<PAGE>
FILED PURSUANT TO
RULE 424(b)(3)
FILE NO: 333-83191
BANK ATLANTA
1221 CLAIRMONT ROAD
DECATUR, GEORGIA 30030
(404) 320-3300
----------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD SEPTEMBER 14, 1999
TO THE SHAREHOLDERS OF BANK ATLANTA
A Special Meeting of Shareholders (the "Meeting") of Bank Atlanta, a
commercial bank organized and existing under the laws of the State of Georgia
("Bank Atlanta"), will be held at the main office of Bank Atlanta, located at
1221 Clairmont Road, Decatur, Georgia, on September 14, 1999, at 4:00 p.m.,
Eastern Time, for the following purpose:
1. Merger. To consider and vote upon a proposal to approve the Agreement
and Plan of Reorganization, dated May 20, 1999, by and between Premier
Bancshares, Inc., a Georgia bank holding company ("Premier"), PMB
Acquisition Corp. II, a wholly owned subsidiary of Premier ("PMB"), and
Bank Atlanta pursuant to which (i) Bank Atlanta will merge with PMB
Acquisition Corp. II with Bank Atlanta as the surviving bank of the merger
and will be operated as a wholly owned subsidiary of Premier and (ii) each
share of Bank Atlanta common stock then outstanding will be converted into
the right to receive 1.25 shares of Premier common stock, subject to
possible adjustment, plus cash in lieu of any fractional share interest. A
copy of the merger agreement is attached to the accompanying proxy
statement/prospectus as Appendix A.
2. Other Business. To transact such other business as may properly come
before the Meeting, including adjourning the Meeting to permit, if
necessary, further solicitation of proxies.
Only shareholders of record at the close of business on July 31, 1999, are
entitled to receive notice of and to vote at the Meeting. The merger requires
the approval of the holders of at least two-thirds of the outstanding shares of
Bank Atlanta common stock.
Bank Atlanta shareholders are entitled to dissent from the merger and obtain
payment of the fair value of their shares in cash by complying with the
applicable provisions of the Financial Institutions Code of Georgia and Article
13 of the Georgia Business Corporation Code, a copy of which is attached as
Appendix B to the accompanying proxy statement/prospectus.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT HOLDERS OF BANK ATLANTA
COMMON STOCK VOTE "FOR" THE MERGER.
You are cordially invited to attend the Meeting in person. However, whether
or not you plan to attend, we urge you to sign, date and return the enclosed
proxy sheet as promptly as possible. You may revoke your proxy by delivering to
the Secretary of Bank Atlanta a written revocation or a duly executed proxy
sheet bearing a later date or by electing to vote in person at the Meeting.
By Order of the Board of Directors
[SIGNATURE OF JAMES B. HENDRY, JR.
APPEARS HERE]
James B. Hendry, Jr.
President and Chief Executive
Officer
Decatur, Georgia
August 12, 1999
<PAGE>
PROXY STATEMENT OF PROSPECTUS OF
BANK ATLANTA PREMIER BANCSHARES, INC.
FOR THE SPECIAL MEETING OF FOR 1,236,708
SHAREHOLDERS SHARES OF COMMON STOCK
TRADING SYMBOL: NYSE-PMB
MERGER PROPOSED--YOUR VOTE IS VERY IMPORTANT
----------------
The Boards of Directors of Bank Atlanta and Premier have agreed on a merger
of Bank Atlanta and a subsidiary of Premier. Bank Atlanta will be the
surviving bank in the merger and will become a wholly owned subsidiary of
Premier following the merger.
If the merger is completed, you will receive 1.25 shares of Premier common
stock for each share of Bank Atlanta common stock you own, subject to possible
adjustment. On August 10, 1999, the closing price of Premier common stock was
$17.44, making the value of the shares of Premier common stock to be received
by Bank Atlanta shareholders equal to $21.80 for each share of Bank Atlanta
common stock.
On July 28, 1999, Premier entered into an Agreement and Plan of
Reorganization with BB&T Corporation, pursuant to which Premier will be merged
with and into BB&T. As a result, each share of Premier common stock, including
shares of Premier common stock you will receive as Bank Atlanta shareholders,
will be converted into the right to receive 0.5155 shares of BB&T common
stock.
This proxy statement/prospectus provides you with detailed information about
the proposed merger. We encourage you to read this entire document carefully.
You can also obtain other information about Premier from documents filed by
Premier with the Securities and Exchange Commission.
The merger cannot be completed unless the shareholders of Bank Atlanta
approve it. Bank Atlanta has scheduled a special meeting of its shareholders
to vote on the merger.
The date, time, and place of the special meeting of shareholders is as
follows:
September 14, 1999, 4:00 p.m.
Main Office, Bank Atlanta
1221 Clairmont Road
Decatur, Georgia 30030
SEE "RISK FACTORS" BEGINNING ON PAGE FOR A DISCUSSION OF CERTAIN FACTORS
THAT YOU SHOULD CONSIDER BEFORE APPROVING THE MERGER.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
REGULATORS HAVE APPROVED THE PREMIER COMMON STOCK TO BE ISSUED IN THE MERGER
OR DETERMINED IF THIS PROXY STATEMENT/PROSPECTUS IS ACCURATE OR ADEQUATE.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
This proxy statement/prospectus is dated August 12, 1999 and was first
mailed to shareholders of Bank Atlanta on August 12, 1999.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
SUMMARY.................................................................... 1
RISK FACTORS............................................................... 6
COMPARATIVE MARKET PRICES AND DIVIDENDS.................................... 8
Premier Market Prices.................................................... 8
Bank Atlanta Market Prices............................................... 8
Dividends................................................................ 9
Shareholders of Record................................................... 9
THE BANK ATLANTA SHAREHOLDERS' MEETING..................................... 10
General.................................................................. 10
Record Date, Voting Rights and Vote Required............................. 10
Voting and Revocation of Proxies......................................... 10
Solicitation of Proxies.................................................. 11
Recommendation of the Bank Atlanta Board................................. 11
THE MERGER................................................................. 12
General.................................................................. 12
Background of, and Reasons for, the Merger............................... 12
Premier's Reasons for the Merger......................................... 13
Opinion of Financial Adviser............................................. 13
Valuation Methodologies.................................................. 15
Exchange Ratio........................................................... 18
Possible Adjustment of Exchange Ratio.................................... 18
Treatment of Bank Atlanta Stock Options.................................. 20
Exchange of Bank Atlanta Common Stock Certificates....................... 20
Effective Time of the Merger............................................. 21
Conditions to the Merger................................................. 21
Conduct of Bank Atlanta's and Premier's Business Prior to the Effective
Time of the Merger...................................................... 22
Waiver, Amendment and Termination of the Merger Agreement................ 22
Directors and Executive Officers Following the Merger.................... 23
Interests of Bank Atlanta's Management in the Merger..................... 23
Rights of Dissenting Shareholders........................................ 24
Regulatory Approvals..................................................... 25
Material Federal Income Tax Consequences of the Merger................... 26
Accounting Treatment..................................................... 27
Restrictions on Resales by Affiliates.................................... 27
Description of Premier Common Stock...................................... 28
Certain Differences in Rights of Shareholders............................ 28
BUSINESS OF PREMIER........................................................ 32
General.................................................................. 32
Subsidiary............................................................... 32
Acquisitions............................................................. 32
BUSINESS OF BANK ATLANTA................................................... 34
General.................................................................. 34
Market Area and Competition.............................................. 34
Lending Services......................................................... 34
Investments.............................................................. 36
Deposits................................................................. 36
Employees................................................................ 36
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
Facilities.............................................................. 36
Legal Proceedings....................................................... 37
BANK ATLANTA MANAGEMENT'S DISCUSSION AND ANALYSIS......................... 38
Forward-Looking Statements.............................................. 38
Liquidity............................................................... 38
Capital Resources....................................................... 38
The Year 2000 Issue..................................................... 39
Financial Condition..................................................... 41
Rate and Volume Analysis................................................ 43
Asset/Liability Management.............................................. 43
Securities Portfolio.................................................... 45
Maturities.............................................................. 46
Loan Portfolio.......................................................... 47
Types of Loans.......................................................... 47
Maturities and Sensitivities to Changes in Interest Rates............... 47
Risk Elements and Nonperforming Loans................................... 48
Commitments and Lines of Credit......................................... 48
Summary of Loan Loss Experience......................................... 49
Deposits................................................................ 50
Return on Assets and Shareholders' Equity............................... 51
Results of Operations--Three Months Ended March 31, 1999 versus Three
Months Ended March 31, 1998............................................ 51
Results of Operations--Year Ended December 31, 1998 versus Year Ended
December 31, 1997...................................................... 52
BANK ATLANTA SECURITY OWNERSHIP........................................... 53
REGULATORY CONSIDERATIONS................................................. 55
General................................................................. 55
Payment of Dividends.................................................... 56
Capital Adequacy........................................................ 57
Support of Subsidiary Institutions...................................... 58
Prompt Corrective Action................................................ 58
FDIC Insurance Assessments.............................................. 60
Safety and Soundness Standards.......................................... 61
Community Reinvestment Act.............................................. 61
EXPERTS................................................................... 62
OPINIONS.................................................................. 62
WHERE YOU CAN FIND MORE INFORMATION....................................... 62
APPENDIX A: AGREEMENT AND PLAN OF REORGANIZATION BY AND BETWEEN PREMIER
BANCSHARES, INC., PMB ACQUISITION CORP. II AND BANK ATLANTA.............. A-1
APPENDIX B: DISSENTERS' RIGHTS PROVISIONS OF THE FINANCIAL INSTITUTIONS
CODE OF GEORGIA AND THE GEORGIA BUSINESS CORPORATIONS CODE............... B-1
APPENDIX C: OPINION OF THE CARSON MEDLIN COMPANY.......................... C-1
</TABLE>
ii
<PAGE>
INCORPORATION BY REFERENCE
The Securities and Exchange Commission allows Premier to "incorporate by
reference" certain information into this proxy statement/prospectus, which
means that Premier can disclose important information to you by referring you
to another document filed separately with the Securities and Exchange
Commission. The information incorporated by reference is considered part of
this proxy statement/prospectus, except for any information superseded by
information contained directly in this proxy statement/prospectus or in later
filed documents incorporated by reference in this proxy statement/prospectus.
This proxy statement/prospectus incorporates by reference the documents
listed below that Premier has previously filed with the Securities and
Exchange Commission. These documents contain important information about
Premier and its business.
PREMIER SECURITIES AND EXCHANGE COMMISSION FILINGS (FILE NO. 001-12625)
<TABLE>
<S> <C>
Annual Report on Form 10-K........... For the fiscal year ended December 31,
1998
Quarterly Report on Form 10-Q........ For the fiscal quarter ended March 31,
1999
Current Reports on Form 8-K.......... Dated April 6, 1999, April 20, 1999,
May 27, 1999 and August 3, 1999
Registration Statements on Form 8- Dated May 27, 1999 (for Common Stock);
A/A................................. Dated May 27, 1999 (for Preferred
Securities of Premier Capital Trust I)
</TABLE>
Premier also incorporates by reference additional documents that may be
filed with the Securities and Exchange Commission between the date of this
proxy statement/prospectus and the completion of the merger or the termination
of the merger agreement. These include periodic reports, such as annual
reports on Form 10-K, quarterly reports on Form 10-Q and current reports on
Form 8-K, as well as proxy statements.
For your convenience we have enclosed a copy of Premier's Current Report on
Form 8-K dated August 3, 1999 relating to the Agreement and Plan of
Reorganization dated July 28, 1999 between Premier and BB&T Corporation.
Premier has supplied all information contained or incorporated by reference
in this proxy statement/prospectus relating to Premier, and Bank Atlanta has
supplied all such information relating to Bank Atlanta.
If you are a shareholder, you can obtain any of the documents incorporated
by reference through Premier, the Securities and Exchange Commission or the
Securities and Exchange Commission's Internet web site as described above.
Documents incorporated by reference are available from Premier without charge,
excluding all exhibits except those that Premier has specifically incorporated
by reference in this proxy statement/prospectus. Shareholders may obtain
documents incorporated by reference in this proxy statement/prospectus by
requesting them in writing or by telephone from Premier at the following
addresses:
Barbara J. Burtt
Corporate Secretary
Premier Bancshares, Inc.
2180 Atlanta Plaza
950 East Paces Ferry Road
Atlanta, Georgia 30326
(404) 814-3090
To receive documents before Bank Atlanta's special shareholder meeting,
please request them from us by September 1, 1999.
iii
<PAGE>
You should rely only on the information contained or incorporated by
reference in this proxy statement/prospectus. Premier and Bank Atlanta have
not authorized anyone to provide you with information that differs from that
which this proxy statement/prospectus contains. This proxy
statement/prospectus is dated August 12, 1999. You should not assume that the
information contained in this proxy statement/prospectus is accurate as of any
date other than that date. Neither mailing this proxy statement/prospectus to
shareholders nor issuing Premier common stock in the merger creates any
implication to the contrary.
iv
<PAGE>
SUMMARY
This summary highlights selected information from this proxy
statement/prospectus and may not contain all of the information that is
important to you. To understand the merger fully and for a more complete
description of the legal terms of the merger, you should read carefully this
entire document and the documents to which we refer you. See "Where You Can
Find More Information."
THE PARTIES (PAGES 32 AND 34)
PREMIER BANCSHARES, INC.
2180 Atlanta Plaza
950 East Paces Ferry Road
Atlanta, Georgia 30326
(404) 814-3090
Premier is incorporated in Georgia and is a Georgia-based bank holding
company. Premier provides banking-related services through its subsidiaries,
primarily in the metropolitan Atlanta area. However, Premier has significant
operations in other areas of Georgia and has a presence in other states in the
Southeast. As of March 31, 1999, Premier's total assets were approximately $1.5
billion, deposits were approximately $1.2 billion, and shareholders' equity was
approximately $137 million.
The section of this proxy statement/prospectus under the caption "Where You
Can Find More Information" refers you to places where you can find more
information about Premier.
BANK ATLANTA
1221 Clairmont Road
Decatur, Georgia 30030
(404) 320-3300
Bank Atlanta is a Georgia commercial bank located in Decatur, Georgia. As of
March 31, 1999, Bank Atlanta's total assets were approximately $80.0 million,
deposits were approximately $70.6 million, and shareholders' equity was
approximately $7.6 million.
THE MERGER (PAGE 12)
Bank Atlanta will merge with a subsidiary of Premier. Bank Atlanta will be
the surviving bank in the merger. Bank Atlanta will become a wholly owned
subsidiary of Premier as a result of the merger. The merger requires the
approval of the holders of at least two-thirds of the outstanding Bank Atlanta
common stock. If Bank Atlanta obtains this approval, Premier currently expects
to complete the merger in September, 1999.
Premier has attached the merger agreement as Appendix A to this proxy
statement/prospectus. Premier encourages you to read the merger agreement in
its entirety, because it is the legal document that governs the merger.
EXCHANGE RATIO (PAGE 18)
If the merger is completed, you will receive 1.25 shares of Premier common
stock for each share of Bank Atlanta common stock you own, plus cash instead of
any fractional share. On August 10, 1999, the closing price of Premier common
stock was $17.44, making the value of shares of Premier common stock received
by Bank Atlanta shareholders in the merger equal to $21.80 per share of Bank
Atlanta common stock. Because the market price of Premier common stock
fluctuates, you will not know when you vote what the shares will be worth when
issued in the merger.
POSSIBLE ADJUSTMENT TO EXCHANGE RATIO (PAGE 18)
The merger agreement protects you as shareholders against a sharp decline in
the trading price of Premier common stock compared to stock prices of other
bank holding companies and the price of the Premier common stock when the
merger agreement was executed. If the average price of Premier common stock
over a ten-day period prior to September 6, 1999 is less than $16.60 and also
underperforms a group of bank holding company stocks between the date of the
Agreement and September 6, 1999, then the number of shares of Premier common
stock you will receive for each share of Bank Atlanta common stock will be
increased. This mechanism is explained in detail under the heading "The
Merger--Possible Adjustment of Exchange Ratio."
1
<PAGE>
EXCHANGE RATIO FAIR TO BANK ATLANTA SHAREHOLDERS ACCORDING TO INVESTMENT BANK
(PAGE 13)
The Carson Medlin Company has given an opinion to the Bank Atlanta board of
directors that, as of the date of this proxy statement/prospectus, the exchange
ratio in the merger is fair from a financial point of view to Bank Atlanta
shareholders. The full text of this opinion is attached as Appendix C to this
document. Premier encourages you to read this opinion carefully. If the merger
is completed, The Carson Medlin Company will be paid approximately $155,500 in
exchange for its advice and for providing its fairness opinion, based on recent
market prices of the Premier common stock.
NO FEDERAL INCOME TAX ON SHARES RECEIVED IN THE MERGER (PAGE 26)
Bank Atlanta shareholders generally will not recognize gain or loss for
federal income tax purposes for the shares of Premier common stock they receive
in the merger. Premier's attorneys have issued a legal opinion to this effect,
which is included as an exhibit to the Registration Statement filed with the
Securities and Exchange Commission for the shares to be issued in the merger.
Bank Atlanta shareholders will be taxed on cash received instead of any
fractional share. Tax matters are complicated, and tax results may vary among
shareholders. Premier and Bank Atlanta urge you to contact your own tax advisor
to understand fully how the merger will affect you.
TWO-THIRDS SHAREHOLDER VOTE REQUIRED (PAGE 10)
Approval of the merger agreement requires the affirmative vote of the holders
of two-thirds of the outstanding shares of Bank Atlanta common stock. Your
failure to vote will have the effect of a vote against approval of the merger
agreement. The directors and executive officers of Bank Atlanta and their
affiliates together own approximately 44.4% of the shares entitled to be cast
at the meeting, and Bank Atlanta expects the directors and senior executive
officers to vote their shares in favor of the merger.
The merger does not require the approval of Premier's shareholders.
MEETING TO BE HELD SEPTEMBER 14, 1999 (PAGE 10)
Bank Atlanta will hold a special shareholders' meeting at 4:00 p.m. on,
September 14, 1999, at the main office of Bank Atlanta, 1221 Clairmont Road,
Decatur, Georgia. At the meeting, you will be able to vote on the merger
agreement and conduct any other business that properly arises.
RECORD DATE AND VOTING (PAGE 10)
If you owned shares of Bank Atlanta common stock at the close of business on
July 31, 1999, the record date, you are entitled to vote on the merger
agreement and any other matters considered at the meeting.
On the record date, there were 711,010 shares of Bank Atlanta common stock
outstanding. You will have one vote at the meeting for each share of Bank
Atlanta common stock you owned on the record date.
BANK ATLANTA BOARD RECOMMENDS SHAREHOLDER APPROVAL (PAGE 11)
The Bank Atlanta board of directors believes that the merger is in the best
interests of Bank Atlanta and its shareholders and unanimously recommends that
the shareholders vote "FOR" approval of the merger agreement.
INTERESTS OF PERSONS IN THE MERGER THAT ARE DIFFERENT FROM YOURS (PAGE 23)
When considering the recommendation of the Bank Atlanta board of directors,
you should be aware that some Bank Atlanta directors and officers have
interests in the merger that differ from the interests of other Bank Atlanta
shareholders. In particular, they hold outstanding options or other rights to
receive stock under Bank Atlanta's existing stock plans. These options or
rights will be converted into stock option rights to acquire Premier common
stock after the merger.
The Bank Atlanta board was aware of these and other interests and considered
them before approving and adopting the merger agreement.
REGULATORY APPROVALS REQUIRED (PAGE 25)
Premier and Bank Atlanta cannot complete the merger unless they obtain the
approval of the Board
2
<PAGE>
of Governors of the Federal Reserve System, the Federal Deposit Insurance
Corporation, and the Georgia Department of Banking and Finance. Premier and
Bank Atlanta have filed all of the required applications or notices with these
regulatory authorities. Although Premier and Bank Atlanta believe the
regulatory approvals will be received in a timely manner, they cannot be
certain when or if they will obtain them.
PREMIER TO USE POOLING-OF-INTERESTS ACCOUNTING TREATMENT (PAGE 27)
Premier anticipates accounting for the merger as a pooling of interests. This
means that Bank Atlanta and Premier will be treated for accounting and
financial reporting purposes as if they had always been combined. By accounting
for the merger as a pooling of interests, Premier will avoid creating any
goodwill relating to the transaction and thus avoid charges to future earnings
as a result of amortizing the goodwill.
DISSENTERS' APPRAISAL RIGHTS (PAGE 24)
Georgia law permits you to dissent from the merger and to have the fair value
of your stock appraised by a court and paid to you in cash. To do this, you
must follow certain procedures, including the filing of certain notices and
refraining from voting your shares in favor of the merger.
If you dissent from the merger, your shares of Bank Atlanta common stock will
not be exchanged for shares of Premier common stock in the merger, and your
only right will be to receive the appraised value of your shares in cash. We
have attached a copy of the provisions of Georgia law which govern the exercise
of dissenters' rights as Appendix B to this proxy statement/prospectus.
