce costs. Cost reduction itself produces extra
expenses in the short-run. These include: $145,000 of severance
pay to Mr. Lockyer; an estimated $140,000 to terminate the lease
of the First Federal space and an approximately $130,000 loss of
the investment in furniture and decoration expenses;
approximately $50,000 in severance pay to other employees; and an
estimated $70,000 in expenses related to the Special Meeting as
well as other potential proxy contests which may ensue.
EFFECT OF PASSAGE OF PROPOSALS A OR B
Under the bylaws of the Company, the number of directors
shall be no fewer than three nor more than twenty-five persons
with the exact number to be fixed and determined from time to time
by resolution of the board of directors or by resolution of the
shareholders at any annual meeting or special meeting of the
shareholders. The Board of Directors has set the number of
directors at eight. The eight board seats are currently filled by
L. McRee Harden, C. Kermit Keenum, Jimmy D. Veal, Michael D.
Hodges, Russell C. Jacobs, Jr., J. Thomas Whelchel, Gregory S.
Junkin and Paul D. Lockyer.
Under the bylaws of the Company, a director may be removed
between annual meetings of shareholders only by a vote of the
holders of the shares entitled to vote at a duly called
shareholders meeting, i.e., by a vote of all of the
shareholders.
If Proposal A(1) is adopted by a vote of all
shareholders, the effect will be for the Board of Directors to be
reduced from eight to six directors. If Proposal A(2) is adopted
by of all shareholders, Messrs. J. Thomas Whelchel, Michael D.
Hodges, C. Kermit Keenum and L. McRee Harden will be removed as
Directors. If Proposal A(3) is adopted by a vote of a majority of
the shares present at the meeting, it will be clear that
additional directors can be elected at the meeting. If all of the
above proposals are adopted, two persons will be nominated for
directors to fill the two vacancies created by the removal of four
directors and reduction of the number of directors. The persons
nominated for director that receive the highest number of votes
will be elected. IF THE TWO PERSONS NOMINATED BY THE JUNKIN GROUP
ARE THEN ELECTED, THE JUNKIN GROUP WILL ELECT FOUR OF THE SIX
DIRECTORS AND WILL HAVE CONTROL OF THE COMPANY AND WOULD HAVE THE
POWER TO RETURN MR. JUNKIN AND MR. LOCKYER TO THEIR PRIOR
MANAGEMENT POSITIONS. IT IS THE EXPRESS STATED INTENT OF MESSRS.
JUNKIN AND LOCKYER TO CONTINUE THE SAME HISTORIC MANAGEMENT
PRACTICES WHICH RESULTED IN THE EXISTING LOSSES TO THE COMPANY.
If Proposal B(5) is adopted by a majority of the shares
voting at the meeting, the Board of Directors will be expanded
from eight to thirteen members. If Proposal B(5) is adopted and
the persons nominated by the Junkin Group receive the highest
number of votes, they will be elected as directors. If so
elected, the five persons nominated by the Junkin Group, with Mr.
Junkin and Mr. Lockyer will constitute seven members of the
thirteen member Board of Directors. THE EFFECT WILL BE THAT THE
JUNKIN GROUP WILL ELECT A MAJORITY OF THE BOARD OF DIRECTORS, AND
WOULD HAVE THE POWER TO RETURN MR. JUNKIN AND MR. LOCKYER TO THEIR
PRIOR MANAGEMENT POSITIONS. IT IS THE EXPRESS STATED INTENT OF
MESSRS. JUNKIN AND LOCKYER TO CONTINUE THE SAME HISTORIC
MANAGEMENT PRACTICES WHICH RESULTED IN THE EXISTING LOSSES TO THE
COMPANY. All members of the Board of Directors, except Messrs.
Junkin and Lockyer, believe that the number of directors should
not be changed and no director should be removed. The Board of
Directors has voted 6 for and 2 against to recommend to the
shareholders to vote AGAINST Proposals A(1), A(2), A(3) and B(5).
The effect of this vote will be to leave the Board of Directors
as it is and allow the majority of directors to pursue the new
direction of the Company set out in this Proxy Statement.
The Board of Directors has not solicited proxies to vote
against the Directors nominated by Mr. Junkin. The question is
not whether or not the named nominees should be elected as
Directors, but strictly whether or not four Directors should be
removed or, in the alternative, the size of the Board increased
from eight to thirteen. In the event Proposals A(1) and A(2)
receive the affirmative vote of two-thirds of the holders of all
the outstanding shares and Proposal A(3) receives a vote of the
majority of those present at the meeting, or if, in the
alternative, Proposal B(5) receives a vote of a majority of the
shares voting at the meeting, the effect will be for Mr. Junkin's
nominees to be elected, because the Board will not submit nominees
for directors. If you use the orange proxy card, you will not be
able to vote for the nominees of the Junkin Group.
IMPORTANCE OF YOUR VOTE
The entire Board of Directors, except for Messrs. Junkin and
Lockyer, recommend to the shareholders that they vote AGAINST all
proposals, including Proposals A(1), A(2), A(3) and B(5) as set
out in the proxy card included herein. The Soliciting Directors
solicit your proxy to vote against these proposals and asks that
you immediately sign, date and return the ORANGE proxy card in the
self-addressed envelope to Mr. Jimmy D. Veal, 200 Plantation
Chase, St. Simons Island, Georgia 31522, Secretary of the Company.
Under the bylaws of the Company, Proposals A(1), A(2) and
A(3) require that two-thirds of the outstanding shares of the
Company, 1,562,868 shares, vote in favor of the Proposal for it to
be adopted. Under the bylaws of the Company, Proposal B(5) only
requires a majority of those shares voting at a meeting with a
quorum present. A quorum is one-third of all of the shareholders.