REASONS FOR THE MERGER (PAGE 13)
Before deciding to approve and recommend the merger, Bank Atlanta's board of
directors considered the financial condition and prospects of Bank Atlanta,
information about Premier, the financial terms of the merger, the likelihood of
receiving regulatory approval of the merger, the federal income tax
consequences of the merger, the advice of Bank Atlanta's board of directors'
legal and financial advisors and other factors. Bank Atlanta's board of
directors has decided that the merger is advisable and is in Bank Atlanta's and
its shareholders' best interests.
COMPARATIVE PER SHARE MARKET PRICE INFORMATION (PAGE 8)
Shares of Premier common stock are now quoted on the New York Stock Exchange.
Shares of Bank Atlanta are not quoted on any established market.
The following table presents some information relating to recent sales of
Premier and Bank Atlanta common stock.
<TABLE>
<CAPTION>
PREMIER BANK ATLANTA
COMMON STOCK COMMON STOCK
- ----------------------------- -----------------------
<S> <C>
$20.50 at May 19, $13.00 at March, 1999
1999 (prior to announcement). (the last known sale
$17.44 at August 10, 1999. prior to announcement).
$17.00 at July 8, 1999.
</TABLE>
MERGER OF PREMIER WITH BB&T CORPORATION (PAGE 33)
On July 28, 1999, Premier entered into an Agreement and Plan of
Reorganization with BB&T Corporation, pursuant to which Premier will be merged
with and into BB&T. As a result, each share of Premier common stock, including
shares of Premier common stock you will receive as Bank Atlanta shareholders,
will be converted into the right to receive 0.5155 shares of BB&T common stock.
3
<PAGE>
COMPARATIVE HISTORICAL AND PRO FORMA FINANCIAL SHARE DATA
Summarized below are per share information for Premier and Bank Atlanta on an
historical, pro forma combined and equivalent basis. You should read this
information in conjunction with Premier and Bank Atlanta historical financial
statements and the related notes. See "Where You Can Find More Information."
The pro forma information gives effect to the merger accounted for as a
pooling of interests, and assumes that Premier issues 1.25 shares of Premier
common stock for each outstanding share of Bank Atlanta common stock. Bank
Atlanta pro forma equivalent share amounts are calculated by multiplying the
pro forma combined basic and diluted net income per share, pro forma combined
cash dividends per common share and pro forma combined shareholders' book value
per common share by the exchange ratio of 1.25 shares of Premier common stock
so that the per share amounts equate to the respective values for one share of
Bank Atlanta common stock. You should not rely on the pro forma information as
being indicative of the historical results that would have resulted if Premier
and Bank Atlanta had been combined or the future results Premier will
experience after the merger, nor should you rely on the three-month information
as being indicative of results Premier or Bank Atlanta expect for the entire
year.
<TABLE>
<CAPTION>
AT AND FOR THE AT AND FOR THE YEAR
THREE MONTHS ENDED DECEMBER 31,
ENDED ---------------------
MARCH 31, 1999 1998 1997 1996
-------------- ------- ------ ------
<S> <C> <C> <C> <C>
NET INCOME PER COMMON SHARE
Basic
Premier historical...................... $ 0.22 $ 0.80 $ 0.73 $ 0.53
Bank Atlanta historical................. 0.49 2.01 1.75 1.48
Pro forma combined...................... 0.23 0.83 0.75 0.56
Bank Atlanta pro forma equivalent....... 0.28 1.04 0.94 0.70
Diluted
Premier historical...................... $ 0.22 $ 0.78 $ 0.71 $ 0.52
Bank Atlanta historical................. 0.47 1.96 1.71 1.48
Pro forma combined...................... 0.22 0.81 0.73 0.55
Bank Atlanta pro forma equivalent....... 0.28 1.01 0.91 0.68
CASH DIVIDENDS DECLARED PER COMMON SHARE
Premier historical...................... $ 0.09 $ 0.31 $ 0.15 $ 0.17
Bank Atlanta historical................. -- 0.10 -- --
Pro forma combined...................... $ 0.09 0.31 0.14 0.17
Bank Atlanta pro forma equivalent....... $ 0.11 0.38 0.18 0.21
BOOK VALUE PER COMMON SHARE
Premier historical...................... $ 5.26 $ 5.23
Bank Atlanta historical................. 10.74 10.33
Pro forma combined...................... 5.37 5.33
Bank Atlanta pro forma equivalent....... 6.71 6.67
</TABLE>
4
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
Premier and Bank Atlanta are providing the following information to help you
analyze the financial aspects of the merger. Premier and Bank Atlanta derived
this information from audited financial statements for 1994 through 1998 and
unaudited financial statements for the three months ended March 31, 1998 and
1999. This information is only a summary, and you should read it in conjunction
with both of our historical financial statements and related notes. See "Where
You Can Find More Information" and "Index to Bank Atlanta Financial
Statements." You should not rely on the three-month information as being
indicative of results expected for the entire year.
PREMIER--HISTORICAL FINANCIAL INFORMATION
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
AT AND FOR THE
THREE MONTHS
ENDED MARCH 31, AT AND FOR THE YEARS ENDED DECEMBER 31,
--------------------- --------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
---------- ---------- ---------- ---------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net interest income..... $ 15,418 $ 14,108 $ 60,151 $ 55,039 $ 45,396 $ 39,389 $ 32,018
Net income.............. 5,766 5,689 20,914 18,737 13,657 11,348 6,694
Diluted earnings per
share.................. 0.22 0.22 0.78 0.71 0.52 0.44 0.28
Cash dividends declared
per share.............. 0.09 0.13 0.31 0.15 0.17 0.06 0.03
Book value per share.... 5.26 4.81 5.23 4.72 5.19 3.73 3.18
Total assets............ $1,510,890 $1,312,292 $1,520,618 $1,280,499 $1,115,290 $937,078 $763,524
BANK ATLANTA--HISTORICAL FINANCIAL INFORMATION
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)
<CAPTION>
AT AND FOR THE
THREE MONTHS
ENDED MARCH 31, AT AND FOR THE YEARS ENDED DECEMBER 31,
--------------------- --------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
---------- ---------- ---------- ---------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net interest income..... $ 823 $ 877 $ 3,642 $ 2,805 $ 2,143 $ 1,792 $ 1,450
Net income.............. 343 319 1,405 1,218 1,035 864 181
Basic earnings per
share.................. .49 .46 2.01 1.75 1.48 1.24 .27
Cash dividends declared
per share.............. -- -- .10 -- -- -- --
Book value per share.... 10.74 8.94 10.33 8.48 6.66 5.33 3.42
Total assets............ $ 79,968 $ 71,060 $ 79,447 $ 70,558 $ 46,544 $ 38,390 $ 35,039
</TABLE>
5
<PAGE>
RISK FACTORS
In addition to the other information contained or incorporated by reference
in this proxy statement/ prospectus, we urge you to consider the following
factors before deciding how to vote at the Bank Atlanta shareholders' meeting.
CHANGES IN INTEREST RATES COULD HAVE AN ADVERSE EFFECT ON PREMIER'S INCOME.
Premier's profitability depends to a large extent upon its net interest
income. Net interest income is the difference between interest income on
interest-earning assets, such as loans and investments, and interest expense
on interest-bearing liabilities, such as deposits and borrowings. Premier's
net interest income will be adversely affected if market interest rates
changed such that the interest Premier had to pay on deposits and borrowings
increased faster than the interest Premier earned on loans and investments.
PREMIER'S PROFITABILITY WILL DEPEND ON ITS ABILITY TO ORIGINATE RESIDENTIAL
MORTGAGE LOANS.
The market for residential mortgages is highly volatile and an increase in
interest rates could materially and adversely affect interest income, non-
interest income and the growth of Premier's residential mortgage operations.
In addition, Premier has derived a substantial portion of its other income
from gains on the sale of mortgage loans and mortgage production fees
consisting of proceeds from the sale of servicing rights, loan origination
fees and discount points. Due to the cyclical nature of residential mortgage
originations, Premier may not be able to sustain recent levels of gains on the
sale of mortgage loans and mortgage production fees.
PREMIER COULD EXPERIENCE SIGNIFICANT DIFFICULTIES AND COMPLICATIONS IN
CONNECTION WITH ITS RAPID GROWTH.
Premier has grown significantly over the last two years and may seek to
continue to grow by acquiring other financial institutions and branches.
However, the market for acquisitions is highly competitive. Premier may not be
as successful in the future as it has been in the past in identifying
acquisition candidates, integrating acquired institutions or preventing
deposit erosion at acquired institutions or branches.
Premier may encounter unforeseen expenses, as well as difficulties and
complications in integrating expanded operations and new employees without
disruption to overall operations. In addition, such rapid growth may adversely
affect Premier's operating results because of many factors, including start-up
costs, diversion of management time and resources, asset quality and required
operating adjustments. Premier may not successfully integrate or achieve the
anticipated benefits of its growth or expanded operations.
LOSING KEY PERSONNEL WILL NEGATIVELY AFFECT PREMIER.
Competition for personnel is stronger in the banking industry than other
industries, and Premier may not be able to attract or retain the personnel it
requires to compete successfully. Premier currently depends heavily on the
services of its Chairman and Chief Executive Officer, Darrell D. Pittard, and
a number of other members of its senior management team. Losing Mr. Pittard's
services or those of other members of senior management could affect Premier
in a material and adverse way. Premier's success will also depend on
attracting and retaining additional qualified management personnel.
BANKING LEGISLATION THAT LIMITS OUR GROWTH AND ACTIVITIES MAY DECREASE THE
RETURN TO OUR INVESTORS.
Current and future legislation and the policies federal and state regulatory
authorities establish will affect Premier's future operations. Banking
legislation and regulations may limit Premier's growth and the return to
investors by restricting certain of Premier's activities.
6
<PAGE>
In addition, legislation may change present capital requirements, which
could restrict Premier's activities and require Premier to maintain additional
capital. Premier cannot predict what changes, if any, federal and state
agencies will make to existing federal and state legislation and regulations
or the effect that such changes may have on Premier's business. See
"Regulatory Considerations."
PREMIER'S RESULTS OF OPERATIONS COULD BE ADVERSELY AFFECTED DUE TO SIGNIFICANT
COMPETITION.
Premier may not be able to compete effectively in its markets, which could
adversely affect Premier's results of operations. The banking and financial
services industry in the Atlanta metropolitan area generally, and in Premier's
market areas specifically, is highly competitive. Premier competes for loans,
deposits and customers with various bank and non-bank financial service
providers, many of which are larger in terms of total assets and
capitalization, have greater access to capital markets and offer a broader
array of financial services than Premier. Competition with such institutions
may cause us to increase our deposit rates or decrease our interest rate
spread on loans we originate.
YEAR 2000 DATA PROCESSING PROBLEMS COULD INTERRUPT AND HURT OUR OPERATIONS.
Premier's operations are dependent on computers and computer systems,
whether maintained internally or by a third party. Systems not properly
recognizing the Year 2000 could produce faulty data or cause a system to fail.
Such failures may include, among other things, the inability to process and
underwrite loan applications, to credit deposits and debit withdrawals from
customer accounts, to credit loan payments or track delinquencies, to
reconcile and record daily activity properly or to engage in similar normal
banking activities. Additionally, if our commercial customers are not Year
2000 compliant and suffer adverse effects on their operations as a result,
their ability to meet their obligations to Premier may be adversely affected.
Premier, its third party providers or its customers may not be successful in
making all necessary changes to avoid computer system failures related to the
Year 2000.
7
<PAGE>
COMPARATIVE MARKET PRICES AND DIVIDENDS
PREMIER MARKET PRICES
Premier common stock has been listed on the New York Stock Exchange under
the symbol "PMB" since June 1, 1999, and was listed on the American Stock
Exchange under the symbol "PMB" from January 1997 to May 31, 1999. From
January 1995 to January 1997, Premier common stock was listed on the NASDAQ
Small Cap Market under the symbol "FABC." The following table sets forth, for
the indicated periods, the high and low sales prices for Premier common stock
as reported by the New York Stock Exchange, American Stock Exchange and the
NASDAQ Small Cap Market for 1997 and 1998 and for each of the quarters in
1999.
CALENDAR PERIOD
<TABLE>
<CAPTION>
SALES PRICE
-------------
HIGH LOW
------ ------
<S> <C> <C>
1997
First Quarter.................................................. $ 9.46 $ 7.66
Second Quarter................................................. 11.67 9.17
Third Quarter.................................................. 14.17 9.83
Fourth Quarter................................................. 17.92 12.83
1998
First Quarter.................................................. $29.69 $16.83
Second Quarter................................................. 29.50 21.38
Third Quarter.................................................. 28.75 19.75
Fourth Quarter................................................. 27.88 15.25
1999
First Quarter.................................................. $26.50 $18.75
Second Quarter................................................. 21.50 15.38
Third Quarter (through August 10).............................. 20.00 17.00
------ ------
</TABLE>
On August 10, 1999, the last day on which Premier common stock was traded
prior to the mailing of this proxy statement/prospectus for which information
was available, the last reported sales price of Premier common stock as
reported on the New York Stock Exchange was $17.44 per share. At the close of
trading on May 19, 1999, the date of the last sale reported by the American
Stock Exchange prior to the public announcement of the merger, the last
reported sales price of Premier common stock was $20.50 per share.
BANK ATLANTA MARKET PRICES
The Bank Atlanta common stock is not listed for quotation on the New York
Stock Exchange or on any other stock exchange. The price of the Bank Atlanta
common stock in the last known transaction prior to the mailing of this
document, which occurred on July 8, 1999, was $17.00 per share. The price of
Bank Atlanta common stock in the last known transaction prior to May 20, 1999,
the date the merger was publicly announced, was $13.00 per share and occurred
in March 1999. Bank Atlanta's management is not aware of the sales prices of
any shares of Bank Atlanta common stock sold in transactions during 1997.
Based on transactions of which Bank Atlanta's management is aware, sales of
Bank Atlanta common stock during 1998 were in a price range of $7.25 to $10.00
per share and sales of Bank Atlanta common stock during 1999 were in a price
range of $10.00 to $13.00 per share. We can give you no assurances that these
price ranges represent the actual market value of Bank Atlanta common stock.
8
<PAGE>
DIVIDENDS
The holders of Premier common stock are entitled to receive cash dividends
when and if Premier's board of directors declares them. Premier declared the
following dividends to its shareholders in each of the last two years and in
the first quarter of 1999:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
First Quarter................................................. 0.09 0.13 0.05
Second Quarter................................................ 0.09 0.05 0.04
Third Quarter................................................. N/A 0.05 0.04
Fourth Quarter................................................ N/A 0.08 0.02
</TABLE>
The future declaration and payment of dividends will depend upon the
earnings of Premier's subsidiaries, business conditions, operating results,
capital and reserve requirements and the board of directors' consideration of
other relevant factors.
Bank Atlanta paid a $0.10 per share cash dividend to its shareholders on
January 15, 1999 based on Bank Atlanta's performance during 1998. Bank Atlanta
did not pay dividends to its shareholders prior to 1999 due to regulatory
restrictions.
Premier is a legal entity separate and distinct from its subsidiaries, and
its revenues depend largely on dividends its subsidiaries pay to it. Premier's
subsidiaries are subject to legal restrictions on the amount of dividends they
may pay to Premier. See "Regulatory Considerations--Payment of Dividends."
SHAREHOLDERS OF RECORD
As of the record date for Bank Atlanta's special shareholders' meeting,
there were 2,429 holders of record of Premier common stock, and 293 holders of
record of Bank Atlanta common stock.
9
<PAGE>
BANK ATLANTA SHAREHOLDERS' MEETING
GENERAL
Bank Atlanta is providing this document to its shareholders as of the record
date of July 31, 1999, along with a proxy sheet. The board of directors of
Bank Atlanta is soliciting proxies for use at a special meeting of
shareholders of Bank Atlanta to be held on Tuesday, September 14, 1999 at 4:00
p.m., Eastern Time, at the main office of Bank Atlanta, located at 1221
Clairmont Road, Decatur, Georgia. At the meeting, Bank Atlanta shareholders
will vote upon a proposal to approve the merger agreement, which is dated as
of May 20, 1999, and under which Bank Atlanta would merge with PMB Acquisition
Corp. II, a wholly owned subsidiary of Premier. Bank Atlanta will be the
surviving bank of the merger and will be operated as a wholly owned subsidiary
of Premier. Proxies may be voted on other matters that may properly come
before the meeting at the discretion of the proxy holders. The Bank Atlanta
board of directors knows of no other matters except those incidental to the
conduct of the meeting. The merger agreement is attached as Appendix A to this
document.
Bank Atlanta requests that holders of Bank Atlanta common stock complete,
date and sign the accompanying proxy sheet and return it promptly to Bank
Atlanta in the enclosed postage prepaid envelope.
RECORD DATE, VOTING RIGHTS AND VOTE REQUIRED
Only the holders of Bank Atlanta common stock on the record date are
entitled to receive notice of and to vote at the meeting. On the record date,
there were 711,010 shares of Bank Atlanta common stock outstanding, held by
approximately 293 holders of record. Each such share of Bank Atlanta common
stock is entitled to one vote on each matter submitted at the meeting.
Approval of the merger agreement requires the affirmative vote of the
holders of two-thirds of the outstanding shares of Bank Atlanta common stock.
FAILURE OF A HOLDER OF BANK ATLANTA COMMON STOCK TO VOTE THEIR SHARES WILL
HAVE THE SAME EFFECT AS A VOTE "AGAINST" THE MERGER AGREEMENT.
Approval of any other matters that shareholders consider at the meeting
requires the presence of a quorum and that the votes in favor of the matter
constitute a majority of the shares represented at the meeting and entitled to
vote. Presence in person or by proxy of a majority of the outstanding shares
of Bank Atlanta common stock entitled to vote at the meeting will constitute a
quorum.
As of the record date, the directors and executive officers of Bank Atlanta
and their affiliates beneficially owned a total of 315,740 shares, or 44.4%,
of the issued and outstanding shares of Bank Atlanta common stock, excluding
shares that may be acquired through the exercise of stock options. As of the
record date, the directors and executive officers of Premier and their
affiliates and Premier and its subsidiaries beneficially owned a total of less
than 1% of the outstanding shares of Bank Atlanta common stock.
VOTING AND REVOCATION OF PROXIES
The shares of Bank Atlanta common stock represented by properly completed
proxies received at or before the time for the meeting will be voted as
directed by the shareholders unless revoked as described below. If no
instructions are given, executed proxies will be voted "FOR" approval of the
merger agreement. In any vote to adjourn the meeting, executed proxies marked
"FOR" approval of the merger agreement and executed but unmarked proxies will
be voted in the discretion of the persons named in the proxy card. Proxies
which are voted "AGAINST" approval of the merger agreement will not be voted
in favor of any motion to adjourn the meeting to solicit more votes in favor
of the merger.
Shares held in street name that have been designated by brokers on proxy
cards as not voted with respect to a proposal will not be counted as votes
cast on the proposal. Shares represented by proxies that have been marked
10
<PAGE>
as abstentions also will not be counted as votes cast on the proposal. Shares
represented by proxies have been marked as not voted and abstentions, however,
will be treated as shares present for purposes of determining whether a quorum
is present.
The proposal to adopt the merger agreement is a "non-discretionary" item,
meaning that brokerage firms may not vote shares in their discretion on behalf
of a client if the client has not furnished voting instructions. Because the
holders of a majority of the outstanding shares of Bank Atlanta common stock
must approve the proposal adopting the merger agreement, abstentions and
broker shares which are not voted will have the same effect as a vote against
the merger at the meeting.
If any other matters are properly presented at the meeting and voted upon,
the proxies solicited by this document will be voted on such matters at the
discretion of the proxy holders. The Bank Atlanta board of directors is not
aware of any other business to be presented at the meeting other than matters
incidental to the conduct of the meeting.
A shareholder's attendance at the meeting will not automatically revoke his
or her proxy. A shareholder may, however, revoke a proxy at any time before it
is exercised by filing a written notice of revocation with, or by delivering a
duly executed proxy bearing a later date to the Secretary of Bank Atlanta at
Bank Atlanta's principal executive offices before the meeting, or by attending
the meeting and voting in person. A shareholder's proxy will not be revoked by
his or her death or incapacity unless, before the shares are voted, the
Secretary of Bank Atlanta, or other person authorized to tabulate the votes,
receives notice of the death or incapacity.
BECAUSE HOLDERS OF TWO-THIRDS OF THE OUTSTANDING SHARES OF BANK ATLANTA
COMMON STOCK MUST APPROVE THE MERGER AGREEMENT, ABSTENTIONS AND BROKER SHARES
WHICH ARE NOT VOTED WILL HAVE THE SAME EFFECT AS NEGATIVE VOTES. ACCORDINGLY,
THE BANK ATLANTA BOARD OF DIRECTORS URGES BANK ATLANTA'S SHAREHOLDERS TO
COMPLETE, DATE AND SIGN THE ACCOMPANYING PROXY CARD AND RETURN IT PROMPTLY IN
THE ENCLOSED POSTAGE PREPAID ENVELOPE.
SOLICITATION OF PROXIES
Directors, officers and employees of Bank Atlanta may solicit proxies
personally or by telephone or facsimile. None of these people will receive any
special compensation for solicitation activities. Bank Atlanta will arrange
with brokerage firms and other custodians, nominees and fiduciaries to forward
proxy solicitation materials to the beneficial owners of the stock that they
hold, and Bank Atlanta will reimburse these record holders for their
reasonable out-of-pocket expenses.
RECOMMENDATION OF THE BANK ATLANTA BOARD OF DIRECTORS
The Bank Atlanta board of directors has unanimously adopted the merger
agreement and believes that the merger is fair to and in the best interests of
Bank Atlanta and its shareholders. The Bank Atlanta board of directors
unanimously recommends that Bank Atlanta's shareholders vote "FOR" approval of
the merger agreement. See "The Merger--Background of, and Reasons for, the
Merger."
SHAREHOLDERS SHOULD NOT SEND IN STOCK CERTIFICATES WITH THEIR PROXY CARDS.
See "The Merger--Exchange of Bank Atlanta Common Stock Certificates."
11
<PAGE>
THE MERGER
The following information describes the material aspects of the merger. This
description does not purport to be complete and is qualified in its entirety
by reference to the appendices attached to this proxy statement/prospectus,
including the merger agreement, which is Appendix A and the terms of which are
incorporated by reference. All shareholders are urged to read the appendices
in their entirety.
GENERAL
In the merger, Bank Atlanta will be merged with and into PMB Acquisition
Corp. II, a subsidiary of Premier, and Bank Atlanta will be the surviving bank
of the merger. Bank Atlanta will become a wholly owned subsidiary of Premier
following the merger. Shareholders of Bank Atlanta will receive shares of the
common stock of Premier in exchange for their shares of Bank Atlanta common
stock.
BACKGROUND OF, AND REASONS FOR, THE MERGER
BACKGROUND OF THE MERGER. During the second quarter of 1998, Bank Atlanta's
board of directors began to discuss whether it would be in the best interests
of Bank Atlanta to combine with a larger institution. On June 5, 1998, Bank
Atlanta's board voted to engage The Carson Medlin Company ("Carson Medlin") to
advise the board of directors regarding the value of Bank Atlanta as an
independent, stand-alone bank compared to its value as a merger candidate.
On June 16, 1998, Bank Atlanta's board of directors met, and Carson Medlin
presented an analysis of Bank Atlanta's strategic options. Based on this
presentation, the board authorized Carson Medlin to prepare a confidential
memorandum to be distributed to potential acquirers of Bank Atlanta to assist
them in making their own evaluation of Bank Atlanta. Carson Medlin furnished
the confidential memorandum to eight potential acquirers, including Premier.
Although Bank Atlanta received initial indications of interest to pursue a
transaction, it was unable to reach an agreement with any of the potential
acquirers.
On May 11, 1999, the chairman of Bank Atlanta's board of directors received
a letter from the chairman and chief executive officer of Premier expressing
Premier's renewed interest in acquiring Bank Atlanta. Consequently, on May 13,
1999, Bank Atlanta's chairman and one of its directors met with Premier's
chairman and chief executive officer to discuss the terms, including price, of
a proposed merger between Bank Atlanta and Premier.
The significant terms of the proposed merger, which were discussed at the
May 13th meeting, were summarized by Premier's chairman and chief executive
officer in his letter dated May 17, 1999 to Bank Atlanta's chairman. On May
17, 1999, Bank Atlanta's board of directors held a special meeting at which
they considered these terms and voted to pursue the proposed merger.
Thereafter, on May 18, 1999, the members of the merger committee of Bank
Atlanta's board of directors met with legal counsel to discuss the proposed
merger.
On May 20, 1999, at a special meeting of Bank Atlanta's board of directors,
counsel to Bank Atlanta reviewed the proposed merger agreement between Bank
Atlanta and Premier and other aspects of the transaction with the board. In
addition, counsel also delivered Carson Medlin's oral opinion that the offer
from Premier was fair to the shareholders of Bank Atlanta from a financial
point of view. Following the presentations and subsequent discussion, Bank
Atlanta's board unanimously authorized its chairman or any member of the
merger committee to execute the definitive merger agreement substantially in
the form presented to the board of directors, with such changes (other than to
the exchange ratio) as Bank Atlanta's merger committee approved.
Following the May 20, 1999 Bank Atlanta board meeting, Bank Atlanta and
Premier executed the definitive merger agreement, and they also issued a joint
press release announcing the merger.
12
<PAGE>
BANK ATLANTA'S REASONS FOR THE MERGER. Bank Atlanta's board of directors has
unanimously approved the merger agreement and has determined that the merger
is in the best interests of Bank Atlanta and its shareholders. The terms of
the merger were the result of arms-length negotiations between representatives
of Bank Atlanta and representatives of Premier. Without assigning any relative
or specific weights to the factors, the board of directors of Bank Atlanta
considered the following material factors:
. the value of the consideration to be received by Bank Atlanta
shareholders relative to the book value and earnings per share of Bank
Atlanta common stock;
. selected information concerning the financial condition, results of
operations and business prospects of Premier;
. the financial terms of recent business combinations in the financial
services industry and a comparison of the multiples of selected
combinations with the terms of the proposed transaction with Premier;
. the alternatives to the merger, including remaining an independent
institution;
. the competitive and regulatory environment for financial institutions
generally, including increasing technology demands;
. the fact that the merger will enable Bank Atlanta shareholders to
exchange their shares of Bank Atlanta common stock, in a tax-free
transaction, for shares of common stock of a larger company, the stock
of which is more widely held and more actively traded; and
. Carson Medlin's opinion that the consideration to be received by Bank
Atlanta shareholders as a result of the merger is fair from a financial
point of view.
Each director of Bank Atlanta has also agreed to vote his shares of Bank
Atlanta common stock in favor of the merger.
BANK ATLANTA'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT BANK ATLANTA'S
SHAREHOLDERS VOTE "FOR" THE PROPOSAL TO APPROVE THE MERGER AGREEMENT.
PREMIER'S REASONS FOR THE MERGER
One of Premier's announced acquisition objectives is to build a statewide
franchise in Georgia with an emphasis on customer service, value and personal
attention. Premier management believes that Bank Atlanta is a well-run
organization that stresses customer service and loyalty, and that by acquiring
it, Premier will increase its presence in DeKalb County, a major step toward
achieving Premier's goal.
OPINION OF FINANCIAL ADVISER
Bank Atlanta engaged Carson Medlin on June 17, 1998 to advise Bank Atlanta
on potential strategic alternatives to enhance shareholder value, to search
for and assist Bank Atlanta in negotiations with parties who might wish to
acquire Bank Atlanta and to render its opinion as to the fairness, from a
financial point of view, of the aggregate consideration to be received in a
resulting transaction. Bank Atlanta selected Carson Medlin as its financial
adviser on the basis of Carson Medlin's historical relationship with Bank
Atlanta and Carson Medlin's experience and expertise in representing community
banks in acquisition transactions. Carson Medlin is an investment banking firm
which specializes in the securities of financial institutions located in the
southeastern United States. As part of its investment banking activities,
Carson Medlin is regularly engaged in the valuation of financial institutions
and transactions relating to their securities.
Representatives of Carson Medlin participated in a meeting of Bank Atlanta's
board of directors held on May 20, 1999. At that meeting Carson Medlin
rendered its oral and written opinion to the effect that the consideration
provided for in the merger agreement is fair from a financial point of view to
the shareholders of Bank Atlanta. Carson Medlin subsequently confirmed its
opinion in writing as of August 9, the most recent practicable date prior to
the printing of this document.
13
<PAGE>
The full text of Carson Medlin's written opinion, dated August 9, is
attached as Appendix C to this document. You should read the opinion in its
entirety for a full discussion to the procedures followed, assumptions made,
matters considered and qualification and limitation on the review undertaken
by Carson Medlin in connection with its opinion. Carson Medlin's opinion is
addressed to Bank Atlanta's board of directors and is substantially identical
to the written opinion delivered to Bank Atlanta's board dated May 20, 1999.
The summary of the opinion of Carson Medlin set forth in this document is
qualified in its entirety by reference to the full text of its opinion. Carson
Medlin's opinions to Bank Atlanta's board of directors rendered in connection
with the merger do not constitute a recommendation to any Bank Atlanta
shareholder regarding how the shareholder should vote at the special meeting.
No limitations were imposed by the board of directors or management of Bank
Atlanta upon Carson Medlin with respect to the investigations made or the
procedures followed by Carson Medlin in rendering its opinions.
The preparation of a financial fairness opinion involves various
determinations as to the most appropriate methods of financial analysis and
the application of those methods to the particular circumstances and,
therefore, is not readily susceptible to partial analysis or summary
description. In connection with rendering its opinions, Carson Medlin
performed a variety of financial analyses. Carson Medlin believes that its
analyses must be considered together as a whole and that selecting portions of
its analyses and the facts considered in its analyses, without considering all
other factors and analyses, could create an incomplete or inaccurate view of
the analyses and the process underlying the rendering of Carson Medlin's
opinions. In performing its analyses, Carson Medlin made numerous assumptions
with respect to industry performance, business and economic conditions, and
other matters, many of which are beyond the control of Premier and Bank
Atlanta and which may not be realized. Any estimates contained in Carson
Medlin's analyses are not necessarily predictive of future results or values,
which may be significantly more or less favorable than the estimates.
Estimates of values of companies do not purport to be appraisals or
necessarily reflect the prices at which the companies or their securities may
actually be sold. Except as described below, none of the analyses performed by
Carson Medlin was assigned a greater significance by Carson Medlin than any
other.
Carson Medlin has relied upon, without independent verification, the
accuracy and completeness of the information it reviewed for the purpose of
rendering its opinions. Carson Medlin did not undertake any independent
evaluation or appraisal of the assets and liabilities of Premier or Bank
Atlanta, nor was it furnished with any appraisals. Carson Medlin is not an
expert in the evaluation of loan portfolios, including under-performing or
non-performing assets, charge-offs or the allowance for loan losses; has not
reviewed any individual credit files of Premier or Bank Atlanta; and has
assumed that the allowances for each of Premier and Bank Atlanta are in the
aggregate adequate to cover losses. In addition, Carson Medlin is not an
expert in the evaluation of Year 2000 readiness, compliance, or expense
allocations and has assumed that Premier and Bank Atlanta have each taken
appropriate steps or actions to properly address this issue. Carson Medlin's
opinion is necessarily based on economic, market and other conditions existing
on the date of its opinion, and on information as of various earlier dates
made available to it. Carson Medlin assumed that the merger will be recorded
as a pooling-of-interests under Generally Accepted Accounting Principles.
In connection with its opinion, dated May 20, 1999, Carson Medlin reviewed:
. the Agreement;
. the annual reports to shareholders of Premier, including the audited
financial statements for the five years ended December 31, 1998;
. audited financial statements of Bank Atlanta for the five years ended
December 31, 1998;
. unaudited interim financial statements of Premier for the three months
ended March 31, 1999; and
. unaudited interim financial statements of Bank Atlanta for the three
months ended March 31, 1999.
14
<PAGE>
In addition, Carson Medlin:
. reviewed and discussed with members of management of Premier and Bank
Atlanta the historical and current business operations, financial
condition and future prospects of their respective companies;
. reviewed the historical market prices and trading activity for the
common stock of Premier and Bank Atlanta and compared them with those of
publicly traded companies that it deemed to be relevant;
. compared the results of operations of Premier and Bank Atlanta with
those of selected financial institutions which it deemed to be relevant;
. compared the financial terms of the Merger with the financial terms, to
the extent publicly available, of selected other recent business
combinations of financial institutions;
. analyzed the pro forma financial impact of the merger on Premier; and
. conducted other studies, analyses, inquiries and examinations as Carson
Medlin deemed appropriate.
VALUATION METHODOLOGIES
The following is a summary of the principal analyses performed by Carson
Medlin in connection with its opinion provided to Bank Atlanta's board of
directors as of May 20, 1999.
Summary of Proposal. Carson Medlin reviewed the terms of the proposed
merger, including the form of consideration, the exchange ratio, the closing
price of Premier's common stock as of May 19, 1999, and the resulting price
per share of Bank Atlanta common stock pursuant to the proposed merger. Under
the terms of the merger agreement, each outstanding share of Bank Atlanta
common stock will be converted into 1.25 shares of Premier's common stock
resulting in an indicated value of $25.63 per share of Bank Atlanta common
stock based on the closing price of Premier's common stock on May 19, 1999 of
$20.50 per share. Carson Medlin calculated that the indicated value
represented 239% of stated book value at March 31, 1999, 15.1 times 1999
estimated core earnings, a 22.5% core deposit premium at March 31, 1999, which
is the aggregate transaction value minus stated book value divided by core
deposits, and 25.2% of total assets of Bank Atlanta at March 31, 1999.
Industry Comparative Analysis. In connection with rendering its opinion,
Carson Medlin compared selected operating results of Premier and Bank Atlanta
to those of 54 publicly-traded community commercial banks in Alabama, Florida,
Georgia, Mississippi, North Carolina, South Carolina, Virginia and West
Virginia as contained in the Southeastern Independent Bank Review(TM), a
proprietary research publication prepared by Carson Medlin quarterly since
1991. These comparable financial institutions range in asset size from
approximately $145 million to $2.8 billion and in shareholders' equity from
approximately $15 million to $344 million. Carson Medlin considers this group
of financial institutions more comparable to Premier and Bank Atlanta than
larger, more widely traded regional financial institutions. Carson Medlin
compared, among other factors, profitability, capitalization, and asset
quality of Premier and Bank Atlanta to these financial institutions. Carson
Medlin noted that based on results for the year ended December 31, 1998:
. Premier's and Bank Atlanta's return on average assets was 1.49% and
1.89%, respectively, compared to mean return on average assets of 1.21%
for the comparable financial institutions;
. Premier's and Bank Atlanta's return on average equity was 16.4% and
21.26%, respectively, compared to mean return on average equity of 11.7%
for the comparable financial institutions;
. Premier's and Bank Atlanta's shareholders' equity to total assets at
December 31, 1998 was 8.9% and 9.2%, respectively, compared to mean
shareholders' equity to total assets of 9.9% for the comparable
financial institutions; and
. Premier's and Bank Atlanta's nonperforming assets (defined as loans 90
days past due, nonaccrual loans and other real estate) to total loans
net of unearned income and other real estate at December 31, 1998 was
0.50% and 0.27%, respectively, compared to mean nonperforming assets to
total loans net of unearned income and other real estate of 0.97% for
the comparable financial institutions.
15
<PAGE>
These comparisons indicated that Premier's financial performance was above
the average comparable financial institutions for profitability factors, asset
quality and capitalization. Bank Atlanta's financial performance was at or
above the average for the comparable financial institutions for all of the
factors considered.
Comparable Transaction Analysis. Carson Medlin reviewed certain information
relating to 20 selected merger transactions involving commercial banks in
southeastern metropolitan areas announced since January 1997. These comparable
transactions consisted of the following
<TABLE>
<CAPTION>
TARGET BUYER
------ -----
<S> <C>
Universal National Bancorp, Miami, FL Totalbank, Miami, FL
Eastern American Bank, Herndon, VA Resource Bank, Virginia Beach, VA
Indian Rocks State Bank, Largo, FL FNB Corp, Hermitage, PA
Citizens National B&T, Port Richey, FL Gulf West Banks, St. Petersburg, FL
Bank of Winter Park, Winter Park, FL Huntington Bancshares, Columbus OH
Ballston Bancorp, Arlington, VA Abigail Adams NB, Washington DC
Tysons Financial, McLean, VA MainStreet Banking, Martinsville, VA
West Coast Bank, Sarasota, FL FNB Corp, Hermitage PA
Regency Financial, Richmond, VA Mainstreet Banking , Martinsville, VA
Marshall National B&T, Marshall VA Mercantile Bankshares, Baltimore, MD
Bank of Alexandria, Alexandria, VA F&M National Corp, Winchester, VA
Peoples Bank of Virginia, Chesterfield,
VA F&M National Corp, Winchester, VA
Central Bank, Miami, FL BankUnited Financial, Coral Gables, FL
Seminole Bank, Seminole, FL FNB Corp, Hermitage, PA
Ballston Bancorp, Arlington, VA MainStreet Banking, Martinsville, VA
CNB Holding Co., Daytona Beach, FL Colonial BancGroup, Montgomery, AL
Community Bank of Naples, Naples, FL Alabama National, Birmingham, AL
Northside Bank of Tampa, Tampa, FL Republic Security, West Palm Beach, FL
Georgia Bancshares, Tucker, GA First Sterling Banks, Marietta, GA
South Florida Bank Holding Corp., Ft.
Myers, FL Fifth Third Bancorp, Cincinnati, OH
</TABLE>
Carson Medlin considered, among other factors, the earnings, capital level,
asset size and quality of assets of the acquired financial institutions.
Carson Medlin compared the transaction prices at the time of announcement to
the stated book value, earnings, core deposits and total assets of the
acquired institutions.
Carson Medlin calculated an average price to stated book value multiple for
the comparable transactions of 255.2% which indicated a value of Bank Atlanta
of $27.41 per share based on Bank Atlanta's stated book value of $10.74 per
share at March 31, 1999. The consideration implied by multiplying the exchange
ratio and Premier's common stock price as of May 19, 1999 was $25.63 per share
and implies a price to stated book value multiple of 239%, which is below the
average of the range for the comparable transactions. The comparable
transactions ranged from 137% to 373.4% of stated book value.
Carson Medlin calculated an average price to earnings multiple for the
comparable transactions of 21.1 times, which indicated a value for Bank
Atlanta of $35.87 per share based on Bank Atlanta's 1999 estimated core
earnings per share of $1.70 per share. The consideration implied by the terms
of the merger agreement is $25.63 per share and implies a price to earnings
multiple of 15.1 times, which is below the average for the comparable
transactions. The comparable transactions ranged from 10.2 to 40.1 times
earnings
Carson Medlin calculated an average core deposit premium for the comparable
transactions of 19.6%. The premium on Bank Atlanta's core deposits implied by
the terms of the Agreement is 22.5%, above the average of the range for the
comparable transactions. The comparable transactions core deposit premiums
ranged from 2.6% to 31.8%.
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Finally, Carson Medlin calculated an average price as a percentage of total
assets for the comparable transactions of 24.3%. The percentage of total
assets implied by the terms of the merger agreement is approximately 25.2%,
above the average of the range for the comparable transactions. The comparable
transactions ranged from 6.5% to 34% of total assets.
No company or transaction used in Carson Medlin's analyses is identical to
Premier, Bank Atlanta or the contemplated transaction. Accordingly, the
results of these analyses necessarily involves complex considerations and
judgments concerning differences in financial and operating characteristics of
Premier and Bank Atlanta and other factors that could affect the value of the
companies to which they have been compared.
Present Value Analysis. Carson Medlin calculated the present value of Bank
Atlanta assuming that Bank Atlanta remained an independent bank. For purposes
of this analysis, Carson Medlin utilized certain projections of Bank Atlanta's
future growth of assets, earnings and dividends and assumed that Bank
Atlanta's Common Stock would be sold at the end of 5 years at 21.1 times
projected 2003 earnings based on the average of the comparable transactions.
This value was then discounted to present value utilizing discount rates of
14% through 16%. These rates were selected because, in Carson Medlin's
experience, they represent the rates that investors in securities such as Bank
Atlanta's Common Stock would demand in light of the potential appreciation and
risks. On the basis of these assumptions, Carson Medlin calculated that the
present value of Bank Atlanta as an independent bank ranged from $23.72 per
share to $25.88 per share. The consideration implied by the terms of the
merger agreement was $25.63 per share, which falls near the high end of the
range under present value analysis. Carson Medlin noted that it included
present value analysis because it is a widely used valuation methodology, but
also noted that the results of this methodology are highly dependent upon the
numerous assumptions that must be made, including assets and earnings growth
rates, dividend payout rates, terminal values and discount rates.
Stock Trading History. Carson Medlin reviewed and analyzed the historical
trading prices and volumes of Premier common stock on a monthly basis from
June 1995 to April 1999. Carson Medlin also compared price performance of the
Premier common stock to the comparable financial institutions, described above
in Industry Comparative Analysis, over the past 16 quarters ended March 31,
1999 on a price to book value basis. Carson Medlin considers Premier common
stock to be liquid and marketable in comparison with these comparable
financial institutions and other bank holding companies.
This analysis showed that over the past 16 quarters, Premier's stock has
traded above the average of the comparable financial institutions based on
price to book value basis. In the most recent quarter, Premier's stock traded
at 378% of book value compared to 196% of book value for the comparable
financial institutions.
Carson Medlin also examined the trading prices and volumes of Bank Atlanta
common stock. Bank Atlanta common stock has not traded in volumes sufficient
to be meaningful. Therefore, Carson Medlin did not place any weight on the
market price of Bank Atlanta's common stock.