Because only a majority of those present at the meeting is
required to adopt Proposal B(5), IT IS EXTREMELY IMPORTANT THAT
EVERY SHAREHOLDER VOTE EITHER IN PERSON BY ATTENDING THE MEETING
OR BY SIGNING AND RETURNING A PROXY. The proxy card will be voted
as directed; however, if no instructions are specified, a signed
proxy card appointing the proxies selected by management will be
voted at the discretion of the proxies AGAINST all proposals,
including Proposals A(1), A(2), A(3) and B(5) listed on the proxy
card.
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth share ownership information
as of January 20, 1997, with respect to any person known to the
Company to be a beneficial owner of more than 5% of the Company's
Common Stock. The information as to beneficial ownership was
furnished to the Company by or on behalf of the persons named.
Unless otherwise indicated, each of the shareholders has sole
voting and investment power with respect to the shares of Common
Stock beneficially owned. Percentage ownership is calculated
based on 2,334,302 outstanding shares.
Security Ownership of Certain Beneficial Owners*
Name and Address Number of
of Beneficial Owner Shares Percent of Class
Leonard W. Golan(1) 200,102 8.3%
21st Floor
Three First National Plaza
Chicago, Illinois 60602
<PAGE>
Gregory S. Junkin
Paul D. Lockyer,
Scott A. Junkin(2)
P.O. Box 30297
Sea Island, Georgia
31561 146,455 7.1%
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* Information relating to beneficial ownership of Common Stock
is based upon "beneficial ownership" concepts set forth in
rules of the SEC under Section 13(d) of the Securities
Exchange Act of 1934, as amended (the "Act"). Under such
rules, a person is deemed to be a "beneficial owner" of a
security if that person has or shares "voting power", which
includes the power to vote or direct the voting of such
security, or "investment power", which includes the power to
dispose of, or to direct the disposition of, such security.
A person is also deemed to be a beneficial owner of any
security of which that person has the right to acquire
beneficial ownership within sixty (60) days. Under the
rules, more than one person may be deemed to be a beneficial
owner of the same securities, and a person may be deemed to
be a beneficial owner of securities as to which he has no
beneficial interest. For instance, beneficial ownership
includes spouses, minor children and other relatives
residing in the same household, and trusts, partnerships,
corporations or deferred compensation plans which are
affiliated with the principal.
(1) Mr. Golan's beneficial ownership of the shares of Common
Stock attributed to him stems from (i) his having voting and
investment power with respect to certain of those shares in
his capacity as Trustee of each of the Leonard W. Golan
Insurance Trust dated January 23, 1968, the Carol P. Golan
Insurance Trust dated November 7, 1977, and the Carol P.
Golan QTIP Trust dated April 18, 1995, and (ii) his claiming
beneficial ownership of certain shares registered in the
name of his son, John F. Golan. The number of shares
beneficially owned by Mr. Golan includes the right to
acquire 64,642 shares pursuant to Class A Warrants owned by
Mr. Golan.
(2) Includes shares held by these individuals as a "group" as
such term is used in Section 13(d)(3) of the Act and
includes rights of the members of the group to acquire
13,916 shares pursuant to Class A Warrants and 2,958 shares
pursuant to the exercise of vested options.
The following table sets forth share ownership information
as of January 20, 1997, with respect to (i) each director and
named executive officer of the Company who beneficially owns
Common Stock of the Company, and (ii) all directors and named
executive officers of the Company as a group. The information as
to beneficial ownership was furnished to the Company by or on
behalf of the persons named. Unless otherwise indicated, each of
the shareholders has sole voting and investment power with respect
to the shares beneficially owned. Percentage ownership is
calculated based on 2,334,302 outstanding shares.
Security Ownership of Management*
Name and Address Number of
of Beneficial Owner Shares Percent of Class
L. McRee Harden(1) 19,385 0.8%
P.O. Box 2369
Darien, Georgia 31305
Michael D. Hodges(2) 38,764 1.6%
207 Dunbarton Drive
St. Simons Island,
Georgia 31522
Russell C. Jacobs,
Jr.(3) 16,763 0.7%
308 Oak Grove Island Drive
Brunswick, Georgia
31525
Gregory S. Junkin(4) 105,653 4.5%
200 Plantation Chase
St. Simons Island,
Georgia 31522
C. Kermit Keenum(5) 16,545 0.7%
100 Old Mountain Road
Powder Springs, Georgia
30073
Paul D. Lockyer(6) 21,058 0.9%
311 Dunbarton Drive
St. Simons Island,
Georgia 31522
Jimmy D. Veal(7) 81,898 3.4%
711 Beachview Drive
Jekyll Island, Georgia
31527
<PAGE>
J. Thomas Whelchel(8) 31,740 1.4%
5 Glynn Avenue
Brunswick, Georgia
31520
All directors and
executive 331,806 14.0%
officers as a group
(8 persons)
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* Information relating to beneficial ownership of Common Stock
is based upon "beneficial ownership" concepts set forth in
rules of the Securities and Exchange Commission under
Section 13(d) of the Act. Under such rules, a person is
deemed to be a "beneficial owner"
(1) Includes 1,250 shares owned by his wife for which he
disclaims beneficial ownership. Also includes the right to
acquire 1,385 shares pursuant to vested options.
(2) Includes the right to acquire 30,124 shares pursuant to
vested options.
(3) Includes the right to acquire 1,263 shares pursuant to
vested options.
(4) Includes the right to acquire 4,044 shares pursuant to Class
A Warrants, and 1,500 shares pursuant to vested options.
(5) Includes the right to acquire 1,045 shares pursuant to
vested options.
(6) Includes the right to acquire 1,458 shares pursuant to
vested options.
(7) Includes 9,125 shares owned as custodian for his son, Daniel
D. Veal, 9,125 shares owned as custodian for his son,
Zachary T. Veal, both under the Uniform Gifts to Minors Act,
and 1,958 shares pursuant to vested options.
(8) Includes 25 shares owned by Mr Whelchel's daughter for which
he disclaims beneficial ownership, and 1,390 shares pursuant
to vested options.