Contribution Analysis. Carson Medlin reviewed the relative contributions in
terms of various balance sheet and income statement components to be made by
Bank Atlanta and Premier to the combined institution based on (1) balance
sheet data at March 31, 1999, and (2) projected net income for 1999 as
estimated by Carson Medlin. Carson Medlin adjusted Premier for the pro forma
impact of the pending acquisitions of North Fulton Bancshares and Farmers and
Merchants. The income statement and balance sheet components analyzed included
total assets, loans, net of unearned income, total deposits, shareholders'
equity, and net income. This analysis showed that Bank Atlanta shareholders
would own approximately 3.1% of the aggregate outstanding shares of the
combined institution based on the exchange ratio, while Bank Atlanta was
contributing 4.1% of total assets, 3.9% of loans, net of unearned income, 4.6%
of total deposits, 4.2% of shareholders' equity, and 3.3% of projected net
income for 1999.
Other Analysis. Carson Medlin also reviewed selected investment research
reports on and earnings estimates for Premier.
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The opinion expressed by Carson Medlin was based upon market, economic and
other relevant considerations as they existed and have been evaluated as of
the date of the opinion. Events occurring after the date of issuance of the
opinion, including but not limited to, changes affecting the securities
markets, the results of operations or material changes in the assets or
liabilities of Bank Atlanta could materially affect the assumptions used in
preparing the opinion.
In connection with its opinion dated August 9, Carson Medlin confirmed the
appropriateness of its reliance on the analyses used to render its May 20,
1999 opinion by performing procedures to update its analyses and reviewing the
assumptions on which its analyses were based and the factors considered in
connection with rendering its opinion.
EXCHANGE RATIO
At the effective time of the merger, Bank Atlanta will merge with and into
PMB Acquisition Corp. II, Bank Atlanta will be the surviving bank in the
merger, and Bank Atlanta will become a wholly owned subsidiary of Premier. In
the merger, each share of Bank Atlanta common stock outstanding at the
effective time will be converted into the right to receive Premier common
stock at the exchange ratio of 1.25 shares of Premier common stock for each
share of Bank Atlanta common stock, subject to possible adjustment as
described below.
Bank Atlanta shareholders should be aware that the actual market value of a
share of Premier common stock at the effective time of the merger, and at the
time certificates for those shares are delivered following surrender and
exchange of certificates for shares of Bank Atlanta common stock, may be more
or less than the value of the shares as of the date of this document or the
date of the Bank Atlanta shareholders' meeting. Bank Atlanta shareholders are
urged to obtain information on the market value of Premier common stock that
is more recent than that which this document provides. See "Comparative Market
Prices and Dividends."
No fractional shares of Premier common stock will be issued in the merger.
Premier will pay holders of Bank Atlanta common stock otherwise entitled to a
fractional share an amount in cash. The amount in cash will be determined by
multiplying the fractional part of the share of Premier common stock by the
closing price of Premier common stock on the last trading day before the
effective time of the merger.
POSSIBLE ADJUSTMENT OF EXCHANGE RATIO
The merger agreement provides for upward adjustments to the exchange ratio
in the event the value of Premier's common stock declines by amounts specified
in the merger agreement. UNDER NO CIRCUMSTANCES WILL THE EXCHANGE RATIO BE
LESS THAN 1.25 SHARES OF PREMIER COMMON STOCK FOR EACH SHARE OF BANK ATLANTA
COMMON STOCK.
The merger agreement provides two conditions which must be met before any
upward adjustment is made to the exchange ratio. First, the average closing
price of Premier's common stock must be less than $16.60. The average closing
price is the average of the daily last sale prices of Premier common stock as
reported on the New York Stock Exchange for the 10 consecutive full trading
days in which Premier shares are traded on the New York Stock Exchange ending
at the close of trading on the determination date, September 6, 1999.
Second, the percentage decline in the value of Premier's common stock from
May 19, 1999 until the determination date must be greater than that of a
selected group of comparable bank holding companies. Under the terms of the
merger agreement this condition is met if:
. Premier's average closing price on the determination date, as a percent
of its May 19, 1999 closing price of $20.75, is less than
. The weighted average last sales price of the common stock of the
comparable bank holding companies on the determination date as a percent
of their weighted average last sales on May 19, 1999.
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These conditions provide a price floor at which the exchange ratio is
adjusted to minimize the decline in value to be received in the exchange by
Bank Atlanta shareholders as a result of declines in the value of Premier
common stock. If the above two conditions are met, the new exchange ratio will
be determined through application of the following formula:
Adjusted Exchange Ratio = [0.75 x ($20.75-Average Closing Price)] +
[Average Closing Price x 1.25]
-----------------------------------------
Average Closing Price
Essentially, this formula results in an increase to the exchange ratio so
that the value Bank Atlanta shareholders receive per share of Bank Atlanta
common stock is increased by an amount equal to 75% of the decrease in
Premier's common stock from the May 19, 1999 start price of $20.75 to the
average closing price on the determination date.
These conditions reflect the parties' agreement that Bank Atlanta's
shareholders will assume the risk of declines in the value of Premier common
stock to $16.60. Any adjustment of the exchange ratio as a result of a decline
in the price of Premier common stock to below $16.60 depends on whether the
percentage decline of the average closing price of Premier common stock is
greater than that of the comparable bank holding company common stocks, as
described above. If the merger agreement did not provide for an adjustment to
the exchange ratio, the value to be received by Bank Atlanta shareholders in
the exchange would continue to decline even after the average closing price of
the Premier common stock fell below $16.60.
The following three scenarios illustrate the operation of the adjustment
mechanism. For purposes of the scenarios, we have assumed that the initial
exchange ratio is 1.25, the starting price as of May 19, 1999 of Premier
common stock is $20.75, and the starting price of the comparable bank holding
companies' common stock is $100.
(1) The first scenario occurs if the average closing price is $16.60 or
greater. Under this scenario, regardless of any comparison between the
value of Premier's common stock and that of the comparable bank holding
companies, the exchange ratio would not be adjusted.
(2) The second scenario occurs if the average closing price is less than
$16.60, but does not represent a percentage decline from the starting price
which is more than the percentage decline of the common stock prices of the
comparable bank holding companies. Under this scenario, the exchange ratio
would not be adjusted.
(3) The third scenario occurs if the average closing price is less than
$16.60 and represents a percentage decline from the starting price greater
than the percentage decline of the common stock prices of the comparable
bank holding companies. Under this scenario, the exchange ratio will be
adjusted so that the value received by the Bank Atlanta shareholders is
increased by 75% of the decrease in the Premier common stock from the
$20.75 starting price.
For example, if the average closing price is $15.00 and the ending weighted
average last sales price of the comparable bank holding companies as of the
determination date is $80, Premier's average closing price as a percent of
its starting price (72.3%) is less than the ending price for the comparable
bank holding companies as a percent of their starting price (80.0%).
Therefore, the exchange ratio would be increased to equal 1.5375 shares of
Premier common stock for each share of Bank Atlanta common stock, as a
result of the application of the above formula. Based upon the assumed
$15.00 average closing price, the new exchange ratio would represent a
value to the Bank Atlanta shareholders of $23.06 per Bank Atlanta share.
It is important to note, however, that the merger agreement contains a
provision which allows either party to terminate the agreement if the average
closing price of the Premier common stock is below $14.53, or pro forma of
$22.83 per share of Bank Atlanta common stock.
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The actual market value of a share of Premier common stock at the effective
time of the merger and at the time certificates for those shares are delivered
following surrender and exchange of certificates for shares of Bank Atlanta
common stock may be more or less than the average closing price. Bank Atlanta
shareholders are urged to obtain current market quotations for Premier common
stock. See "Comparative Market Prices and Dividends."
TREATMENT OF BANK ATLANTA STOCK OPTIONS
The merger agreement provides that all rights with respect to Bank Atlanta
common stock pursuant to stock options granted under Bank Atlanta's stock
option plans which are outstanding at the effective time of the merger,
whether or not then exercisable, will convert into and will become rights with
respect to Premier common stock. Premier will assume these options in
accordance with the terms and the plans under which they were issued and the
agreement by which they were evidenced. After the effective time, these
options will become options to purchase Premier common stock, with the
exercise price and number of shares of Premier common stock adjusted to
reflect the exchange ratio. As of the effective date of the merger, Premier
may elect to substitute stock options under the Premier Bancshares, Inc. 1997
Stock Option Plan, as amended, for all or a part of the stock options granted
by Bank Atlanta. Substituted stock options will be subject to the conditions
contained in the merger agreement.
The executive officers and directors of Bank Atlanta held in the aggregate
exercisable options to purchase 30,000 shares of Bank Atlanta common stock as
of the date of this proxy statement/prospectus.
EXCHANGE OF BANK ATLANTA COMMON STOCK CERTIFICATES
At the effective time, by virtue of the merger and without any action on the
part of Bank Atlanta or the holders of Bank Atlanta common stock, each share
of Bank Atlanta common stock issued and outstanding immediately before the
effective time will convert into and will represent the right to receive, upon
surrender of the certificate representing the share of Bank Atlanta common
stock, whole shares of Premier common stock and cash in lieu of any fractional
share interest. Promptly after the effective time, Premier's exchange agent
will deliver or mail to each Bank Atlanta shareholder a transmittal letter and
instructions for use in surrendering the Bank Atlanta share certificates that,
immediately before the effective time, represented any shares of Bank Atlanta
common stock. Premier's exchange agent will promptly transfer the merger
consideration to the persons entitled to receive it upon surrender of the
certificates or other satisfactory evidence of ownership, delivery of a duly
executed transmittal letter completed in accordance with its instructions, and
other documents as may be reasonably requested.
BANK ATLANTA SHAREHOLDERS SHOULD NOT SEND IN THEIR STOCK CERTIFICATES UNTIL
THEY RECEIVE TRANSMITTAL LETTERS AND INSTRUCTIONS.
Until surrendered as described above, each outstanding certificate
representing multiple shares of Bank Atlanta common stock will be deemed upon
the effective time for all purposes to represent only the right to receive the
merger consideration. Premier will pay no interest on the merger consideration
upon the surrender of the certificate or certificates representing shares of
Bank Atlanta common stock. With respect to any certificate for Bank Atlanta
common stock that has been lost or destroyed, Premier will pay the merger
consideration attributable to the certificate upon receiving a surety bond or
other adequate indemnity as required in accordance with Premier's standard
policy and evidence reasonably satisfactory to Premier of ownership of the
shares in question. After the effective time, no transfer of the shares of
Bank Atlanta common stock outstanding immediately before the effective time
will be made on Premier's stock transfer books.
Premier will pay any dividends or other distributions with respect to Bank
Atlanta common stock that Bank Atlanta has declared or made before the
effective time, but which remain unpaid as of the effective time, in
accordance with the terms of the merger agreement. To the extent permitted by
law, former shareholders of record of Bank Atlanta will be entitled to vote
after the effective time of the merger at any meeting of Premier
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shareholders the number of whole shares of Premier common stock into which
their respective shares of Bank Atlanta common stock are converted, regardless
of whether the holders have exchanged their certificates representing Bank
Atlanta common stock for certificates representing Premier common stock.
Whenever Premier declares a dividend or other distribution on the Premier
common stock, the record date for which is at or after the effective time, the
declaration will include all shares of Bank Atlanta common stock, which
represent the right to receive Premier common stock. Bank Atlanta shareholders
will only receive the dividend or other distribution, however, after they
surrender their Bank Atlanta certificate(s) for exchange as described above.
Upon surrendering their Bank Atlanta certificate(s), both the Premier common
stock certificate and any undelivered dividends and cash payments payable
under the merger agreement, without interest, will be delivered and paid with
respect to each share of Bank Atlanta common stock the certificate(s)
represents.
EFFECTIVE TIME OF THE MERGER
The effective time will occur at the time and date specified in the articles
of merger which Premier will file with the Secretary of State of Georgia.
Premier and Bank Atlanta currently intend to file the articles of merger as
soon as practicable following the date on which the merger agreement is
approved by the Bank Atlanta shareholders and all other conditions to complete
the merger have been satisfied. If the Bank Atlanta shareholders approve the
merger at the shareholders' meeting, we currently anticipate that the filing
of the articles of merger and the effective time will occur by September 30,
1999.
CONDITIONS TO THE MERGER
Premier and Bank Atlanta's obligations to complete the merger are subject to
satisfaction or, if permissible, waiver of the following conditions at or
before the effective time:
. the approval of the merger agreement by the holders of at least two-
thirds of the outstanding shares of Bank Atlanta common stock;
. regulatory approval from the Board of Governors of the Federal Reserve
System, the Federal Deposit Insurance Corporation and the Georgia
Department of Banking and Finance and the expiration of all applicable
waiting periods associated with these approvals, without any conditions
or restrictions that would, in the reasonable judgment of either party,
so materially and adversely impact the economic or business benefits of
the merger as to render inadvisable the consummation of the merger;
. the receipt by both parties of all necessary consents required for
consummation of the merger or for the preventing of any default under
any contract of either party, which, if not obtained, would be
reasonably likely to have a material adverse effect on the party;
. the absence of any action by any court or governmental authority of
competent jurisdiction restricting, prohibiting or making illegal the
consummation of the merger and the other transactions contemplated by
the merger agreement;
. the receipt by both parties of a written opinion from Womble Carlyle
Sandridge & Rice, PLLC, counsel to Premier, that the merger qualifies
for federal income tax treatment as a reorganization under Section
368(a) of the Internal Revenue Code, with the effects described under
"--Federal Income Tax Consequences of the Merger," including, among
others, that the exchange of Bank Atlanta common stock for Premier
common stock will not give rise to recognition of gain or loss to Bank
Atlanta shareholders, except to the extent of any cash received;
. approval for listing on the New York Stock Exchange of the shares of
Premier common stock to be issued in the merger; and
. receipt of letters from Ernst & Young LLP and Mauldin & Jenkins, LLC
dated as of the effective date of the merger, regarding the
appropriateness of pooling of interests accounting treatment.
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Consummation of the merger is also subject to the satisfaction or waiver of
various other conditions specified in the merger agreement which are customary
in transactions of this nature. These conditions include, among others: the
delivery by Premier and Bank Atlanta of opinions of their respective counsel
and certificates executed by their respective duly authorized officers as to
the satisfaction of various conditions and obligations in the merger
agreement, the accuracy of various representations and warranties made by
them, and their compliance in all material respects with their agreements and
covenants.
CONDUCT OF BANK ATLANTA'S AND PREMIER'S BUSINESS PRIOR TO THE EFFECTIVE TIME
OF THE MERGER
Bank Atlanta and Premier have each generally agreed to operate their
business only in the usual, regular and ordinary course, and to preserve
intact their business organizations and assets and maintain their rights and
franchises. Each has also agreed to take no action which would materially
adversely affect the ability of either party to obtain any consents required
for the merger or which would adversely affect the ability of either party to
perform its covenants and agreements under the merger agreement.
In addition, the merger agreement includes other restrictions applicable to
the operation of Bank Atlanta's business prior to consummation of the merger.
Bank Atlanta has agreed not to take various actions relating to the operation
of its business pending consummation of the merger without Premier's prior
written consent, which Premier has agreed it shall not unreasonably withhold.
The actions Bank Atlanta has agreed not to take are in the general categories
of:
. amending the Charter, Bylaws, or other governing instruments of Bank
Atlanta;
. incurring additional indebtedness;
. acquiring any of its outstanding shares or making distributions,
including the payment of dividends, with respect to its outstanding
shares; provided, however, that Bank Atlanta may be permitted to pay a
cash dividend to its shareholders if it is determined by Premier's
accountants that such payment will not cause the merger to be accounted
for as a "purchase";
. issuing additional securities of Bank Atlanta or rights or options to
acquire such securities;
. reclassifying any of Bank Atlanta's capital stock or selling or
encumbering assets;
. acquiring or investing in other entities;
. increasing employees' salaries and benefits or accelerating the vesting
of any stock-based compensation or employee benefits or entering into or
amending any employment contracts;
. adopting any new employee benefit plans or amending existing plans;
. changing accounting methods or practices;
. beginning or settling litigation; or
. entering into or terminating material contracts.
In addition, Bank Atlanta has agreed not to solicit, directly or indirectly,
any acquisition proposal from any other person or entity. Bank Atlanta also
has agreed not to negotiate with respect to any acquisition proposal, provide
nonpublic information to any party making an acquisition proposal, or enter
into any agreement with respect to any acquisition proposal, except in
compliance with the fiduciary obligations of its board of directors. In
addition, Bank Atlanta has agreed to cause its advisors and other
representatives not to engage in any of the foregoing activities.
WAIVER, AMENDMENT AND TERMINATION OF THE MERGER AGREEMENT
Prior to the effective time of the merger, and to the extent permitted by
law, any provision of the merger agreement generally may be waived by the
party benefited by the provision or amended by a written agreement
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between Premier and Bank Atlanta, which is approved by their respective boards
of directors. After the merger agreement is approved by the Bank Atlanta
shareholders, however, no amendment that pursuant to the Financial
Institutions Code of Georgia requires further approval of the Bank Atlanta
shareholders, including decreasing the consideration to be received by Bank
Atlanta shareholders, may be made without the shareholders' further approval.
The board of directors of either party may terminate the merger agreement,
and abandon the merger, at any time prior to the effective time of the merger,
either before or after approval by Bank Atlanta shareholders, under selected
circumstances, including:
. final denial of any required consent of any regulatory authority, if the
denial is nonappealable or was not appealed within the time limit for
appeal;
. the failure of the holders of the requisite number of shares of Bank
Atlanta common stock to approve the merger agreement;
. in the event of any inaccuracy in any representation or warranty by the
other party that meets certain standards specified in the merger
agreement that cannot be or has not been cured within 30 days after the
giving of written notice to the breaching party, provided the
terminating party is not in material breach of any representation,
warranty, covenant, or agreement included in the merger agreement;
. in the event of a breach by the other party of any covenant or agreement
included in the merger agreement that cannot be cured within 30 days
after giving notice to the breaching party, provided the terminating
party is not in material breach of any representation, warranty,
covenant, or agreement included in the merger agreement;
. if the merger is not consummated by November 30, 1999, but only if the
failure to consummate the merger by such date has not been caused by the
terminating party's breach of the merger agreement; and
. if the average closing price of the Premier common stock as reported on
the New York Stock Exchange for the 10 consecutive full trading days
ending at the close of trading on September 6, 1999 is less than $14.53.
In addition, the boards of directors may terminate the merger agreement and
abandon the merger by mutual consent. If the merger agreement is terminated,
the parties will have no further obligations, except with respect to selected
provisions, including those providing for payment of expenses and restricting
disclosure of confidential information. Further, termination generally will
not relieve the parties from the consequences of any uncured willful breach of
the merger agreement giving rise to the termination.
DIRECTORS AND EXECUTIVE OFFICERS FOLLOWING THE MERGER
The merger agreement provides that the officers and directors of Bank
Atlanta after the effective time of the merger will consist of the officers
and directors of Bank Atlanta before the merger, together with any additional
persons as may be elected by Premier.
INTERESTS OF BANK ATLANTA'S MANAGEMENT IN THE MERGER
Certain members of Bank Atlanta's management have interests in the merger
that are in addition to their interests as shareholders of Bank Atlanta
generally. The Bank Atlanta board of directors was aware of these factors and
considered them, among other matters, in approving the merger agreement.
The merger agreement provides that, after the effective time of the merger,
Premier will provide employee benefits to officers and employees of Bank
Atlanta who, at or after the effective time, become officers or employees of
Premier or its subsidiaries. These employee benefits will be under employee
benefit plans, the
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terms and conditions of which, taken as a whole, are substantially similar to
those employee benefits Premier and its subsidiaries currently provide to
their similarly-situated officers and employees. For purposes of participation
under these employee benefit plans, service with Bank Atlanta prior to the
effective time of the merger will be treated as service with Premier or its
subsidiaries.
The merger agreement further provides that Premier will honor all
employment, severance, consulting and other compensation contracts between
Bank Atlanta and any current or former director, officer or employee that Bank
Atlanta previously disclosed to Premier. Premier will also honor all
provisions for vested amounts earned or accrued through the effective time
under Bank Atlanta's benefit plans.
As described above, under "--Treatment of Bank Atlanta Stock Options," the
merger agreement also provides that all rights with respect to Bank Atlanta
common stock pursuant to stock options or stock appreciation rights granted
under Bank Atlanta's stock option and other stock-based compensation plans
which are outstanding at the effective time, will be converted into and will
become rights with respect to Premier common stock. Premier will assume each
of these options in accordance with its terms.
As of the record date, the directors and executive officers of Bank Atlanta
owned less than 1% of the outstanding shares of Premier common stock.
RIGHTS OF DISSENTING SHAREHOLDERS
By virtue of the provisions of the Financial Institutions Code of Georgia
applicable to Georgia state banks and trust companies, the rights of
shareholders who desire to dissent from the merger are governed by the
provisions of Sections 14-2-1301 through 14-2-1332 of the Georgia Business
Corporations Code. Under these provisions, if the merger is consummated, any
shareholder of record of Bank Atlanta who objects to the merger and who fully
complies with Sections 14-2-1301 through 14-2-1332 of the Georgia Business
Corporation Code will be entitled to demand and receive payment in cash of an
amount equal to the fair value of all, but not less than all, of his or her
shares of Bank Atlanta common stock. A shareholder may assert dissenters'
rights as to fewer than the shares registered in his or her name only if he or
she dissents with respect to all shares beneficially owned by any one
beneficial owner and notifies Bank Atlanta in writing of the name and address
of each person on whose behalf he or she asserts dissenters' rights. For the
purpose of determining the amount to be received in connection with the
exercise of statutory dissenters' rights, the fair value of a dissenting
shareholder's Bank Atlanta common stock equals the value of the shares
immediately before the effective date of the merger, excluding any
appreciation or depreciation in anticipation of the merger.
Any shareholder of Bank Atlanta desiring to receive payment of the fair
value of his or her Bank Atlanta common stock in accordance with the
requirements of the dissenters' rights provisions of Georgia law must:
. deliver to Bank Atlanta prior to the shareholder vote on the merger
agreement, a written notice of his or her intent to demand payment for
his or her shares if the merger is consummated;
. not vote his or her shares in favor of the merger agreement; and
. demand payment and deposit the stock certificates representing Bank
Atlanta common stock in accordance with the terms of a notice which will
be sent to the shareholder by Premier no later than 10 days after the
merger is consummated.
A written notice of intent to dissent with respect to the merger should be
sent to: Bank Atlanta, 1221 Clairmont Road, Decatur, Georgia 30030, Attention:
James B. Hendry, Jr., President. A VOTE AGAINST THE MERGER AGREEMENT ALONE
WILL NOT SATISFY THE REQUIREMENTS FOR THE SEPARATE WRITTEN NOTICE OF INTENT TO
DISSENT TO THE MERGER, THE SEPARATE WRITTEN DEMAND FOR PAYMENT OF THE FAIR
VALUE OF SHARES OF BANK ATLANTA COMMON STOCK OR THE DEPOSIT OF THE STOCK
CERTIFICATES. RATHER, A DISSENTING SHAREHOLDER MUST SEPARATELY COMPLY WITH
EACH OF THESE REQUIREMENTS.
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Premier must offer to pay to each dissenting shareholder the amount Premier
estimates to be the fair value of the dissenting shareholder's shares, plus
accrued interest. Premier must make the payment offer within 10 days of the
later of the effective date of the merger or receipt of a payment demand by a
dissenting shareholder who deposits his or her stock certificates in
accordance with the Bank Atlanta dissenters' notice sent to those shareholders
who notified Bank Atlanta of their intent to dissent. Premier's offer must be
accompanied by:
. Bank Atlanta's balance sheet as of the end of a fiscal year ended not
more than 16 months before the date of making the offer, an income
statement for that year, a statement of changes in shareholders' equity
for that year, and the latest available interim financial statements, if
any;
. an explanation of how the interest was calculated;
. a statement of the dissenting shareholder's right to demand payment of a
different amount under Section 14-2-1327 of the Georgia Business
Corporations Code; and
. a copy of the dissenters' rights provisions of the Georgia Business
Corporations Code.
If the dissenting shareholder accepts Premier's offer, by written notice to
Premier, within 30 days after Premier's offer, or is deemed to have accepted
the offer by failing to respond to Premier's offer, Premier must make payment
to the dissenting shareholder for his or her shares within 60 days after the
making of the offer or the effective time, whichever is later. Upon payment of
the agreed value, the dissenting shareholder will cease to have any interest
in his or her shares of Bank Atlanta common stock.
If within 30 days after Premier offers payment for the shares of a
dissenting shareholder, the dissenting shareholder rejects the offer and
demands payment of his or her own estimate of the fair value of the shares and
interest due, then Premier, within 60 days after receiving the dissenting
shareholder's payment demand, must file an action in a court of competent
jurisdiction in DeKalb County, Georgia, requesting that the fair value of the
dissenting shareholder's shares be found and determined. Premier must make all
dissenting shareholders whose demands remain unsettled parties to the
proceeding. If Premier does not commence the proceeding within the 60-day
period, it is required to pay each dissenting shareholder whose demand remains
unsettled the amount demanded by the dissenting shareholder.
This discussion of dissenters' rights under Georgia law is not a complete
statement of the provisions of the Financial Institutions Code of Georgia and
the Georgia Business Corporations Code relating to statutory dissenters'
rights. You are urged to read the entire dissenters' rights provisions, which
have been included as Appendix B to this document.
REGULATORY APPROVALS
The merger may not proceed in the absence of the requisite regulatory
approvals. It is possible that regulatory approvals may not be obtained or
obtained timely. It is also possible that any approval may be accompanied by a
conditional requirement which causes approval to fail to satisfy the
conditions in the merger agreement. Premier has submitted applications for the
approvals described below to the appropriate regulatory agencies.
Premier and Bank Atlanta are not aware of any material governmental
approvals or actions that are required for consummation of the merger, except
as described below. Should any other approval or action be required, we
presently contemplate that we would seek the approval or action.
The merger is subject to approval by the Board of Governors of the Federal
Reserve System under Section 3 of the Bank Holding Company Act of 1956. The
Federal Reserve will not approve the merger if it finds that the transaction
will result in a monopoly or be in furtherance of any combination or
conspiracy to monopolize the business of banking in any geographic area. In
addition, the Federal Reserve will not approve the merger if it finds that the
effect of the merger may be to lessen competition substantially or to tend to
create a monopoly or would in any other manner be in restraint of trade,
unless it finds that the anti-competitive effects of the merger
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are clearly outweighed by the public interest and the probable effect of the
merger in meeting the convenience and needs of the communities to be served.
The Federal Reserve will also take into consideration the financial condition,
managerial resources and future prospects of Premier, its subsidiaries and
Bank Atlanta. Finally, the Federal Reserve will consider the compliance
records of Premier's subsidiaries under the Community Reinvestment Act.
The Bank Holding Company Act provides for the publication of notice and
comment on the merger application and authorizes the Federal Reserve to permit
interested parties to intervene in the proceedings. If an interested party is
permitted to intervene, the intervention could delay the regulatory approvals
required for consummation of the merger. Section 11 of the Bank Holding
Company Act imposes a waiting period which prohibits the consummation of the
merger, in ordinary circumstances, for a period ranging from 15-30 days
following the Federal Reserve's approval of the merger. During this period,
the United States Department of Justice may challenge the consummation of the
merger on antitrust grounds.
The merger also requires the prior approval of the FDIC pursuant to relevant
provisions of the Bank Merger Act. In granting its approval, the FDIC must
take into consideration, among other factors, the financial and managerial
resources and future prospects of the institutions and the convenience and
needs of the communities to be served. The relevant statutes prohibit the FDIC
from approving the merger (1) if it would result in a monopoly or be in
furtherance of any combination or conspiracy to monopolize or attempt to
monopolize the business of banking in any part of the United States or (2) if
its effect in any section of the country may be to substantially lessen
competition or to tend to create a monopoly, or if it would be a restraint of
trade in any other manner, unless the FDIC finds that any anti-competitive
effects are outweighed clearly by the public interest and the probable effect
of the transaction in meeting the convenience and needs of the communities to
be served. Under the Bank Merger Act, the merger may not be consummated until
the thirtieth (30th) day, which may be shortened to the fifteenth (15th) day,
following the date of FDIC approval, during which time, the United States
Department of Justice may challenge the transaction on antitrust grounds. The
commencement of any antitrust action would delay the effectiveness of the
FDIC's approval, unless a court specifically orders otherwise.
Premier and Bank Atlanta are also required to obtain the approval of the
Georgia Department of Banking and Finance under the provisions of the
Financial Institutions Code of Georgia before completing the merger. In its
evaluation of the merger, the Georgia Department will take into account
considerations similar to those applied by the Federal Reserve and the FDIC.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
The following is a summary of the material anticipated federal income tax
consequences of the merger. This summary is based on the federal income tax
laws now in effect and as currently interpreted. This summary does not take
into account possible changes in these laws or interpretations, including
amendments to applicable statutes or regulations or changes in judicial or
administrative rulings, some of which may have retroactive effect. This
summary does not address all aspects of the possible federal income tax
consequences of the merger and is not intended as tax advice to any person.
In particular, this summary does not address the federal income tax
consequences of the merger to Bank Atlanta shareholders in light of their
particular circumstances or status. For example, this summary does not address
the federal income taxation of the merger to Bank Atlanta shareholders who are
foreign persons, tax-exempt entities, dealers in securities, insurance
companies or corporations, among others. Nor does this summary address any
consequences of the merger under any state, local, estate or foreign tax laws,
or the tax treatment of options or other rights to purchase shares of Bank
Atlanta common stock that are or have been received as compensation. You are
urged to consult your own tax advisor as to the specific tax consequences of
the merger to you, including tax return reporting requirements, the
application and effect of federal, foreign, state, local and other tax laws,
and the implications of any proposed changes in the tax laws.
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In connection with the filing of the registration statement of which this
document is a part, Womble Carlyle Sandridge & Rice, PLLC delivered a tax
opinion to Premier and Bank Atlanta. The following discussion summarizes the
material income tax consequences of the merger to the shareholders of Premier
and Bank Atlanta, which were described in that opinion. This discussion is
qualified in its entirety by reference to the tax opinion, which is included
as an exhibit to the registration statement. In connection with the tax
opinion, Womble Carlyle Sandridge & Rice, PLLC has relied upon factual
assumptions which are customary in similar tax opinions and representations
made by Premier and Bank Atlanta in the merger agreement.
Based upon the merger agreement, the factual assumptions and representations
made by Premier and Bank Atlanta, Womble Carlyle Sandridge & Rice, PLLC is of
the opinion that:
. The merger will be a tax-free reorganization within the meaning of
Section 368(a) of the Internal Revenue Code.
. The shareholders of Bank Atlanta will recognize no gain or loss upon the
exchange of their Bank Atlanta common stock solely for shares of Premier
common stock, except for the recognition of gain as a result of the
receipt by the Bank Atlanta shareholders of cash in lieu of fractional
shares.
. Cash that a dissenting Bank Atlanta shareholder receives will be treated
as having been received as a distribution in redemption of his or her
Bank Atlanta common stock. A dissenting shareholder will realize and
recognize gain or loss in an amount equal to the difference between the
amount of cash received and the adjusted basis of the Bank Atlanta
common stock surrendered. BANK ATLANTA SHAREHOLDERS ELECTING TO EXERCISE
DISSENTERS' RIGHTS SHOULD CONSULT THEIR OWN TAX ADVISORS FOR TAX
TREATMENT FOR THEIR PARTICULAR CIRCUMSTANCES.
. Neither Premier nor Bank Atlanta will recognize any income, gain or loss
as a consequence of the merger.
. The aggregate tax basis of the Premier common stock that Bank Atlanta
shareholders receive pursuant to the merger will be the same tax basis
as their shares of Bank Atlanta common stock being exchanged, decreased
by any portion of the tax basis allocated to fractional shares of
Premier common stock that Premier treats as redeemed.
. The holding period of the shares of Premier common stock that Bank
Atlanta shareholders receive will include the holding period of the
shares of Bank Atlanta common stock being exchanged, provided that the
Bank Atlanta common stock is held as a capital asset on the date of the
consummation of the merger.
ACCOUNTING TREATMENT
It is anticipated that the merger will be accounted for as a pooling-of-
interests transaction under Generally Accepted Accounting Principles. Under
this accounting method, Bank Atlanta shareholders will be deemed to have
combined their existing voting common stock interest with that of holders of
Premier common stock by exchanging their shares for shares of Premier common
stock. Accordingly, the book value of the assets, liabilities and
shareholders' equity of Bank Atlanta, as reported on its consolidated balance
sheet, will carry over to Premier's consolidated balance sheet, and no
goodwill will be created. Premier will be able to include in its consolidated
income the consolidated income of Bank Atlanta for the entire fiscal year in
which the merger occurs. Premier, however, will reflect some of its expenses
incurred to effect the merger as current charges against income rather than
adjustments to its balance sheet. If the merger does not qualify for pooling-
of-interests accounting treatment, Premier may, in its discretion, terminate
the transaction.
RESTRICTIONS ON RESALES BY AFFILIATES
All shares of Premier common stock issuable in the merger will be registered
under the Securities Act of 1933 and will be freely transferable, except for
shares received by "persons" who are deemed to be "affiliates" of Bank
Atlanta. At the effective time, affiliates may resell their Premier common
stock (a) only in transactions
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registered under the Securities Act of 1933 or permitted by the resale
provisions of Rule 145 under the Securities Act or as otherwise permitted by
the Securities Act and (b) following the satisfaction of the requirements of
the Securities and Exchange Commission's Accounting Series Release Nos. 130
and 135 relating to publication of financial results of the post-merger
combined operations of Premier and Bank Atlanta. Affiliates generally include
individuals or entities that directly, or indirectly through one or more
intermediaries, control, are controlled by or are under common control with
Bank Atlanta, and include directors, certain executive officers and principal
shareholders of Bank Atlanta. The restrictions on resales by an affiliate
extend also to certain related parties of the affiliate, including spouses,
relatives and spouse's relatives who in each case have the same home as the
affiliate.
The merger agreement requires Bank Atlanta to cause each of its affiliates
to deliver to Premier a written agreement to the effect generally that the
affiliate will not offer or otherwise dispose of any shares of Premier common
stock issued to that affiliate in the merger, except in compliance with (a)
the Securities Act and the rules and regulations issued under the Securities
Act and (b) the requirements of the accounting releases described above.
DESCRIPTION OF PREMIER COMMON STOCK
Premier is currently authorized to issue 60,000,000 shares of Premier common
stock, of which 26,190,786 shares were issued and outstanding as of August 10,
1999. Holders of Premier common stock are entitled to receive dividends as
Premier's board of directors may declare out of funds legally available.
Premier's ability to pay dividends is affected by its subsidiaries' ability to
pay dividends, which is limited by applicable regulatory requirements and
capital guidelines. At March 31, 1999, under these requirements and
guidelines, Premier's combined subsidiaries had $15.6 million, respectively,
of undivided profits legally available for the payment of dividends without
regulatory approval. See "Certain Regulatory Considerations--Payment of
Dividends."
CERTAIN DIFFERENCES IN RIGHTS OF SHAREHOLDERS
General. As a result of the merger, Bank Atlanta's shareholders will
exchange their shares of a Georgia bank governed by the Financial Institutions
Code of Georgia and Bank Atlanta's Charter and Bylaws, for shares of Premier,
a Georgia corporation governed by the Georgia Business Corporations Code and
Premier's Articles of Incorporation and Bylaws. Because of differences between
the Financial Institutions Code of Georgia and the Georgia Business
Corporation Code and between Bank Atlanta's Charter and Bylaws and Premier's
Articles of Incorporation and Bylaws, the current rights of Bank Atlanta
shareholders will change after the merger. The following is a summary of the
material differences in the rights of shareholders of Premier and Bank
Atlanta. This summary is not intended to be a complete discussion of the
Georgia Business Corporations Code or the Georgia Financial Institutions Code
and the Articles of Incorporation and Bylaws of Premier or the Charter and
Bylaws of Bank Atlanta.
Authorized Capital Stock. Premier is currently authorized to issue
60,000,000 shares of common stock, $1.00 par value, of which 26,190,786 shares
were outstanding as of August 10, 1999. No other class of common stock is
currently authorized. The board of directors of Premier may issue additional
shares of Premier's common stock up to the maximum amount permitted by the
Articles of Incorporation, without further action by the Premier shareholders,
unless applicable law requires shareholder action. Premier's Articles of
Incorporation provide that no shareholders of Premier will have any preemptive
rights to subscribe for or to purchase any shares or other securities Premier
issues.
Premier's Articles of Incorporation provide for the issuance of up to
2,000,000 shares of preferred stock by the board of directors of Premier
without further shareholder action. Premier's board of directors may issue
preferred stock in one or more series, and the board may determine the rights,
preferences, privileges and restrictions, including dividend rates, conversion
rights, voting rights, terms of redemption, redemption prices, amounts payable
upon liquidation and number of shares constituting any series or the
designation of the series.
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Premier has designated a series of non-voting preferred stock, $60.00 par
value per share. Premier's preferred stock pays a dividend of 8% of its par
value each year from current earnings or undivided profits, and is cumulative
but subordinate to the rights of trade creditors. If at any time Premier is in
default in the payment of the dividends on its preferred stock and until such
time as the default is cured, the holders of Premier's preferred stock will be
entitled to one vote for each share of Premier's preferred stock along with
the holders of Premier's common stock on all matters coming before the
shareholders at all regular and called Premier shareholder meetings. Beginning
on January 1, 2000, Premier has the right to redeem up to 20% of its
originally issued preferred stock each year at a redemption price of $60.00
per share, plus all accrued and unpaid dividends. The holder of any preferred
stock that remains issued and outstanding after May 20, 2004 may require
Premier to redeem the preferred stock at a redemption price of $60.00 per
share, plus all accrued and unpaid dividends. There are currently 40,770
shares of Premier's preferred stock issued and outstanding.
Bank Atlanta is authorized to issue 10,000,000 shares of Bank Atlanta's
common stock, $1.00 par value, of which 711,010 shares were issued and
outstanding as of July 31, 1999. Bank Atlanta's board of directors has not
authorized any other class of capital stock. Bank Atlanta's board of directors
may issue additional shares of common stock up to the maximum amount permitted
by Bank Atlanta's Charter, without further action by Bank Atlanta's
shareholders, unless applicable law requires shareholder action. Bank
Atlanta's Charter does not provide Bank Atlanta's shareholders with preemptive
rights to purchase or subscribe to any unissued authorized shares of Bank
Atlanta's common stock.
Removal of Directors. Premier's Bylaws provide that a director may be
removed from office, at a meeting the purpose for which was disclosed in the
notice to shareholders, shareholders may remove any director at a meeting with
respect to which notice of such purpose is given:
. without cause, only upon the affirmative vote of the holders of at least
two-thirds of the issued and outstanding shares of Premier's common
stock; and
. with cause, only upon the affirmative vote of the holders of a majority
of the issued and outstanding shares of Premier's common stock.
The term "cause" means the adjudication of the director as incompetent by a
court having jurisdiction in the matter; the conviction of the director of a
felony; the failure of the director to accept office either in writing or by
attendance at no less than one of the first two meetings of the board of
directors following his or her election; or the failure of the director to
attend regular meetings of the board of directors for six consecutive meetings
without having been excused by the board of directors.
Neither Bank Atlanta's Charter nor Bylaws provide specific procedures for
removing directors. As a result, the provisions of the Georgia Financial
Institutions Code govern the removal of Bank Atlanta directors. The Georgia
Financial Institutions Code generally provides that directors may be removed
without cause by the affirmative vote of a majority of the issued and
outstanding shares of Bank Atlanta's common stock.
Limitation on Director Liability. Premier's Articles of Incorporation
provide that no director of Premier will be personally liable to Premier or
its shareholders for monetary damages for a breach of the duty of care or
other duty as a director, provided that this elimination of liability will not
eliminate or limit the liability of a director:
. for an appropriation in violation of his or her duties of any business
opportunity of Premier;
. for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
. for the types of liability described in section 14-2-832 of the Georgia
Business Corporations Code; or
. for any transaction in which the director received an improper personal
benefit.
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Section 14-2-832 of the Georgia Business Corporations Code provides that a
director who votes for or assents to a distribution made in violation of
section 14-2-640 of the Georgia Business Corporations Code or the articles of
incorporation is personally liable to the corporation for the amount of the
distribution that exceeds what could have been distributed without violating
section 14-2-640 of the Georgia Business Corporations Code or the articles of
incorporation.
However, for the director to be liable for these distributions, the
corporation must establish that the director did not perform his or her duties
in a manner the director believed in good faith to be in the best interests of
the corporation and with the care an ordinarily prudent person in a like
position would exercise under similar circumstances. Section 14-2-640 of the
Georgia Business Corporations Code describes specific situations when a
corporation is not permitted to make distributions.
Neither Bank Atlanta's Charter nor Bylaws provide for the limitation of the
personal liability of a director to the shareholders of Bank Atlanta for
monetary damages for breach of duty as a director of Bank Atlanta.
Indemnification. Premier's Bylaws provide that Premier may indemnify or
obligate itself to indemnify an individual made a party to a proceeding
because he or she is or was a director, officer, employee or agent of Premier.
Premier may indemnify these individuals for reasonable expenses, judgments,
fines, penalties and amounts paid in settlement that are incurred in
connection with the proceeding if the individual acted in a manner he or she
believed in good faith to be in or not opposed to the best interests of
Premier and, in the case of any criminal proceeding, he or she had no
reasonable cause to believe his or her conduct was unlawful. To the extent
that a director, officer, employee or agent of Premier has been successful, on
the merits or otherwise, in defending any proceeding to which he or she was a
party, or in defending any claim, issue or matter in the proceeding, because
he or she is or was a director, officer, employee or agent of Premier, Premier
will indemnify the director, employee or agent against reasonable expenses he
or she incurred in connection with the proceeding.