[This space intentionally blank].
of a security if that person has or shares "voting power", which
includes the power to vote or direct the voting of such security,
or "investment power", which includes the power to dispose of, or
to direct the disposition of, such security. A person is also
deemed to be a beneficial owner of any security of which that
person has the right to acquire beneficial ownership within sixty
(60) days. Under the rules, more than one person may be deemed to
be a beneficial owner of the same securities, and a person may be
deemed to be a beneficial owner of securities as to which he has
no beneficial interest. For instance, beneficial ownership
includes spouses, minor children and other relatives residing in
the same household, and trusts, partnerships, corporations or
deferred compensation plans which are affiliated with the
principal.
None of the Soliciting Directors (i.e., the directors other
than Mr. Junkin and Mr. Lockyer) or any other person who may be
deemed a "participant" in this solicitation have purchased or
sold any Common Stock within the past two years, borrowed any
funds for the purpose of acquiring or holding any Common Stock, or
is or was within the past year a party to any contract,
arrangement or understanding with any person with respect to any
Common Stock. There have not been any transactions outside the
ordinary course of business since the beginning of the Company's
last fiscal year and there is not any currently proposed
transaction to which the Company or any of its subsidiaries was or
is to be a party, in which any of the Soliciting Directors, or any
associate or immediate family member of any of the Soliciting
Directors or any other person who may be deemed a "participant" in
this solicitation had or will have a direct or indirect material
interest. Other than the directorships contemplated by the
Proposals, and the employment of Mr. Hodges, as an officer of the
Bank as discussed below in "Employment Agreements," none of the
Soliciting Directors or any associate of any of the foregoing
persons or any other person who may be deemed a "participant" in
this solicitation has any arrangement or understanding with any
person with respect to any future employment by the Company or its
affiliates, or with respect to any future transactions to which
the Company or its affiliates will or may be a party.
Following is information about each director, including
biographical data for at least the last five years.
L. McRee Harden (41). Mr. Harden has been a director of the
Company since July 1988, a director of the Bank since February
1990, and a director of First Credit Service Corporation since
July 1993. Mr. Harden operates a chain of approximately 22
convenience stores in south Georgia and Florida.
Michael D. Hodges (43). Mr. Hodges has been a director of
the Company since 1991 and a director of the Bank since June 1990.
He also has been Acting President and CEO of the Bank since
October 1996. Prior to that, he had been Senior Vice President of
the Bank since June 1990, with principal responsibilities for the
Bank's loan portfolio.
Russell C. Jacobs, Jr. (61). Mr. Jacobs has been a director
of the Company since July 1988, a director of the Bank since
February 1990, and a director of First Bank Mortgage Corporation
since July 1993. He also has been a Vice Chairman of the Bank
since July 1995. Mr. Jacobs is self-employed as an agent for the
Equitable Financial Companies, and as a registered representative
with Equico Securities, Inc. Mr. Jacobs holds both the Chartered
Life Underwriter ("CLU") and Chartered Financial Consultant
("CHFC") designations.
Gregory S. Junkin (55). Mr. Junkin has been a director of
the Company since March 1987. From March 1987 until October 17,
1996, Mr. Junkin was Chairman and Chief Executive Officer of the
Company. From July 1993 until October 17, 1996, Mr. Junkin was
Chairman and Chief Executive Officer of FCC and FBMC. Mr. Junkin
is now retired.
Claude Kermit Keenum (61). Mr. Keenum has been a director
of the Company since July 1988, a director of the Bank since
February 1990, and a director of FCC since July 1995. He was the
Superintendent of the Glynn County School System from 1980 to 1989
and the Superintendent of the Cobb County School System in
metropolitan Atlanta from 1989 to 1992. Mr. Keenum is currently
President of Southeastern Communication Systems, Inc.
Paul D. Lockyer (45). Mr. Lockyer has been a director of
the Company since December 1987. From July 1995 to October 17,
1996, Mr. Lockyer was President and Chief Operating Officer of the
Company. From September 1988 through July 1995, he served as
Senior Vice President of the Company. From February 1990 until
October 17, 1996, Mr. Lockyer was President, Chief Executive
Officer and a director of the Bank. Mr. Lockyer is now retired.
Jimmy D. Veal (48). Mr. Veal has been a Vice Chairman of
the Company since July 1995. He has been a director of the
Company since June 1987 and Secretary/Treasurer of the Company
since September 1992. He has been a Vice Chairman of the Bank
since July 1995, a director of the Bank since July 1990, and
Secretary/Treasurer and a director of both FCC and FBMC since July
1993. He is Secretary/Treasurer and a director of Motel
Properties, Inc., a corporation that owns and operates four motels
in Glynn County and two in Camden County.
J. Thomas Whelchel (62). Mr. Whelchel has been the Acting
Chairman and CEO of the Company since October 17, 1996. Prior to
that, Mr. Whelchel was a Vice Chairman of the Company between July
1995 and October 1996. From July 1988 through July 1995, he
served as President of the Company. Mr. Whelchel has been a
director of the Company since July 1988, and Chairman and a
director of the Bank since February 1990. Mr. Whelchel has also
been a director of both FCC and FBMC since July 1993. He is a
senior partner in the Brunswick law firm of Whelchel, Brown,
Readdick and Bumgartner.
<PAGE>
RELATED TRANSACTIONS
During 1996, the Bank loaned funds to certain of the
Company's executive officers and directors or to businesses in
which such persons had an interest. All such loans were: (a) in
the ordinary course of business, (b) on substantially the same
terms, including interest rates and collateral, as those
prevailing at the time for comparable transactions with other
persons, and (c) did not involve more than the normal risk of
collectibility or present other unfavorable features.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely on review of Forms 3 and 4 and amendments
thereto furnished to the Company during its the fiscal year and
Form 5 and amendments thereto furnished to the Company with
respect to the 1996 fiscal year, no person who, at any time during
the 1996 fiscal year was a director, officer or beneficial owner
of more than 10% of the Common Stock, failed to file on a timely
basis, as disclosed in such forms, reports required by Section
16(a) of the Act during the 1996 fiscal year.