Bank Atlanta's Bylaws provide that Bank Atlanta will indemnify or reimburse
any person, his or her heirs, executors, or administrators for reasonable
expense actually incurred in connection with any action, suit or proceeding,
civil or criminal, to which he or she is made a party by reason of his or her
being or having been a director, officer, or employee of Bank Atlanta or of
any firm, corporation, or organization which he or she served in any of these
capacities at the request of Bank Atlanta. No person, however, will be
indemnified or reimbursed in relation to any matter in an action, suit, or
proceeding as to which he or she is finally adjudged guilty of or liable for
negligence or willful misconduct in the performance of his or her duties to
the bank. Additionally, no person will be indemnified or reimbursed in
relation to any matter in such action, suit or proceeding, which has been made
the subject of a compromise settlement, except with the approval of a court of
competent jurisdiction, or the holders of record of a majority of the
outstanding shares of the bank, or the board of directors, acting by vote of
directors not parties to the same or substantially the same action, suit, or
proceeding, constituting a majority of the whole number of directors. This
right of indemnification or reimbursement is not exclusive of other rights to
which the person, his or her heirs, executors, or administrators may be
entitled to under the law.
Mergers, Consolidations, and Sales of Assets. Neither Premier's Articles of
Incorporation nor Bylaws provide for specific approval requirements for
mergers, consolidations and sales of assets. As a result, the provisions of
the Georgia Business Corporations Code govern the approval of these
transactions. The Georgia Business Corporations Code generally provides that
approval of these transactions requires a recommendation by the board of
directors to the shareholders and approval by the shareholders by a majority
of all the votes entitled to be cast by all shares entitled to vote on the
transaction.
Neither Bank Atlanta's Charter nor Bylaws provide for specific approval
requirements for mergers, consolidations and sales of assets. As a result, the
provisions of the Financial Institutions Code govern the approval of these
transactions. The Georgia Financial Institutions Code generally provides that
approval of these transactions requires the affirmative vote of a majority of
the directors and approval by the shareholders by two-thirds of all the votes
entitled to be cast by all shares entitled to vote on the transaction.
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Number of Directors. Premier's Bylaws state that the board of directors will
consist of not less than four nor more than 19 directors. The board of
directors or the shareholders may fix or change the number of directors from
time to time within this range. The Premier board of directors presently is
fixed at 15 members.
Bank Atlanta's Bylaws state that the board of directors will consist of not
less than five nor more than 25 directors. The board of directors may increase
or decrease the number of directors within this range and by no more than two
in any one year. Bank Atlanta's board of directors presently consists of 7
members.
Dividends. Premier's Articles of Incorporation provide that subject to the
provisions of section 14-2-640 of the Georgia Business Corporations Code, the
board of directors will have the power to distribute a portion of Premier's
assets, in cash or in property, to Premier shareholders out of Premier's
capital surplus. As explained above, section 14-2-640 of the Georgia Business
Corporations Code establishes certain situations where a corporation may not
make distributions to its shareholders.
Neither Bank Atlanta's Bylaws nor Charter address how or when Bank Atlanta
may pay dividends to shareholders.
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BUSINESS OF PREMIER
GENERAL
Premier is a bank holding company headquartered in Atlanta, Georgia. Premier
conducts operations primarily in the metropolitan Atlanta area. However,
Premier also has significant operations in other areas of Georgia, as well as
a limited presence in Alabama, Florida, North Carolina, South Carolina and
Tennessee. Premier operates primarily through its commercial bank subsidiary,
Premier Bank. The principal asset of Premier is all of the issued and
outstanding shares of common stock of Premier Bank.
SUBSIDIARY
Premier Bank currently operates through 21 commercial banking offices in
Georgia. Premier Bank is a Georgia chartered commercial bank that provides a
wide range of banking services in its local markets for retail and commercial
customers, including small and mid-size businesses, public agencies and local
governments and individuals. In addition, Premier Lending Corporation, a
wholly owned subsidiary of Premier Bank, operates a total of 15 offices
throughout the Southeast. Premier Lending is a Georgia corporation that
operates primarily as a mortgage banker and acts as an intermediary between
purchasers of residential real estate or homeowners refinancing their
residences and correspondent or institutional investors seeking to purchase
mortgage loan investments.
ACQUISITIONS
Premier's profitability and market share have increased through both
internal growth and acquisitions of other financial institutions located in
Georgia.
On June 23, 1997, Premier completed its merger with Central and Southern
Holding Company, a Georgia corporation that served as the holding company for
The Central and Southern Bank of Georgia and The Central and Southern Bank of
North Georgia, FSB, in a transaction that was accounted for as a pooling of
interests. Effective April 24, 1998, The Central and Southern Bank of North
Georgia, FSB was merged into Premier Bank; and effective March 19, 1999, The
Central and Southern Bank of Georgia was merged into Premier Bank.
On December 12, 1997, Premier completed the acquisition of Citizens Gwinnett
Bankshares, Inc., a Georgia corporation that served as the holding company for
Citizens Bank of Gwinnett, in a transaction accounted for as a pooling of
interests. Effective March 27, 1998, Citizens Bank of Gwinnett was merged into
Premier Bank.
On June 9, 1998, Premier completed the acquisition of Lanier Bank & Trust
Company, a Georgia chartered commercial bank, and the merger of Lanier Bank &
Trust into Premier Bank. This transaction was accounted for as a pooling of
interests.
On July 1, 1998, Premier completed the acquisition of Button Gwinnett
Financial Corporation, a Georgia corporation that served as the holding
company for The Bank of Gwinnett County, in a transaction accounted for as a
pooling of interests. Effective December 4, 1998, The Bank of Gwinnett County
was merged into Premier Bank.
On July 2, 1998, Premier completed the acquisition of The Bank Holding
Company, a Georgia corporation that served as the holding company for The Bank
of Spalding County and First Community Bank of Henry County, in a transaction
that was accounted for as a pooling of interests. Effective April 23, 1999,
The Bank of Spalding County was merged into Premier Bank; and effective May 7,
1999, First Community Bank of Henry County was merged into Premier Bank.
On December 17, 1998, Premier completed the acquisition of Frederica Bank &
Trust, a Georgia chartered commercial bank, in a transaction accounted for as
a pooling of interests. Effective April 2, 1999, Frederica Bank & Trust was
merged into Premier Bank.
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On April 6, 1999, Premier announced an agreement to acquire North Fulton
Bancshares, Inc., a Georgia bank holding company located in Roswell, Georgia,
in a stock transaction valued at $38.5 million, based on Premier's closing
price of $20.00 on April 6, 1999. The exchange ratio will be 0.8749 shares of
Premier common stock for each share of North Fulton's common stock. North
Fulton is a holding company with assets of approximately $191 million and owns
Milton National Bank in Roswell, Georgia, which also operates in Atlanta
through its division, The Buckhead Bank. The merger with North Fulton, which
is expected to be accounted for as a pooling of interests, is subject to the
approval of regulators and North Fulton shareholders and is expected to be
completed during the third quarter of 1999.
On April 20, 1999, Premier announced an agreement to acquire Farmer's &
Merchant's Bank, a Georgia chartered commercial bank located in Summerville,
Georgia, in a stock transaction valued at $56 million, based on Premier's
closing price of $19.25 on April 19, 1999. The exchange ratio will be 4.028
shares of Premier common stock for each share of Farmer's & Merchant's common
stock. Farmer's & Merchant's was originally organized in 1926, and has assets
of approximately $173 million. From its main office and three branches in
Chattooga County, Georgia, Farmer's & Merchant's currently holds approximately
75% of the market areas' deposits, giving it the largest market share in its
market. The acquisition of Farmer's & Merchant's, which is expected to be
accounted for as a pooling of interests, is subject to the approval of
regulators and Farmers and Merchants shareholders and is expected to be
completed during the third quarter of 1999.
On July 28, 1999, Premier entered into an Agreement and Plan of
Reorganization with BB&T Corporation, pursuant to which Premier will be merged
with and into BB&T and BB&T will be the surviving corporation. As a result of
this merger, each share of Premier common stock then outstanding, including
shares of Premier common stock you will receive as Bank Atlanta shareholders,
will be converted into the right to receive 0.5155 shares of BB&T common
stock, plus cash in lieu of any fractional share interest. BB&T is a multi-
bank holding company headquartered in Winston-Salem, North Carolina. BB&T
conducts its operations in North Carolina, South Carolina, Georgia, Virginia,
Maryland and Washington, D.C., primarily through its commercial banking
subsidiaries, and to a lesser extent through its other subsidiaries. As of
March 31, 1999, BB&T had total assets of approximately $38 billion, total
deposits of approximately $24.5 billion, and total shareholders' equity of
approximately $3 billion. The merger of Premier with and into BB&T is subject
to the approval of Premier shareholders and banking regulators. The merger is
expected to be accounted for as a pooling of interests and is expected to be
completed in the first quarter of 2000. You, as a shareholder of Bank Atlanta,
will be able to vote on the merger of Premier and BB&T as a result of your
status as a Premier shareholder following Premier's completion of its
acquisition of Bank Atlanta. The foregoing is qualified in its entirety by
reference to Premier's Current Report on Form 8-K dated August 3, 1999. See
"Incorporation by Reference."
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BUSINESS OF BANK ATLANTA
GENERAL
Bank Atlanta was incorporated in 1986 under the laws of the State of
Georgia. Bank Atlanta is a full-service commercial bank, offering personal and
business checking accounts, interest-bearing checking accounts, and various
types of certificates of deposit. Bank Atlanta also provides financing for
commercial transactions, makes secured and unsecured loans, and provides other
financial services to its customers. At March 31, 1999, Bank Atlanta had total
assets of approximately $80.0 million, total deposits of approximately $70.6
million, and total shareholders' equity of approximately $7.6 million.
Bank Atlanta's principal executive offices are located at 1221 Clairmont
Road, Decatur, Georgia 30031, and its telephone number at that address is
(404) 320-3300.
MARKET AREA AND COMPETITION
Bank Atlanta is located in Decatur, Georgia. Its primary market area is
defined as DeKalb County, Georgia, from which it draws a majority of its
business. Bank Atlanta competes for deposits and loans with numerous other
financial institutions whose resources are equal to or greater than those
available to Bank Atlanta.
LENDING SERVICES
GENERAL. At March 31, 1999, Bank Atlanta's real estate-related loans
comprised 76% of its total loan portfolio, its commercial loans comprised 23%
of its total loan portfolio, and its consumer loans comprised 1% of its total
loan portfolio.
LOAN APPROVAL AND REVIEW. Bank Atlanta's loan approval policies provide for
various levels of officer lending authority. When the total amount of loans to
a single borrower exceeds that individual officer's lending authority, an
officer with a higher lending limit or Bank Atlanta's loan committee
determines whether to approve the loan request. Bank Atlanta makes loans to
its directors and executive officers on terms that are no more favorable than
are available to any other borrower.
LENDING LIMITS. Bank Atlanta's lending activities are subject to a variety
of lending limits imposed by federal law. Differing limits apply based on the
type of loan and the nature of the borrower, including the borrower's other
loan relationships with Bank Atlanta. In general, however, Bank Atlanta is
able to loan any one borrower a maximum amount equal to either:
. 15% of Bank Atlanta's capital and surplus; or
. 25% of its capital and surplus if the excess over 15% is secured by good
collateral or other ample security.
At March 31, 1999, Bank Atlanta's lending limit was approximately $1.14
million for loans not fully secured and approximately $1.90 million for loans
secured by good collateral or other ample security.
CREDIT RISK. The principal economic risk associated with each category of
the loans that Bank Atlanta makes is the creditworthiness of the borrower.
Borrower creditworthiness is affected by general economic conditions and the
strength of the service and retail market segments. Risks associated with real
estate loans also include fluctuations in the value of real estate, new job
creation trends, tenant vacancy rates and, in the case of commercial
borrowers, the quality of the borrower's management. In addition, a commercial
borrower's ability both to properly evaluate changes in the supply and demand
characteristics affecting its markets for products and services and to respond
effectively to such changes are significant factors in determining its
creditworthiness. General economic factors affecting a borrower's ability to
repay include interest, inflation and employment rates.
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REAL ESTATE LOANS. Bank Atlanta makes commercial real estate loans,
construction and development loans, and residential real estate loans in and
around DeKalb County. These loans include commercial loans where Bank Atlanta
takes a security interest in real estate. The primary source of repayment on
these loans, however, is not from the sale or rental of the real estate.
Instead, it is from the operations of the business. Real estate loans exclude
home equity loans which are classified as consumer loans.
Commercial Real Estate. Commercial real estate loan terms generally are
limited to five years or less, although payments may be structured on a longer
amortization basis. Interest rates may be fixed or adjustable, although rates
generally are not fixed for a period exceeding 60 months. Bank Atlanta will
also generally charge an origination fee. Bank Atlanta attempts to reduce
credit risk on its commercial real estate loans by generally:
. emphasizing loans on owner-occupied office, warehouse and retail
buildings;
. limiting the ratio of the principal amount of the loan to the value of
the collateral, as established by an independent appraisal, to no more
than 80%; and
. requiring that the net projected cash flow available for debt service
equal 120% of the debt service requirement.
In addition, Bank Atlanta generally requires personal guarantees from the
property owners supported by Bank Atlanta's review of the owners' personal
financial statements. Risks associated with commercial real estate loans
include fluctuations in the value of real estate, new job creation trends,
tenant vacancy rates and the quality of the borrower's management. Bank
Atlanta limits its risk by analyzing borrowers' cash flow and their collateral
value on an ongoing basis.
Construction and Development Loans. Bank Atlanta makes construction and
development loans on a pre-sold and speculative basis. If the borrower has
entered into an agreement to sell the property prior to beginning
construction, then the loan is considered to be on a pre-sold basis. If the
borrower has not entered into an agreement to sell the property prior to
beginning construction, then the loan is considered to be on a speculative
basis. Construction and development loans are generally made with a term of
twelve months and interest is paid monthly. The ratio of the principal amount
of the loan to the value of the collateral, as established by an independent
appraisal, does not exceed 75%. Speculative loans are based on the borrower's
track record, financial strength and cash flow position. Loan proceeds are
disbursed as the project is completed and only after the project has been
physically inspected by an experienced construction lender or appraiser. Risks
associated with construction loans include fluctuations in interest rates and
in the value of real estate, and new job creation trends.
Residential Real Estate. Bank Atlanta's residential real estate loans
consist of residential construction loans and residential mortgage loans. Bank
Atlanta offers variable rates on its residential construction loans and
generally makes these loans to both established builders and directly to
homeowners. The ratio of the construction loan principal to the value of
collateral, as established by an independent appraisal, generally does not
exceed 80%. Bank Atlanta believes that this loan-to-value ratio limitation is
sufficient to compensate for fluctuations in real estate market value and to
minimize losses that could result from a downturn in the residential real
estate market.
COMMERCIAL LOANS. Bank Atlanta makes commercial loans to small- and medium-
size businesses and professional concerns. The terms of these loans vary by
their purpose and by their underlying collateral, if any. Bank Atlanta
typically makes equipment loans for a term of seven years or less at fixed or
variable rates, with the loan being fully amortized over the term. Equipment
loans are generally secured by the financed equipment, and the ratio of the
amount of the loan to the value of the financed equipment or other collateral
is generally 80% or less. Loans to support working capital typically have
terms of one year or less and are usually secured by accounts receivable and
inventory. In general, all loans carry the personal guarantees of the
principals of the business. For loans secured by accounts receivable or
inventory, principal is typically repaid as the assets securing the loan are
converted into cash, and for loans secured with other types of collateral,
principal is
35
<PAGE>
typically due at maturity. The quality of the commercial borrower's
management, its ability to properly evaluate changes in the supply and demand
characteristics affecting its markets for products and services, and its
ability to respond effectively to such changes are significant factors in its
creditworthiness.
Bank Atlanta also makes commercial loans to small businesses with respect to
which the SBA generally guarantees repayment of up to 75% of the loan amount,
subject to other customary limitations. Bank Atlanta may sell the guaranteed
portion of these loans to institutional investors in the secondary markets.
Bank Atlanta retains servicing rights and obligations on all the guaranteed
portions which are sold. Risks associated with these loans include credit
risk, e.g., fraud, bankruptcy, economic downturn, deteriorated or non-existing
collateral and changes in interest rates, and operational risk, e.g., failure
of Bank Atlanta to adhere to SBA funding and servicing requirements that are
needed to secure and maintain the SBA guarantees and servicing rights.
CONSUMER LOANS. Bank Atlanta makes a variety of loans to individuals for
personal, family and household purposes, including secured and unsecured
installment and term loans, home equity loans and lines of credit. Consumer
loan repayments depend upon the borrower's financial stability and can be
adversely affected by divorce, job loss, illness and personal hardships.
Because many consumer loans are secured by depreciable assets such as boats,
cars and trailers, Bank Atlanta amortizes the loan over the useful life of the
asset. To minimize the risk that the borrower cannot afford the monthly
payments, Bank Atlanta limits fixed monthly obligations to no more than 38% of
the borrower's gross monthly income. In addition, the borrower should also be
employed for at least 12 months prior to obtaining the loan. The loan officer
reviews the borrower's past credit history, past income level, debt history
and, when applicable, cash flow to determine the impact of all of these
factors on the borrower's ability to make future payments as agreed.
INVESTMENTS
In addition to loans, Bank Atlanta makes other investments primarily in
obligations of the United States government agencies or obligations guaranteed
as to principal and interest by the United States government, other taxable
securities and other obligations of states and municipalities. As of March 31,
1999, investment securities comprised approximately 18% of Bank Atlanta's
assets, with net loans comprising approximately 64% of Bank Atlanta's assets.
Bank Atlanta also engages in Federal funds transactions with its principal
correspondent banks, and Bank Atlanta primarily acts as a net seller of
Federal funds. The sale of Federal funds amounts to a short-term loan from
Bank Atlanta to another financial institution.
DEPOSITS
Bank Atlanta offers a wide range of commercial and consumer deposit
accounts, including checking accounts, money market accounts, a variety of
certificates of deposit, and individual retirement accounts. The primary
sources of deposits are residents of, and businesses and their employees
located in and around, DeKalb County. Deposits are obtained through personal
solicitation by Bank Atlanta's officers and directors, direct mail
solicitations and advertisements published in the local media. Bank Atlanta
offers a broad array of competitively priced deposit services, including
demand deposits, regular savings accounts, money market deposits (transaction
and investment), certificates of deposit, retirement accounts, and other
deposit or funds transfer services which may be permitted by law or regulation
and which may be offered to remain competitive in the market.
EMPLOYEES
At March 31, 1999, Bank Atlanta employed 23 full-time employees. Bank
Atlanta considers its employee relationships to be very good.
FACILITIES
Bank Atlanta owns its main office, which is located at 1221 Clairmont Road,
Decatur, Georgia.
36
<PAGE>
LEGAL PROCEEDINGS
Neither Bank Atlanta nor any of its properties is subject to any material
pending legal proceedings, and Bank Atlanta does not know of any material
proceedings being contemplated by any governmental authority.
37
<PAGE>
BANK ATLANTA MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This analysis has been prepared to provide insight into the financial
condition of Bank Atlanta and address the factors which have affected Bank
Atlanta's results of operations. Bank Atlanta's financial statements and
accompanying notes are an integral part of this discussion and should be read
in conjunction with it.
FORWARD-LOOKING STATEMENTS
This discussion contains forward-looking statements which are based on
assumptions and involve risks and uncertainities. These forward-looking
statements describe our future plans, strategies, and our expectations.
Forward-looking statements are generally identified by use of the words
"believe," "expect," "intend," "anticipate," "estimate," "project," or similar
expressions. Our ability to predict results or the actual effect of future
plans or strategies is inherently uncertain. Factors which could have a
material adverse effect on our operations include, but are not limited to,
changes in interest rates, general economic conditions, legislation and
regulation, monetary and fiscal policies of the U.S. Government, including
policies of the U.S. Treasury and the Federal Reserve Board, the quality or
composition of our loan or investment portfolios, demand for loan products,
deposit flows, competition, demand for financial services in our market area,
and accounting principles and guidelines. You should consider these risks and
uncertainties in evaluating forward-looking statements and should not place
undue reliance on forward-looking statements. We will not revise any forward-
looking statements to reflect events or circumstances after the date of this
discussion or to reflect the occurrence of anticipated or unanticipated
events.
LIQUIDITY
Liquidity management involves the management of assets and liabilities in
such a way to meet customer demands for deposit withdrawals and fund all
prudent loan requests. Bank Atlanta's primary sources of cash flows are
generated from interest and fee income, loan repayments, deposit growth, and
the maturities of securities.
Bank Atlanta manages its assets with the intent to satisfy its liquidity
needs through normal bank operations. Bank Atlanta's target is to maintain a
liquidity ratio of 25%. Federal funds sold, which averaged approximately
$4,150,000 during 1998, represent Bank Atlanta's primary immediate source of
liquidity and are generally maintained at a level adequate to meet its ongoing
needs for liquidity. Bank Atlanta also maintains a Federal funds purchase line
totaling approximately $4.1 million with a correspondent bank to further
facilitate liquidity needs.
As of December 31, 1998, Bank Atlanta's liquidity ratio was approximately
33% and Bank Atlanta had no borrowings outstanding under its federal funds
purchase line. Bank Atlanta monitors its assets and liabilities in an effort
to provide for proper balance between liquidity, safety, and profitability.
The liquidity position of Bank Atlanta is significantly affected by the loan
to deposit ratio. Bank Atlanta monitors its loan to deposit ratio on a daily
basis and targets a ratio of 75%. At December 31, 1998 and 1997 the loan to
deposit ratio was 77.85% and 80.07%, respectively.
CAPITAL RESOURCES
As of March 31, 1999 and December 31, 1998, Bank Atlanta had capital in
excess of regulatory minimums, as shown below. Stockholders' equity of
$7,308,000 at December 31, 1998 increased by 23.6% over December 31, 1997. The
increase in capital was due to earnings of $1,405,000 offset by Bank Atlanta's
first declared dividend of $71,000 or $.10 per share. Additionally,
stockholders' equity was decreased by $13,000 in unrealized losses on
securities available-for-sale, net of tax. During 1998, stock options were
exercised resulting in an injection of $59,000 of capital. The tax effect of
stock-based compensation related to the exercise of non-qualified stock
options, which totaled $16,000, was recorded as an additional increase to
capital surplus. As of
38
<PAGE>
March 31, 1999, stockholder's equity increased by $286,000 or 3.91% to
$7,594,000 compared to December 31, 1998. The increase in capital was due to
earnings of $343,000 offset by unrealized losses of $57,000 in securities
available-for-sale, net of tax.
The table below shows capital ratios for Bank Atlanta as of March 31, 1999
and December 31, 1998:
<TABLE>
<CAPTION>
MINIMUM CAPITAL REQUIREMENTS ACTUAL CAPITAL RATIOS
---------------------------- --------------------------------
MARCH 31, 1999 DECEMBER 31, 1998
-------------- -----------------
<S> <C> <C>
Tier 1 Capital to Risk-based Assets: 4%.... 12.83%(1) 11.72%(1)
Total Capital to Risk-based Assets: 8%..... 14.08%(2) 12.97%(2)
Leverage Ratio (Tier 1 Capital to Average
Total Assets): 4%......................... 9.50%(3) 9.24%(3)
</TABLE>
- --------
(1) Minimum for "well-capitalized" = 6%
(2) Minimum for "well-capitalized" = 10%
(3) Minimum for "well-capitalized" = 5%
THE YEAR 2000 ISSUE
The year 2000 issue concerns the potential inability of computer systems or
any equipment with computer chips to recognize the year 2000. On January 1,
2000, any clock or date recording mechanism, including date-sensitive
software, which uses only two digits rather than four to represent the year
may recognize a date using "00" as the year 1900 rather than the year 2000.
For example, computer systems may compute payment, interest, delinquency or
other amounts important to Bank Atlanta's operations based on the wrong date.
This could result in system failures or miscalculations that cause disruption
of operations, including, among other things, a temporary inability to process
transactions, send invoices, or perform similar tasks.
Year 2000 problems could have a material adverse effect on Bank Atlanta's
operations if interest accruals for loans and deposits are not calculated
properly. Additionally, system failure could result in a disruption of
business which in turn could cause Bank Atlanta to lose a significant portion
of its customer base and could result in material adverse consequences for
Bank Atlanta.
At Bank Atlanta, preparation for year 2000 challenges is a top priority.
Bank Atlanta has formed a project team consisting of select personnel to
address the year 2000 issue. The project manager reports to the board of
directors. The project team has been charged with the responsibility of
assessing the problem, overseeing corrective action, as well as testing the
year 2000 readiness of all equipment, software, and applications after
upgrades have been made. Bank Atlanta's senior management continues to oversee
the year 2000 project. The year 2000 project is well underway to minimize any
disruption in service to customers and to preserve customer confidence. Bank
Atlanta has committed the people and the resources it believes are necessary
to prepare for the millennium change. Bank Atlanta has progressed through the
awareness, assessment, and renovation phases and is well into the validation
and implementation phases. In the validation and implementation phases,
testing is conducted and results are analyzed to confirm that the changes made
bring the affected system into compliance and that no problems have surfaced
as a result.
Bank Atlanta's goal is to make sure that customers are protected from any
year 2000 problems and to provide customers with accurate and timely
information about the year 2000 problem as well as Bank Atlanta's progress
towards compliance. Bank Atlanta has provided numerous informational brochures
and letters to its customers. This will be continued throughout 1999.
Bank Atlanta has distinguished between its mission critical and non-critical
systems and is giving priority attention to its mission-critical systems.
These systems are core processing system, both hardware and software, teller
processing system and items processing. During the first quarter of 1999, Bank
Atlanta converted to a new data processing service provider. Bank Atlanta
believes that the change will not pose any year 2000 compliance
39
<PAGE>
problems. Automated new accounts and loan document preparation software, local
area network and personal computers have been designated as mission-necessary
and have also been given appropriate attention. All personal computers and the
local area network have been tested and certified to be year 2000 compliant.
Bank Atlanta's loan customers could also experience business interruptions
that could affect their ability to repay debts owed to Bank Atlanta resulting
in adverse financial performance by Bank Atlanta. Bank Atlanta's senior
lending officer is evaluating the current commercial relationships and is
continuing with the assessment of each new commercial relationship. Management
and the board of directors realize that, due to many factors, consumers may
withdraw extra amounts of money which could result in a liquidity issue for
Bank Atlanta. Bank Atlanta will closely monitor its liquidty needs throughout
1999, with extra emphasis during the fourth quarter.
In addition to assessing Bank Atlanta's information technology system and
the risks associated with its customer credit relationships, Bank Atlanta has
also assessed its electronic equipment, such as building security,
environmental systems and other devices which contain embedded electronic
circuits. Since Bank Atlanta relies on other outside vendors for many services
such as electricity, phone service, water, gas, bond accounting, accounts
payable, and other related services, Bank Atlanta has sent correspondence to
each of these vendors requesting information regarding their year 2000
readiness. Correspondence with vendors continues to be obtained and evaluated.
With regard to these non-information technology systems, Bank Atlanta
anticipates substantial year 2000 compliance no later than June 30, 1999.
Bank Atlanta presently believes that, with modifications to its computer
systems and the conversion to new systems, the year 2000 issue will not pose
significant operational problems for Bank Atlanta or have a material adverse
effect on future operating results. However, Bank Atlanta can give no
assurance that the modifications and conversions will remedy all deficiencies,
that failure of any of Bank Atlanta's systems will not have a material impact
on operations, or that failure of any other companies' systems with whom Bank
Atlanta conducts business will not have a material impact on Bank Atlanta's
operations.
Due to the critical nature of the core processing system, Bank Atlanta has
developed new contingency plans to accommodate the new systems that were
recently installed as a result of the conversion to the new data processing
service provider. Bank Atlanta is also developing contingency plans to
accommodate disruption of service due to power outages, natural disasters and
other year 2000 issues. These plans are expected to be in place by June 30,
1999.
After the assessment phase of Bank Atlanta's year 2000 project, the board of
directors approved a budget of $80,000 to address year 2000 issues, consisting
mainly of new hardware and software systems. The budget is subject to
continuous review and amendment. Management does not expect the cost of
remediation to vary significantly from the present budget. As of March 31,
1999, approximately $64,522 of costs had been incurred by Bank Atlanta with
respect to year 2000 issues.
The costs of the year 2000 project and the date which Bank Atlanta plans to
complete the year 2000 modifications are based upon management's best
estimates, which it derived utilizing assumptions of future events including
the continued availability of resources, third party modification plans and
other factors. Bank Atlanta can give no guarantee that these estimates will be
achieved, and actual results could differ materially from those planned.
Specific factors that might cause material differences from Bank Atlanta's
estimates include, but are not limited to, the availability and cost of
personnel trained in this area, the ability to locate and correct all relevant
computer codes, and similar uncertainties.
Bank Atlanta is not aware of any known trends, events or uncertainties,
other than the effect of the events described above, that will have or that
are reasonably likely to have a material effect on its liquidity, capital
resources or operations. Bank Atlanta is also not aware of any current
recommendations by its regulatory authorities which, if they were implemented,
would have such an effect.
40
<PAGE>
FINANCIAL CONDITION
Total assets of Bank Atlanta increased to $79,447,000 at December 31, 1998
from $70,558,000 at December 31, 1997 or a $8,889,000 increase, which
approximates a 12.60% growth rate for 1998. As of March 31, 1999, total assets
grew to $79,968,000, representing a 0.66% increase over December 31, 1998.
This growth has been funded by increases in deposits of $7,103,000 and
$310,000 for the year ended December 31, 1998 and the three months ended March
31, 1999, respectively.
In 1998, average earning assets were approximately $71,159,000, a 28.53%
increase from $55,364,000 in 1997. The increase of $15,795,000 consisted
mainly of a $13,782,000 increase in average loans and a $2,981,000 increase in
average securities, offset by a $1,010,000 decrease in average federal funds
sold. Average earning assets totaled approximately $78,114,000 for the first
three months of 1999, which represents a 9.77% increase over the 1998 average.
The increase was mainly in Federal funds sold which increased to an average
balance of $10,348,000 for the three months ended March 31, 1999 from an
average balance of $4,150,000 for the year ended December 31, 1998 or a 150%
increase.
Earning assets are funded primarily from deposit accounts obtained from Bank
Atlanta's geographic trade area. Average deposits approximated $65,954,000
during 1998 compared to $52,313,000 during 1997. Of the average deposits,
approximately $58,379,000 and $45,304,000 were interest-bearing liabilities
during 1998 and 1997, respectively. The growth in average deposits from 1997
to 1998 was concentrated in time deposits and is a result of several deposit
campaigns to attract new time deposits to keep pace with Bank Atlanta's loan
demand.
The following table shows the amount of Bank Atlanta's interest income and
interest expense for each category of interest-earning assets and interest-
bearing liabilities and the average interest yield/rate for total interest-
earning assets and total interest-bearing liabilities, net interest spread and
net yield on average interest-earning assets.
41
<PAGE>
DISTRIBUTION OF ASSETS, LIABILITIES AND STOCKHOLDERS' EQUITY INTEREST RATES AND
INTEREST DIFFERENTIALS
<TABLE>
<CAPTION>
1998 1997
--------------------------- ---------------------------
AVERAGE INCOME/ YIELDS/ AVERAGE INCOME/ YIELDS/
BALANCES(1) EXPENSE RATES BALANCES(1) EXPENSE RATES
----------- ------- ------- ----------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Taxable investment secu-
rities................. $8,771 $ 533 6.08% $7,977 $ 500 6.27%
Nontaxable investment
securities(5).......... 2,269 110 4.85 82 4 4.88
Unrealized gains (loss-
es) on securities...... 13 (42)
Federal funds sold...... 4,150 219 5.28 5,160 293 5.68
Loans(2)(4)............. 55,969 6,020 10.76 42,187 4,473 10.60
Allowance for loan loss-
es..................... (946) (677)
Cash and due from banks. 1,908 1,646
Other assets............ 2,125 2,358
------ ----- ------ -----
Total................. 74,259 6,882 58,691 5,270
====== ===== ====== =====
Total interest-earning
assets................. 71,159 9.67% 55,406 9.51%
====== ===== ====== =====
Noninterest-bearing de-
mand................... 7,575 7,009
Interest-bearing demand
& savings.............. 7,353 206 2.80 7,355 210 2.86
Time.................... 51,026 3,034 5.95 37,949 2,255 5.94
------ ----- ----- ------ ----- -----
Total deposits........ 65,954 3,240 52,313 2,465
Other liabilities....... 1,644 1,124
Stockholders' equity(3). 6,661 5,254
------ ------
Total................. 74,259 3,240 58,691 2,465
====== ===== ====== =====
Total interest-bearing
liabilities............ 58,379 5.55% 45,304 5.44%
====== ===== ====== =====
Net interest income..... 3,642 2,805
===== =====
Net interest spread..... 4.12% 4.07%
===== =====
Net yield on average in-
terest-earning assets.. 5.12% 5.06%
===== =====
</TABLE>
- --------
(1) Average balances were determined using daily average balances.
(2) Average balances of loans include nonaccrual loans and are net of deferred
interest and fees.
(3) Average unrealized gains (losses) on securities available-for-sale, net of
tax, have been included in stockholders' equity at $9,308 and $(27,466) for
1998 and 1997, respectively.
(4) Interest and fees on loans include $378,000 and $226,000 of loan fee income
for the years ended December 31, 1998 and 1997, respectively.
(5) Yields on nontaxable securities are not presented on a tax-equivalent
basis.
42
<PAGE>
RATE AND VOLUME ANALYSIS
The following table describes the extent to which changes in interest rates
and changes in volume of interest-earning assets and interest-bearing
liabilities have affected Bank Atlanta's interest income and expense during
the year indicated. For each category of interest-earning assets and interest-
bearing liabilities, information is provided on changes attributable to (1)
change in volume, which is the change in volume multiplied by old rate; (2)
change in rate, which is the change in rate multiplied by old volume; and (3)
a combination of change in rate and change in volume. The changes in interest
income and interest expense attributable to both volume and rate have been
allocated proportionately to the change due to volume and the change due to
rate.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1998 TO 1997
--------------------------------
INCREASE (DECREASE)
DUE TO CHANGE IN
---------------------
VOLUME RATE TOTAL
----------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Income from interest-earning assets:
Interest and fees on loans.................. $ 1,478 $ 69 $ 1,547
Interest on taxable securities.............. 46 (13) 33
Interest on nontaxable securities........... 107 (1) 106
Interest on Federal funds sold.............. (54) (20) (74)
----------- -------- --------
Total interest income..................... 1,577 35 1,612
----------- -------- --------
Expense from interest-bearing liabilities:
Interest on interest-bearing demand deposits
and savings deposits....................... -- (4) (4)
Interest on time deposits................... 775 4 779
----------- -------- --------
Total interest expense.................... 775 -- 775
----------- -------- --------
Net interest income....................... $ 802 $ 35 $ 837
=========== ======== ========
</TABLE>
ASSET/LIABILITY MANAGEMENT
Bank Atlanta's objective is to manage assets and liabilities to provide a
satisfactory, consistent level of profitability within the framework of
established cash, loan, investment, borrowing and capital policies. Certain
officers are charged with the responsibility of monitoring policies and
procedures that are designed to ensure acceptable composition of the
asset/liability mix. Bank Atlanta's overall philosophy is to support asset
growth primarily through growth of core deposits of all categories deposited
by individuals, partnerships and corporations in Bank Atlanta's primary market
area.
Bank Atlanta's asset/liability mix is monitored on a regular basis.
Management prepares a report evaluating Bank Atlanta's interest rate-sensitive
assets and liabilities and presents it to the board of directors on a monthly
basis. The objective of this policy is to minimize the impact of substantial
movements in interest rates on earnings. An asset or liability is considered
to be interest rate-sensitive if it will reprice or mature within the time
period analyzed. The interest rate-sensitivity gap is the difference between
the interest-earning assets and interest-bearing liabilities scheduled to
mature or reprice within the time period. A gap is considered positive when
the amount of interest rate-sensitive assets exceeds the amount of interest
rate-sensitive liabilities. A gap is considered negative when the amount of
interest rate-sensitive liabilities exceeds the interest rate-sensitive
assets. During a period of rising interest rates, a negative gap would tend to
adversely affect net interest income, while a positive gap would tend to
result in an increase in net interest income. Conversely, during a period of
falling interest rates, a negative gap would tend to result in an increase in
net interest income, while a positive gap would tend to adversely affect net
interest income. If Bank Atlanta's assets and liabilities were equally
flexible and moved concurrently, the impact of any increase or decrease in
interest rates on net interest income would be minimal.
A simple interest rate "gap" analysis by itself may not be an accurate
indicator of how net interest income will be affected by changes in interest
rates. Accordingly, Bank Atlanta also evaluates how the repayment of
particular assets and liabilities is impacted by changes in interest rates.
Income associated with interest-earning
43
<PAGE>
assets and costs associated with interest-bearing liabilities may not be
affected uniformly by changes in interest rates. In addition, the magnitude
and duration of changes in interest rates may have a significant impact on net
interest income. For example, although certain assets and liabilities may have
similar maturities or periods of repricing, they may react in different
degrees to changes in market interest rates. Interest rates on certain types
of assets and liabilities fluctuate in advance of changes in general market
rates, while interest rates on other types may lag behind changes in general
market rates. In addition, certain assets, such as adjustable rate mortgage
loans, have features, generally referred to as interest rate caps and floors,
that limit the amount of changes in interest rates. Prepayment and early
withdrawal levels also could deviate significantly from those assumed in
calculating the interest rate gap. The ability of many borrowers to service
their debts also may decrease during periods of rising interest rates.
Changes in interest rates also affect Bank Atlanta's liquidity position.
Bank Atlanta currently prices deposits in response to market rates, and it is
management's intention to continue this policy. If deposits are not priced in
response to market rates, a loss of deposits could occur, which would
negatively affect Bank Atlanta's liquidity position.
At December 31, 1998 Bank Atlanta's cumulative one year interest rate-
sensitivity gap ratio was 96%. Bank Atlanta's targeted ratio is 80% to 120% in
this time period. This indicates that Bank Atlanta's interest-earning assets
will reprice during this period at a rate slower than Bank Atlanta's interest-
bearing liabilities.
The following table shows the distribution of the repricing of Bank
Atlanta's interest-earning assets and interest-bearing liabilities as of
December 31, 1998, the interest rate sensitivity gap which is interest rate-
sensitive assets less interest rate-sensitive liabilities, the cumulative
interest rate-sensitivity gap, the interest rate-sensitivity gap ratio which
is interest rate-sensitive assets divided by interest rate-sensitive
liabilities, and the cumulative interest rate-sensitivity gap ratio.
The table also shows the time periods in which interest-earning assets and
interest-bearing liabilities will mature or may reprice in accordance with
their contractual terms. However, the table does not necessarily indicate the
impact of general interest rate movements on the net interest margin since the
repricing of various categories of assets and liabilities is subject to
competitive pressures and the needs of Bank Atlanta's customers. In addition,
various assets and liabilities indicated as repricing within the same period
may in fact reprice at different times within the period and at different
rates.
<TABLE>
<CAPTION>
AFTER
THREE AFTER
MONTHS ONE YEAR
WITHIN BUT BUT AFTER
THREE WITHIN WITHIN FIVE
MONTHS ONE YEAR FIVE YEARS YEARS TOTAL
------- -------- ---------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Earning assets:
Federal funds sold.............. $ 8,950 $ -- $ -- $ -- $ 8,950
Investment securities........... 212 505 9,031 2,667 12,415
Loans........................... 45,849 3,180 4,214 1,737 54,980
------- -------- ------- ------- -------
Total interest earning assets. 55,011 3,685 13,245 4,404 76,345
------- -------- ------- ------- -------
Interest-bearing liabilities:
Interest-bearing demand depos-
its............................ 6,305 -- -- -- 6,305
Savings......................... 493 -- -- -- 493
Time deposits................... 12,652 41,474 2,709 -- 56,835
------- -------- ------- ------- -------
Total interest-bearing liabil-
ities........................ 19,450 41,474 2,709 -- 63,633
------- -------- ------- ------- -------
Interest rate sensitivity gap..... $35,561 $(37,789) $10,536 $ 4,404 $12,712
======= ======== ======= ======= =======
Cumulative interest rate sensitiv-
ity gap.......................... $35,561 $ (2,228) $ 8,308 $12,712
======= ======== ======= =======
Interest rate sensitivity gap ra-
tio.............................. 2.83 0.09 4.89 --
======= ======== ======= =======
Cumulative interest rate sensitiv-
ity gap ratio.................... 2.83 0.96 1.13 1.20
======= ======== ======= =======
</TABLE>
44
<PAGE>
Bank Atlanta actively manages the mix of asset and liability maturities to
control the effects of changes in the general level of interest rates on net
interest income. Except for its effect on the general level of interest rates,
inflation does not have a material impact on Bank Atlanta due to the rate
variability and short-term maturities of its earning assets. In particular,
approximately 89% of the loan portfolio is comprised of loans which have
variable rate terms or mature within one year. Most mortgage loans are made on
a variable rate basis with rates being adjusted every one to five years.
SECURITIES PORTFOLIO
Bank Atlanta's securities portfolio constitutes the second largest component
of total earning assets. The securities portfolio:
. provides a primary source of liquidity for meeting Bank Atlanta's loan
demands and periodic deposit outflows;
. serves as an investment medium for funds not immediately needed for
meeting loan demand or deposit flows; and
. provides a supply of collateral for public deposits.
Bank Atlanta generally intends to hold all securities purchased to maturity.