THE BOARD OF DIRECTORS AND ITS COMMITTEES
The Company's Board of Directors have established an audit
committee (the"Audit Committee") and a compensation committee
("Compensation Committee").
The current members of the Audit Committee are L. McRee
Harden, Russell C. Jacobs, Jr., and Jimmy D. Veal.* The Audit
Committee held 12 meetings during the 1996 fiscal year. The
mission of the Audit Committee is to prevent losses by the Company
from fraud, defalcation and/or operating deficiencies.
The Compensation Committee was created on January 16, 1997.
The members of the Compensation Committee are L. McRee Harden,
Claude Kermit Keenum and Jimmy D. Veal. The mission of the
Compensation Committee is to determine the compensation and
benefits of the Company's senior officers.
The Board of Directors of the Company met 16 times during
the 1996 fiscal year. Each of the directors attended more than
75% of the aggregate of (i) the total number of meetings of the
Board of Directors; and (ii) the total number of meetings held by
all committees of the Board of Directors on which he served during
the period of the 1996 fiscal year that he served as a director.
On the date of the Special Meeting, the Board of Directors
will consist of eight members. Under the Company's Bylaws,
shareholders or the Board of Directors have the authority to
change the size of the Board of Directors within a range of 3 to
25 members and to fill vacancies. Pursuant to this authority, at
the Special Meeting, shareholders will consider proposals to
reduce the size of the Board of Directors to 6 members, or, in the
alternative, to increase the size of the Board of Directors to 13
members.
Director's Compensation
The Company has no permanent arrangement for the
compensation of its directors for their services as a director.
In 1995, however, the directors were awarded restricted shares of
Common Stock for their past services. Mr. Hodges received 1,615
shares, Messrs. Harden, Jacobs, Keenum and Whelchel each received
3,000 shares and Messrs. Lockyer, Junkin and Veal each received
3,615 shares**. The shares are subject to forfeiture if the
recipient does not continue serving the Company in certain
capacities. The restrictions will lapse evenly over a period of
seven years from the effective date of the grant. This award was
approved by the shareholders at the 1995 Annual Meeting. In
addition, in January 1996, the Company's Board of Directors
granted nonqualified stock options to directors of the Company for
services rendered during fiscal year 1995 on the Boards of
Directors and committees of the Company and its various
subsidiaries. The following table presents information regarding
such option grants.
- ------------------------------------------------------------------
* From June 20, 1996 until he became acting CEO on October 17,
1996, J. Thomas Whelchel was also a member of the Audit Committee.
** In addition, in 1995, Mr. Veal was awarded 11,700 restricted
shares and Mr. Whelchel was awarded 7,325 restricted shares,
respectively, in their capacity as officers of the Company.
JANUARY 1996 OPTION GRANTS TO DIRECTORS FOR
SERVICES RENDERED IN FISCAL YEAR 1995
Number of
Securities
Underlying Exercise Expiration
Name Options Price Date
L. McRee Harden 1,385 $6.00 1/19/06
Michael D. Hodges 1,042** $6.00 1/19/06
Russell C. Jacobs,
Jr. 1,263 $6.00 1/19/06
Gregory S. Junkin 1,500 $6.00 1/19/06
C. Kermit Keenum 1,045 $6.00 1/19/06
Paul D. Lockyer 1,458 $6.00 1/19/06
Jimmy D. Veal 1,958* $6.00 1/19/06
J. Thomas Whelchel 1,390* $6.00 1/19/06
The options listed above were granted pursuant to the 1995
Plan. The Board may make similar awards for services rendered as
directors in 1996.
* In addition, in 1995, Mr. Veal was awarded 11,700 restricted
shares and Mr. Whelchel was awarded 7,325 restricted shares,
respectively, in their capacity as officers of the Company.
** In addition, in 1996, Mr. Hodges was awarded stock options to
acquire 1,000 shares of the Company's stock for his service as an
officer of the Bank.
[This space intentionally blank].
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth the compensation paid
to the named executive officers of the Company and its
subsidiaries for each of the Company's last three completed fiscal
years.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
Name and Other
Principal Annual
Position Year Salary Bonus Compensation
(a) (b) (c) (d) (e)
J. Thomas Whelchel
Acting Chairman
and CEO of the
Company(2) 1996 $0(11) $0 $0
Michael D.
Hodges, President
and CEO of the Bank
subsidiary(2) 1996 $100,861 $ 0 $0
1995 $ 92,096 $ 6,000 $0
1994 $ 85,500 $15,000 $0
Gregory S. Junkin,
Former Chairman
and CEO of the
Company(2) 1996 $125,192 $ 0 $0
1995 $147,211 $ 0 $0
1994 $ 40,558 $ 0 $0
Paul D. Lockyer,
Former President,
COO and CFO of the
Company(2) 1996 $262,115(8) $ 0 $0
1995 $107,627 $12,785 $0
1994 $100,000 $32,000 $0
LONG TERM COMPENSATION
AWARDS PAYOUTS
Restricted Securities
Stock Underlying LTIP All Other
Awards(1) Options/SARs Payouts Compensation
(f) (g) (h) (i)
J. Thomas Whelchel
$0 0 $0 $0
Michael D. Hodges
1996
$0 1,000(4) $0 $0
1995
$10,498(3) 6,921(4) $0 $0
1994
$4,650(3) 1,408(5) $0 $0
Gregory S. Junkin
1996
$0 0 $0 $0
1995
$99,548(6) 1,500(7) $0 $0
1994
$42,000(6) 0 $0 $0
Paul D. Lockyer
1996
$0 0 $0 $0
1995
$71,500(9) 1,458(10) $0 $0
1994
$6,600(9) 0 $0 $0
- ------------
(1) In the event that the Company declares a dividend on its
outstanding shares of Common Stock, then such dividend will
be equally applicable to the restricted stock reported in
this column (f).
(2) Messrs. Whelchel and Hodges were elected to their respective
positions on October 17, 1996. Messrs. Junkin and Lockyer
were terminated from their respective positions on October
17, 1996.
(3) The aggregate number of shares of restricted stock held by
Michael D. Hodges as of January 20, 1997, is 2,390 shares
and the value of such shares is $12,548. All of the 775
shares of restricted stock awarded to Mr. Hodges in 1994
("1994 Restricted Stock") vests upon the earlier of (i)
three years from August 17, 1994, the date the shares were
granted to Mr. Hodges, or (ii) a change of control in the
ownership of the Company through the acquisition of more
than 50% of the Company's outstanding stock by a third
party. Mr. Hodges will forfeit the 1994 Restricted Stock if
he is not employed by either the Company or one of its
subsidiaries on August 16, 1999, unless Mr. Hodges'
employment is terminated because of the sale of the Company
or a subsidiary through which Mr. Hodges is employed and Mr.
Hodges is not offered other employment within the Company or
one of its subsidiaries. Under the terms of the award of
1,615 shares of restricted stock awarded to Mr. Hodges in
1995 ("1995 Restricted Stock") one-seventh of such shares
(i.e., 230.71 shares) became vested on July 25, 1996, and an
additional one-seventh of such shares will vest on July 25
of each year thereafter until all such shares have vested.
If at any time Mr. Hodges becomes neither a director nor an
executive officer of the Company or any subsidiary of the
Company, then he shall forfeit any shares of 1995 Restricted
Stock which have not already vested at the time of the event
which triggers the forfeiture.
(4) These options are incentive stock options which have been
granted pursuant to that certain Golden Isles Financial
Holdings, Inc. 1995 Stock Option Plan adopted by the Company
on July 25, 1995 (the "1995 Plan"). The 1995 Plan provides
for the granting of certain options that are intended to
qualify as incentive stock options within the meaning of
Section 422(b) of the Internal Revenue Code, as well as
certain nonstatutory stock options that are not intended to
qualify as incentive stock options within the meaning of
Section 422(b) of the Internal Revenue Code. These
incentive stock options were granted on July 25, 1995, and
vested immediately upon being granted. These options may be
exercised at any time before the earlier of (i) July 25,
2005; or (ii) the date upon which the optionee ceases to be
an employee of the Company; provided, however, that if the
optionee's employment with the Company is terminated for any
reason other than (a) optionee's death or disability, (b)
optionee's voluntary termination of his employment without
the Company's consent, or (c) termination of optionee's
employment by the Company for cause, then, in such event,
optionee may exercise these incentive stock options for up
to three months after termination of his employment (but in
no event later than July 25, 2005).
(5) These options are nonstatutory stock options which have been
granted pursuant to that certain 1991 Incentive Stock Option
Plan and 1991 Nonstatutory Stock Option Plan adopted by the
Company on May 30, 1991 (the "Plan"). The Plan provides
for the granting of certain nonstatutory stock options that
are not intended to qualify as incentive stock options
within the meaning of Section 422(b) of the Internal Revenue
Code. These nonstatutory stock options shall be vested and
may be exercised by the individual to whom such options have
been granted during the period such individual serves as an
officer or any other key employee of the Company.
(6) The aggregate number of shares of restricted stock held by
Gregory S. Junkin as of January 20, 1997, is 22,315 shares
and the value of such shares is $117,154. All of the 7,000
shares of restricted stock awarded to Mr. Junkin in 1994
("1994 Restricted Stock") will vest upon the earlier of (i)
three years from August 17, 1994, the date the shares were
granted to Mr. Junkin, or (ii) a change of control in the
ownership of the Company through the acquisition of more
than 50% of the Company's outstanding stock by a third
party. Mr. Junkin will forfeit the 1994 Restricted Stock if
he is not in the employment of either the Company or any of
its subsidiaries on August 16, 1997, unless Mr. Junkin's
employment is terminated because of the sale of the Company
or a subsidiary through which Mr. Junkin is employed and Mr.
Junkin is not offered other employment within the Company or
one of its subsidiaries. With respect to the shares of
restricted stock granted to Mr. Junkin in 1995 (15,315
shares), one-seventh of such shares (i.e., 2,187.86 shares
became vested on July 25, 1996, and an additional one-seventh
of such shares will vest on July 25 of each year
thereafter until all such shares have vested. If at any
time Mr. Junkin becomes neither a director of the Company
nor an executive officer of the Company or any subsidiary of
the Company, then he shall forfeit any of the restricted
shares granted to him in 1995 which have not already vested
at the time of the event which triggers the forfeiture.
(7) These options are nonstatutory stock options which were
granted to Mr. Junkin pursuant to the Plan in his capacity
as a director of the Company.
(8) Mr. Lockyer's 1996 salary includes a severance payment of
$145,000, pursuant to the termination of his employment on
October 17, 1996.
(9) The aggregate number of shares of restricted stock held by
Paul D. Lockyer as of January 20, 1997, is 12,100 shares
and the value of such shares is $63,525. All of the 1,100
shares of restricted stock awarded to Mr. Lockyer in 1994
("1994 Restricted Stock") vest upon the earlier of (i) three
years from August 17, 1994, the date the shares were granted
to Mr. Lockyer, or (ii) a change of control in the ownership
of the Company through the acquisition of more than 50% of
the Company's outstanding stock by a third party. Mr.
Lockyer will forfeit the 1994 Restricted Stock if he is not
in the employment of either the Company or any of its
subsidiaries on August 16, 1999, unless Mr. Lockyer's
employment is terminated because of the sale of the Company
or a subsidiary through which Mr. Lockyer is employed and
Mr. Lockyer is not offered other employment within the
Company or one of its subsidiaries. With respect to the
shares of restricted stock granted to Mr. Lockyer in 1995
(11,000 shares), one-seventh of such shares (i.e., 1,571.43
shares) became vested on July 25, 1996, and an additional
one-seventh of such shares will vest on July 25 of each year
thereafter until all such shares have vested. If at any
time Mr. Lockyer becomes neither a director of the Company
nor an executive officer of the Company or any subsidiary of
the Company, then he shall forfeit any of the restricted
shares granted to him in 1995 which have not already vested
at the time of the event which triggers the forfeiture.
(10) These options are nonstatutory stock options which were
granted to Mr. Lockyer pursuant to the Plan in his capacity
as a director of the Company. As a result of the termination
of his employment on October 17, 1996, on January 17, 1997,
45,523 incentive and nonstatutory stock options were
forfeited by Mr. Lockyer.
(11) The Compensation Committee of the Board has agreed to
compensate Mr. Whelchel for his time spent as CEO of the
Company. As of February 10, 1997, no rate has been
determined.
No stock options were exercised and there were no SARs
outstanding during fiscal year 1996. The following table
presents information regarding the value of unexercised options
held at January 20, 1997.
AGGREGATED OPTION/SAR EXERCISES IN LAST
FISCAL YEAR AND FY-END OPTION/SAR VALUES
Shares Acquired
Name on Exercise Value Realized
(a) (b) (c)
J. Thomas Whelchel -- --
Michael D. Hodges -- --
Gregory S. Junkin -- --
Paul D. Lockyer -- --
Value of Unexercised
Number of Securities in-the-Money
Underlying Unexercised Options/SARs
Options/SARs at FY-End at FT-End
Exercisable/Unexercisable Exercisable/Unexercisable
(d) (e)
J. Thomas Whelchel 1,390(2) $0/$0(1)
Michael D. Hodges 30,124(3) $24,089/$0(1)
Gregory S. Junkin 1,500(2) $0/$0(1)
Paul D. Lockyer 1,458(2) $0/$0(1)
- ---------------------------------------------------------------
(1) Dollar values have been calculated by determining the
difference between the estimated fair market value of the
Company's Common Stock at December 31, 1996 ($5.25) and the
exercise prices of the options.
(2) On January 18, 1996, these options were awarded to Mr.
Whelchel, Mr. Junkin and Mr. Lockyer as compensation with
respect to their services as directors.
(3) Michael D. Hodges has the right to acquire 30,124 shares of
the Company's Common Stock pursuant to stock options issued
by the Company to Mr. Hodges. All of the 30,124 stock
options held by Mr. Hodges were exercisable as of January
20, 1996. Of the 30,124 stock options, 18,750 are
exercisable at the price of $4.00 per share, 1,003 are
exercisable at the price of $4.60 per share, 1,408 are
exercisable at the price of $6.25 per share, 6,921 are
exercisable at the price of $6.50 per share, and 2,042 are
exercisable at the price of $6.00 per share.
The Company does not have any Long Term Incentive Plans in
effect.
EMPLOYMENT AGREEMENTS
On June 5, 1992, the Bank issued a letter to Paul D.
Lockyer (the "Lockyer Letter") summarizing the terms of Mr.
Lockyer's employment with the Bank. Pursuant to the terms of the
Lockyer Letter, Mr. Lockyer was to serve as President and Chief
Executive Officer of the Bank and Senior Vice President and
Principal Financial Officer of the Company. Mr. Lockyer's base
salary was set at $80,500 per year, subject to possible annual
increases. The Lockyer Letter confirms that Mr. Lockyer is
entitled to certain stock options and that he is to be provided
with a company vehicle. Mr. Lockyer may terminate his employment
with the Bank upon 90 days advance notice. The Board of
Directors of the Bank may terminate Mr. Lockyer's employment with
the Bank with or without cause. However, if Mr. Lockyer is
dismissed from his employment for reasons other than fraud or
dishonesty, he is entitled to severance pay in an amount equal to
six months of his then current base salary. On July 2, 1996, the
term of the Lockyer Letter was extended to July 2, 1998. In
addition, the Lockyer Letter was modified to provide severance
pay in an amount equal to twelve months of his then current base
salary if Mr. Lockyer is dismissed for reasons other than fraud
or dishonesty. On October 17, 1996, the Board terminated Mr.
Lockyer's employment.
On June 5, 1992, the Bank issued a letter to Michael D.
Hodges (the "Hodges Letter") summarizing the terms of Mr. Hodges'
employment with the Bank. Pursuant to the terms of the Hodges
Letter, Mr. Hodges is to serve as Senior Vice President of the
Bank. Mr. Hodges' base salary was set at $75,500 per year,
subject to possible annual increases. The Hodges Letter confirms
that Mr. Hodges is entitled to certain stock options and that he
is to receive a monthly automobile allowance of $300. Mr. Hodges
may terminate his employment with the Bank upon 90 days advance
notice. The Chief Executive Officer or the Board of Directors of
the Bank may terminate Mr. Hodges' employment with the Bank with
or without cause. However, if Mr. Hodges is dismissed from his
employment for reasons other than fraud or dishonesty, he is
entitled to severance pay in an amount equal to six months of his
then current base salary. The term of the Hodges Letter was
effective through July 2, 1996, when it was not extended. As of
January 20, 1997, Mr. Hodges has been informed by the Bank's
Board of Directors that an employment agreement will be entered
into by the Bank with compensation determined by the Company
Board's Compensation Committee.
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
On December 8, 1996, the certifying accountant for the
Company, Francis & Company, of Marietta, Georgia, notified the
Company that it did not wish to be engaged as the Company's
certifying accountant for the year ended December 31, 1996. The
report of Francis & Company accompanying the Company's financial
statements as of and for the years ended December 31, 1995 and
December 31, 1994, did not contain an adverse opinion, or a
disclaimer of opinion, and was not modified with respect to any
uncertainty, audit scope or accounting principles.
On December 9, 1996, the Company engaged Mauldin & Jenkins
LLC of Albany, Georgia as its new certifying accountant. The
Company did not consult with Mauldin & Jenkins LLC regarding the
application of accounting principles to a specific completed or
contemplated transaction or the type of audit opinion that might
be rendered on the Company's financial statements.
The decision of the Company to engage new certifying
accountants was approved by its Board of Directors. There were,
during the two most recent fiscal years of the Company and for
the period of January 1, 1996 through the December 8, 1996, no
disagreements, whether resolved or unresolved, with Francis &
Company with regard to any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or
procedure, which, if not resolved to its satisfaction would have
caused Francis & Company to make reference to the subject matter
of the disagreement(s) in connection with its report.
One or more representatives of Mauldin & Jenkins LLC will
be present at the Special Meeting, will have an opportunity to
make a statement if so desired, and will be available to respond
to appropriate questions.
VOTE REQUIRED
Approval of Proposal A(1) and A(2) submitted to the
shareholders requires the affirmative vote of 1,556,268 shares
of Common Stock; such amount being two-thirds of the shares
entitled to vote at an election of directors. For purposes of
determining whether the requisite affirmative votes have been
obtained with respect to Proposal A(1) and A(2), abstentions and
"broker non-votes" will be disregarded in the calculation.
Approval of Proposals A(3) and Proposal B(5) requires a
plurality of the shares of Common Stock present or represented
and entitled to vote at the Special Meeting. For purposes of
determining whether the requisite affirmative votes have been
obtained with respect to Proposal A(3) and Proposal B(5),
abstentions and "broker non-votes" will be disregarded in the
calculation.
OTHER MATTERS THAT MAY COME
BEFORE THE SPECIAL MEETING
The management of the Company knows of no matters other
than those above that are to be brought before the Special
Meeting. However, if any other matter should be properly
presented for consideration and voting at the Special Meeting or
any adjournment thereof, it is the intention of the persons named
in the enclosed form of proxy to vote the proxy in accordance
with their judgment of what is in the best interest of the
Company.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Jimmy D. Veal
Jimmy D. Veal, Secretary
Schedule 1
TEXT OF RESOLUTION ADOPTED BY BOARD OF DIRECTORS ON DECEMBER 9,
1996
1. Within 30 days from the adoption date of this
resolution, the Board will develop and submit to the supervisory
authorities a management plan for the parent company and each of
its subsidiaries. In developing that plan, the Board will
identify the positions considered necessary at each company along
with the responsibilities and duties of those positions. The
plan must include:
a. The type and number of management positions needed
to manage the affairs of the parent and each subsidiary,
including the development of an organizational chart
reflecting the management structure;
b. A clear and concise description of the required
level of education, experience, and level of compensation
for each management position;
c. An evaluation of each officer currently serving
in a management position to determine whether those
individuals possess the ability, education, experience, and
other qualifications required to perform present and
anticipated duties, including establishment and enforcement
of sound policies and practices;
d. Identification and establishment of such Board
committees at the parent and at each subsidiary as may be
necessary to provide guidance and oversight to active
management;
e. A plan of action to recruit and hire any
additional or replacement personnel with the requisite
ability, experience, and other qualifications, which the
Board deems necessary to fill management positions;
f. At a minimum, the Board shall review the role of
each company's chairman, chief executive officer, chief
lending officer, and chief financial officer. One
individual may hold more than one position; however, the
duties assigned to the combined positions shall not be of
such responsibility as to diminish the effectiveness of any
one position;
g. Authorities of each management position and of
each Board committee are to be expressly granted by the
respective Boards of the companies;
h. Upon the resignation, termination, and/or hiring
of any management personnel including Board members, the
Board will notify the supervisory authorities of each such
event. Such notice will include the information on each
individual the Board used in making a decision to hire that
person.
2. The Board will review the results or recommendations
from the current engagement of Arthur Andersen, LLP regarding
appropriate internal routine and controls, accounting systems,
policies and procedures, internal loan review, internal audit and
any other areas and develop appropriate steps or procedures to
strengthen noted weaknesses. The results of the Board's review and
the Board's plans or procedures to strengthen noted weaknesses
will be supplied to the supervisory authorities within 30 days.
3. The Board will supply to the supervisory authorities
the results, interim and/or final, of any audit, investigation,
or review conducted at the parent or any subsidiary, performed in
addition to the regular annual independent audit, within 15 days
of receipt.
4. After considering the results and recommendations
from the current engagement of Arthur Andersen, LLP, the Board
will review the scope and adequacy of the annual independent
audit as performed for the prior year end, and as proposed for
1996, with particular emphasis on the adequacy of the review of
internal routine and controls. Based on the results of this
review, the Board will take appropriate steps to expand the scope
of the proposed 1996 independent audit if necessary to include
any of the areas noted in 2 above not covered in the current
engagement of Arthur Andersen LLP. The results of the Board's
review will be provided to the supervisory authorities within 60
days of the adoption of this resolution.
5. The Board will notify the external auditor in writing
that his or her responsibility is to the entire Board and then
any findings or recommendations should be made directly to the
entire Board.
6. The Board will develop a strategic plan for the
parent and each subsidiary covering a three to five year period.
These plans will be supported by annual business plans that
include an annual budgeting process including projected balance
sheets. This budget must take into account the maintenance of
adequate liquidity, adequate capital, and adequate reserves for
loan loss in the bank and in the consolidated entity. Debt
service requirements must be reflected as well. The strategic
plan and the 1997 business plan and budget will be submitted to
the supervisory authorities for review as soon as possible but no
later than January 31, 1997.
7. The parent and each of its subsidiaries will charge
off all assets reflected as Loss on the agenda presented to the
Board on December 9, 1996. The Board also commits to immediately
charge off any other losses that come to its attention through
any supervisory authority examination or inspection, any internal
or external audit, or in any other manner. In addition, each
entity will make provisions to the respective loan loss reserve
accounts to bring them to adequacy before December 31, 1996.
8. The Board will further undertake to assure that the
parent's and each subsidiary's books are stated in accordance
with generally accepted accounting principals by December 31,
1996. Specifically, the Board will conduct a review, either
independently or through the scope of the 1996 independent audit,
of the assets and lease obligations of the various companies to
locate any improperly capitalized expenses, and to determine that
assets and liabilities are properly booked.
9. The Boards of the parent and of the bank subsidiary
will not declare or pay any cash or property dividend or any
other form of capital distribution without the prior written
consent of the supervisory authorities.
<PAGE>
10. The parent will not incur any additional debt after
this resolution is adopted without prior notification to the
supervisory authorities. Such notification must occur at least
15 days prior to the date on which the company wishes to incur
the additional debt. Additional debt does not include draws on
existing debt arrangements. Any debt incurred or renewed between
November 15, 1996, and the date of adoption of this resolution
will be immediately reported to the supervisory authorities.
11. The company will not reduce its capital by purchasing
or redeeming treasury stock without prior notification to the
supervisory authorities. Such notification must occur at least
15 days prior to the date on which the company wishes to purchase
or redeem the stock.
12. The Board will review its obligations with respect to
reporting suspicious activity and will file all Suspicious
Activity Reports as required. This item is intended to cover
matters currently known or that become known to the Board.
13. Beginning 30 days from the date of adoption and every
30 days thereafter, the Board will report progress on each item
of this resolution to the supervisory authorities. Each progress
report will include copies of any correspondence from Golden
Isles Financial Holdings, Inc. to the Securities and Exchange
Commission and/or to the company's shareholders.
[END OF RESOLUTION]<PAGE>
REVOCABLE PROXY GOLDEN ISLES FINANCIAL
HOLDINGS, INC.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS FOR THE SPECIAL
MEETING OF SHAREHOLDERS TO BE HELD ON MARCH 11, 1997
The undersigned hereby acknowledges receipt of the notice
of special meeting of shareholders of Golden Isles Financial
Holdings, Inc. (the "Company") and proxy statement for the
special meeting of the shareholders of the Company to be held on
March 11, 1997 (the "Special Meeting").
The undersigned hereby appoints J. Thomas Whelchel, Jimmy
D. Veal and Michael D. Hodges, and each of them, proxies with the
full power of substitution, to act for and in the name of the
undersigned to vote all the shares of common stock of the Company
which the undersigned is entitled to vote at the special meeting
to be held on Tuesday, March 11, 1997, at 10:00 a.m. local time,
at the Embassy Suites Hotel, 500 Mall Boulevard, Brunswick,
Georgia 31520, or at any adjournment or postponement thereof, as
indicated below.
[ ] AGAINST ALL PROPOSALS IN THEIR ENTIRETY.
You may mark an "X" in the above box to vote this proxy card
AGAINST all of the proposals listed below in this Proxy Card.
THIS IS THE POSITION OF THE MAJORITY OF THE MEMBERS OF THE BOARD
OF DIRECTORS (L. MCREE HARDEN, MICHAEL D. HODGES, RUSSELL C.
JACOBS, JR., C. KERMIT KEENUM, JIMMY D. VEAL AND J. THOMAS
WHELCHEL).
IF THE ABOVE BOX IS MARKED, YOU DO NOT NEED TO VOTE SEPARATELY
BELOW. HOWEVER, IF YOU DESIRE, YOU MAY VOTE SEPARATELY BY
MARKING EACH INDIVIDUAL PROPOSAL BELOW WITH AN (X) IN THE
APPROPRIATE BOX. In the event a vote on a separate proposal is
inconsistent with a check of the box above, the proxy will be
voted in accordance with your vote below.
PROPOSAL AS TO CHAIRMAN OF THE SPECIAL MEETING:
To elect Gregory S. Junkin, or, in his absence, Paul D. Lockyer,
as the chairman of the Special Meeting.
[ ] AGAINST Gregory S. Junkin, or, in his absence, Paul D.
Lockyer, as chairman of the Special Meeting.
[ ] FOR Gregory S. Junkin, or, in his absence, Paul D. Lockyer,
as chairman of the Special Meeting.
[ ] WITHHOLD AUTHORITY
PROPOSAL A
1. That the number of members constituting the full Board of
Directors be fixed at six (a decrease of two members).
[ ] Against [ ] For [ ] Abstain
2. That each of J. Thomas Whelchel, Michael D. Hodges, C.
Kermit Keenum and L. McRee Harden be removed as members of the
Board of Directors.
[ ] Against [ ] For [ ] Abstain
3. That Article 3, Section 3.6 of the bylaws of the Company be
amended to clarify that the shareholders of the Company shall
have the right to fill a vacancy on the Board of Directors
(created by the removal of a director) at a special meeting or an
annual meeting.
[ ] Against [ ] For [ ] Abstain
PROPOSAL B
5. That the number of members constituting the full Board of
Directors be fixed at thirteen (an increase of five members).
[ ] Against [ ] For [ ] Abstain
In their discretion, the proxies are authorized to vote
upon such other business as may properly come before the Special
Meeting and at any adjournments thereof.
This proxy will be voted as directed. If no instructions
are specified, this proxy card will be voted "against" the
proposals listed in this proxy card in their entirety. If any
other business is presented at the Special Meeting, this proxy
card will be voted by the proxies in their best judgment. At the
present time, the Board of Directors knows of no other business
to be presented to a vote of the shareholders at the Special
Meeting.
If the undersigned is present and elects to withhold this
proxy card and vote in person at the Special Meeting or any
adjournment thereof, and notifies the Secretary of the Company at
the Special Meeting of the decision of the undersigned to
withdraw this proxy card, then the power of the proxies shall be
deemed terminated and of no further force and effect.
Please sign exactly as your
name appears on your stock
certificate. When shares
are held jointly, both
holders should sign. When
signing as attorney,
executor, administrator,
trustee or guardian, please
give your full title. If
the holder is a
corporation, partnership or
other entity, the full
corporate, partnership or
entity name should be
signed by the duly
authorized partner,
officer, or other
representative.
Date: , 1997
Signature
Signature, if shares held
jointly
Title
Please sign, date and mail promptly in the postage paid
envelope provided.