However, market conditions may from time to time warrant the sale of
securities prior to maturity. Therefore, Bank Atlanta has classified 73.63% of
securities as of March 31, 1999 as available-for-sale in accordance with
Statement of Financial Accounting Standards No. 115. As of December 31, 1998
and 1997, the ratio of available-for-sale securities to total securities was
66.13% and 42.81%, respectively.
From December 31, 1997 to December 31, 1998, Bank Atlanta's holdings in
securities, including overnight Federal funds sold, increased $4,801,000 or
28.98%. At December 31, 1998, securities, including overnight Federal funds
sold, represented 28.10% of earning assets as compared to 24.68% at December
31, 1997. Securities with a carrying value of $2,520,000 and $3,999,000 at
December 31, 1998 and 1997, respectively, were pledged to secure public
deposits and for other purposes. As of March 31, 1999, holdings of securities
and Federal funds sold increased $4,568,000 or 21.38% over December 31, 1998
as a result of a decreasing loan portfolio.
Unrealized losses amounted to approximately $10,000 and unrealized gains
amounted to approximately $9,000 at December 31, 1998 and 1997, respectively.
Due to the rising interest rate environment during the first quarter of 1999,
coupled with a longer weighted average life of the U.S. Agency portfolio, Bank
Atlanta's available-for-sale bond portfolio depreciated in value with
unrealized losses, net of tax, amounting to $98,000 as of March 31, 1999.
45
<PAGE>
The following table reflects the carrying value and approximate fair value
of Bank Atlanta's securities as well as selected maturity information.
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
--------- ---------- ---------- ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Securities Available-for-Sale December
31, 1998:
U. S. Government and agency securi-
ties................................ $6,497 $20 $(24) $6,493
Mortgage-backed securities........... 1,511 -- (6) 1,505
Equity securities.................... 212 -- -- 212
------ --- ---- ------
$8,220 $20 $(30) $8,210
====== === ==== ======
December 31, 1997:
U. S. Government and agency securi-
ties................................ $4,001 $12 $ (3) $4,010
Equity securities.................... 140 -- -- 140
------ --- ---- ------
$4,141 $12 $ (3) $4,150
====== === ==== ======
Securities Held-to-Maturity December
31, 1998:
U. S. Government and agency securi-
ties................................ $ 500 $13 $-- $ 513
State and municipal securities....... 2,827 65 (3) 2,889
Mortgage-backed securities........... 878 12 -- 890
------ --- ---- ------
$4,205 $90 $ (3) $4,292
====== === ==== ======
December 31, 1997:
U. S. Government and agency securi-
ties................................ $3,483 $16 $ (4) $3,495
State and municipal securities....... 598 9 -- 607
Mortgage-backed securities........... 1,463 10 -- 1,473
------ --- ---- ------
$5,544 $35 $ (4) $5,575
====== === ==== ======
</TABLE>
Bank Atlanta does not have investments in any one issuer totaling more than
10% of Bank Atlanta's stockholders' equity.
MATURITIES
The carrying amounts of securities in each category as of December 31, 1998
are shown in the following table according to maturity classifications of: (1)
one year or less; (2) after one year through five years; (3) after five years
through ten years; and (4) after ten years.
<TABLE>
<CAPTION>
U. S. TREASURY AND
STATE AND OTHER U.S.
POLITICAL GOVERNMENT
SUBDIVISIONS AGENCIES
-------------- --------------------
CARRYING CARRYING
AMOUNT YIELD AMOUNT YIELD
-------- ----- ---------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
MATURITY:
One year or less........................ $ -- -- % $ 505 5.62%
After one year through five years....... 1,801 6.05 7,230 5.72
After five years through ten years...... 478 6.08 1,641 6.56
After ten years......................... 548 7.01 -- --
------ ----------
$2,827 6.24% $ 9,376 5.86%
====== ==========
</TABLE>
46
<PAGE>
The yields indicated in the table were computed using coupon interest rates,
including discount accretion, or subtracting premium amortization, as
appropriate, on a ratable basis over the life of each security. The weighted
average yield for each maturity range was computed using the acquisition price
of each security in that range. Additionally, yields on state and political
subdivision securities have been computed on a tax-equivalent basis. The table
excludes the carrying amounts of equity securities totaling $212,000 which
have no contractual maturity.
LOAN PORTFOLIO
Loans are the single largest component of earning assets, as well as the
highest yielding component. At December 31, 1998 and 1997, respectively, loans
represented 71.90% and 75.32% of total earning assets and 68.83% and 71.65% of
total assets. Total loans increased $4,126,000 or 8.16% in 1998, compared to
an increase of $18,583,000 or 58.12% in 1997. The increase in 1998 was
concentrated in commercial and real estate lending. The substantial increases
in 1997 were due to a focus on loan production in the areas of construction
and commercial loans. These loan production areas finished the year $4,337,000
and $5,271,000 ahead of budget for loan production in 1997.
During 1998, Bank Atlanta experienced turnover in several key positions,
including the president, the construction lender, and the SBA loan originator.
As a result, loan production declined during 1998 due to Bank Atlanta's focus
on management transition. The budgeted loan production for 1998 in the
construction and SBA areas was a combined $35,550,000 compared to actual
combined production of $22,270,000.
Bank Atlanta's loan portfolio has a concentration in loans secured by real
estate. Real estate loans consist primarily of real estate mortgages and real
estate construction projects. Bank Atlanta's other loan concentration is in
commercial and industrial loans, which are made primarily to businesses in
Decatur, Georgia and the surrounding metro Atlanta area. Management is not
aware of any additional concentration.
TYPES OF LOANS
The amount of loans outstanding at the indicated dates is shown in the
following table according to the type of loans.
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1998 1997
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Commercial and industrial............................. $ 10,916 $ 8,778
Real estate--construction............................. 14,226 13,723
Real estate--mortgage................................. 29,156 27,638
Consumer and other.................................... 682 713
----------- -----------
54,980 50,852
Unearned income....................................... (299) (297)
Allowance for loan losses............................. (981) (849)
----------- -----------
Loans, net............................................ $ 53,700 $ 49,706
=========== ===========
</TABLE>
MATURITIES AND SENSITIVITIES TO CHANGES IN INTEREST RATES
Total loans as of December 31, 1998 are shown in the following table
according to maturities of (1) one year or less, (2) after one year through
five years, and (3) after five years.
<TABLE>
<CAPTION>
(DOLLARS IN
THOUSANDS)
-----------
<S> <C>
Maturity:
One year or less.................................................. $49,029
After one year through five years................................. 4,214
After five years.................................................. 1,737
-------
$54,980
=======
</TABLE>
47
<PAGE>
The following table summarizes loans at December 31, 1998 with due dates
after one year which (1) have predetermined interest rates and (2) have
floating or adjustable interest rates.
<TABLE>
<CAPTION>
(DOLLARS IN
THOUSANDS)
-----------
<S> <C>
Predetermined interest rates........................................ $ 5,951
Floating or adjustable interest rates............................... 22,465
-------
$28,416
=======
</TABLE>
RISK ELEMENTS AND NONPERFORMING LOANS
At March 31, 1999, past due loans over 30 days totaled approximately
$1,259,000 or 2.42% of loans outstanding compared to $810,000 or 1.48% at
December 31, 1998 and $209,000 or .41% at December 31, 1997. All loans which
are 90 days delinquent are placed on non-accrual status unless the loan is
fully secured by marketable collateral. Loans are charged-off when losses are
identified. Loans past due 90 days or more and still accruing totaled
approximately $6,000 as of December 31, 1998, which represents 0.01% of
outstanding loans. As of December 31, 1997 there were no loans past due 90
days or more and still accruing. As of March 31, 1999, there were no loans
past due 90 days or more and still accruing.
Management considers all nonaccrual loans to be impaired in accordance with
Statement of Financial Accounting Standards No. 114 and No. 118. Loans past
due greater than 90 days and still accruing represent those loans which have
adequate collateral values, therefore minimizing the risk of loss of
principal. As a result of management's ongoing review of the loan portfolio,
loans are classified as nonaccrual when it is not reasonable to expect
collection of interest or principal under the original terms of the loan.
These loans may be classified as nonaccrual even though the presence of
collateral or the borrower's financial strength may be sufficient to provide
for ultimate repayment of the principal. No loans were classified as
restructured as of March 31, 1999 nor as of December 31, 1998 and 1997. There
were no loans classified as nonaccrual as of December 31, 1998 and a minimal
amount of $13,000 was classified as nonaccrual as of March 31, 1999. As of
December 31, 1997, approximately $662,000 of loans were classified as
nonaccrual; however, these loans were adequately secured and no specific
reserve was assigned to them. There was no interest lost during the year ended
1998 as a result of loans on nonaccrual status. All interest on previously
classified nonaccrual loans was collected.
Properties held in foreclosure, or other real estate owned, totaled
approximately $142,000 and $441,000 as of December 31, 1998 and 1997. There
were no properties held in other real estate owned as of March 31, 1999.
In the opinion of management, any loans classified by regulatory authorities
as doubtful, substandard or special mention that have not been disclosed above
do not (1) represent or result from trends or uncertainties which management
reasonably expects will materially impact future operating results, liquidity
or capital resources, or (2) represent material credits about which management
is aware of any information which causes management to have serious doubts as
to the ability of the borrowers to comply with the loan repayment terms. Any
loans classified by regulatory authorities as loss have been charged off.
COMMITMENTS AND LINES OF CREDIT
In the ordinary course of business, Bank Atlanta has granted commitments to
extend credit and standby letters of credit to approved customers. Generally,
these commitments to extend credit have been granted on a temporary basis for
seasonal or inventory requirements and have been approved by Bank Atlanta's
board of directors. These commitments are recorded in the financial statements
when funds are disbursed or the financial
48
<PAGE>
instruments become payable. Bank Atlanta uses the same credit policies for
these off balance sheet commitments as it does for financial instruments that
are recorded in the financial statements. Commitments generally have fixed
expiration dates or other termination clauses and may require payment of a
fee. Since many of the commitment amounts expire without being drawn upon, the
total commitment amounts do not necessarily represent future cash
requirements.
Following is a summary of the commitments outstanding at December 31, 1998
and 1997.
<TABLE>
<CAPTION>
1998 1997
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Commitments to extend credit........................... $ 12,978 $ 19,071
Standby letters of credit.............................. 30 127
----------- -----------
$ 13,008 $ 19,198
=========== ===========
</TABLE>
SUMMARY OF LOAN LOSS EXPERIENCE
The provision for possible loan losses is created by direct charges to
operations. Losses on loans are charged against the allowance in the period in
which the loans, in management's opinion, become uncollectible. Recoveries
during the period are credited to the allowance. The factors that influence
management's judgment in determining the amount charged to operating expense
are past loan loss experience, composition of the loan portfolio, evaluation
of possible future losses, current economic conditions, and other relevant
facts. Bank Atlanta's allowance for loan losses was approximately $992,000 or
1.91% of total loans at March 31, 1999 compared with $981,000 or 1.79% of
total loans at December 31, 1998. Bank Atlanta's allowance for loan losses was
approximately $849,000 or $1.68% of total loans at December 31, 1997.
Management reviews the allowance for loan losses regularly, taking into
consideration its evaluation of current risk characteristics of the loan
portfolio, as well as the impact of prevailing and expected economic business
conditions. Management considers the allowance for loan losses adequate to
cover inherent loan losses on the loans outstanding.
Bank Atlanta also takes a risk based approach in estimating its allowance
for loan losses. Loans are graded on a scale of 1 to 8 with grade 1 being
minimal credit risk and grade 8 being a loss. In addition, Bank Atlanta makes
a special allocation for its SBA loan portfolio due to its elevated risk.
Management has also evaluated the risk to Bank Atlanta's loan portfolio that
may result from the century date change and has allocated a portion of its
reserve for this purpose.
Management has not specifically allocated Bank Atlanta's allowance for loan
losses to categories of loans. Based on management's best estimate,
approximately 73% of the allowance should be allocated to real estate loans,
25% to commercial and industrial loans and 2% to consumer loans as of December
31, 1998.
The following table summarizes the allocation of the allowance for loan
losses compared to the percentage of loans in each category as of the
indicated dates.
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C> <C> <C>
Real Estate loans........................................... $716 79% $620 82%
Commercial and industrial................................... 245 20 212 17
Consumer loans.............................................. 20 1 17 1
---- --- ---- ---
$981 100% $849 100%
==== === ==== ===
</TABLE>
49
<PAGE>
The following table summarizes average loan balances for each year ended
December 31, 1998 and 1997 and for the quarter ended March 31, 1999, changes
in the allowance for loan losses arising from loans charged off, recoveries on
loans previously charged off, additions to the allowance which have been
charged to operating expense, and the rate of net charge offs during the
period to average loans.
<TABLE>
<CAPTION>
DECEMBER 31,
MARCH 31, -----------------
1999 1998 1997
--------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Average amount of loans outstanding.............. $53,491 $55,969 $42,187
======= ======= =======
Balance of allowance for loan losses at beginning
of period....................................... $ 981 $ 849 $ 613
Charge offs:
Consumer....................................... -- 33 --
Real estate.................................... -- 69 90
Commercial..................................... -- 94 46
------- ------- -------
-- 196 136
------- ------- -------
Recoveries:
Consumer....................................... -- 12 2
Real estate.................................... 4 14 17
Commercial..................................... 7 7 3
------- ------- -------
11 33 22
------- ------- -------
Net (charge offs), recoveries.................... 11 (163) (114)
------- ------- -------
Additions to allowance charged to operating ex-
pense during year............................... -- 295 350
------- ------- -------
Balance of allowance for loan losses at end of
year............................................ $ 992 $ 981 $ 849
======= ======= =======
Ratio of net loans (charged off) recovered during
the year to average loans outstanding........... .02% (.29)% (.27)%
======= ======= =======
</TABLE>
DEPOSITS
Total deposits increased by $7,103,000 or 11.25% in 1998, compared to an
increase of $21,935,000 or 53.24% in 1997. Total deposits continued to grow
during the first three months of 1999 to a level of $70,551,000 or an increase
of 0.44% over December 31, 1998. The growth in deposits during 1997 was due to
several certificate of deposit growth campaigns to support the increased loan
production. Bank Atlanta also obtained $3,000,000 in brokered time deposits
which matured in 1998. As of December 31, 1998, Bank Atlanta did not hold any
brokered deposits.
Average amounts of deposits and average rates paid on deposits, classified
as to noninterest-bearing demand deposits, interest-bearing demand and savings
deposits, and time deposits, for the periods indicated are presented below.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1998 1997
------------ ------------
AMOUNT RATE AMOUNT RATE
------- ---- ------- ----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Noninterest-bearing demand deposits................. $ 7,575 -- % $ 7,009 -- %
Interest-bearing demand and savings................. 7,353 2.80 7,355 2.86
Time deposits....................................... 51,026 5.95 37,949 5.94
------- -------
Total deposits.................................... $65,954 $52,313
======= =======
</TABLE>
The amounts of time certificates of deposit issued in amounts of $100,000 or
more as of December 31, 1998 are shown below by time remaining until maturity
of (1) three months or less, (2) over three through twelve months, and (3)
over twelve months.
50
<PAGE>
<TABLE>
<CAPTION>
(DOLLARS IN
THOUSANDS)
-----------
<S> <C>
Three months or less................................................ $ 4,861
Over three months through twelve months............................. 9,360
Over twelve months.................................................. 311
-------
Total............................................................. $14,532
=======
</TABLE>
RETURN ON ASSETS AND SHAREHOLDERS' EQUITY
The following table presents rate of return information for the periods
indicated.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
--------------
1998 1997
------ ------
<S> <C> <C>
Net income to average total assets.............................. 1.89% 2.08%
Net income to average equity.................................... 21.09 23.18
Dividends declared per share to diluted earnings per share...... 5.10 --
Average equity to average total assets.......................... 8.97 8.95
</TABLE>
RESULTS OF OPERATIONS--THREE MONTHS ENDED MARCH 31, 1999 VERSUS THREE MONTHS
ENDED MARCH 31, 1998
Net income for the three months ended March 31, 1999 was $343,000 compared
to $319,000 for the same period in 1998. Net interest income decreased $54,000
which was attributable to an increase in interest expense of $90,000,
partially offset by an increase in interest income of $36,000. The yield on
interest earning assets was 8.85% and 9.90% for the three months ended March
31, 1999 and 1998. Bank Atlanta's cost of funds was 5.40% and 5.60% for the
same time periods. These yields resulted in a net interest spread of 3.45% and
4.30% for the three months ended March 31, 1999 and 1998 and a net interest
margin of 4.35% and 5.25% for the same time periods. The reduction in the
first quarter interest spread from 1998 to 1999 is the result of earning
assets moving from higher yielding loans into lower yielding securities and
federal funds sold, coupled with the drop in the prime interest rate in the
fourth quarter of 1998.
There was no provision for loan losses for the three months ended March 31,
1999 compared to $75,000 for the same period in 1998. The decrease is due to
the decline in the loan portfolio of approximately $3,125,000 from March 31,
1998 to March 31, 1999. Net recoveries of loans previously charged off
increased from approximately $5,000 during the three months ended March 31,
1998 to approximately $11,000 during the same period in 1999. The allowance
for loan losses as a percentage of total outstanding loans was 1.91% at March
31, 1999 compared to 1.68% at March 31, 1998, thus further reducing the need
for additional loan loss provisions. The reserve percentage increase is a
direct result of the decreasing loan portfolio.
Following is a comparison of noninterest income for the three months ended
March 31, 1999 and 1998:
<TABLE>
<CAPTION>
1999 1998
------- -------
<S> <C> <C>
Service charges on deposit accounts............................ $30,094 $24,506
Other operating income......................................... 48,908 49,552
------- -------
$79,002 $74,058
======= =======
</TABLE>
Other income increased $5,000 for the three months ended March 31, 1999
compared to the same period in 1998. The change is due primarily to an
increase in service charges on deposits of $5,600 and a gain on the sale of
other real estate of $7,600 during the first quarter of 1999. The increases
were offset by decreases in gains on sales of loans and securities of $4,400
and $3,200 respectively. Service charges on deposit accounts increased due to
increased nonsufficient funds activity.
51
<PAGE>
Following is an analysis of noninterest expense for the three months ended
March 31, 1999 and 1998:
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Salaries and employee benefits............................... $236,949 $219,844
Occupancy and equipment expense.............................. 46,288 45,233
Other expense................................................ 172,679 127,485
-------- --------
$455,916 $392,562
======== ========
</TABLE>
Noninterest expense increased $63,000 or 16.14% for the three months ended
March 31, 1999 compared to the same period in 1998. This change is primarily
due to increases in salaries and employee benefits of $17,000, loan and
collection expenses of $21,000, and data processing expenses of $7,400. The
increase in salaries and employee benefits is due to the replacement of vacant
staff positions.
Bank Atlanta recognized an income tax provision of $103,000 for the three
months ended March 31, 1999, compared to $165,000 for the same period in 1998.
The provisions resulted in a 23% and 34% effective tax rate for the periods
ended March 31, 1999 and 1998, respectively. The decrease in the effective tax
rate is due to the recognition in 1999 of a valuation allowance recorded
against Bank Atlanta's deferred tax assets previously recorded for operating
loss carryforwards. As of January 1, 1999, Bank Atlanta determined that the
valuation allowance was no longer needed. The valuation allowance at December
31, 1998 totaled $208,000 and is being recognized as a reduction of income tax
expense at a rate of approximately $16,000 per month during 1999.
RESULTS OF OPERATIONS--YEAR ENDED DECEMBER 31, 1998 VERSUS YEAR ENDED DECEMBER
31, 1997
Net income for 1998 was $1,405,312 compared to $1,217,897 for 1997. Net
interest income before provisions for loan losses increased $837,941 or 29.88%
from $2,804,514 in 1997 to $3,642,455 in 1998. Yields on interest earning
assets increased to 9.67% in 1998 from 9.52% in 1997. The cost of interest-
bearing liabilities increased from 5.44% in 1997 to 5.54% in 1998. The effect
of these changes was to increase the net interest spread from 4.08% in 1997 to
4.13% in 1998. The net interest margin increased from 5.06% in 1997 to 5.12%
in 1998. The increase is due primarily to increases in the volume of interest-
earning assets.
Bank Atlanta decreased its provision for loan losses during 1998 by $55,000
due to a general improvement in the quality of the loan portfolio as evidenced
by the level of nonaccrual loans at December 31, 1998 and a decreasing amount
of classified assets during 1998. Bank Atlanta had net charge offs of $163,000
during 1998 compared to $114,000 during 1997. The allowance for loan losses
was $981,153 or 1.79% of total loans outstanding at December 31, 1998,
compared to $849,007 or 1.68% of total loans outstanding at December 31, 1997.
Following is a comparison of noninterest income for 1998 and 1997.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1998 1997
----------- -----------
<S> <C> <C>
Service charges on deposit accounts.................... $ 102,542 $ 158,192
Gain on sale of SBA loans.............................. 249,161 375,253
Gain on sale of securities............................. 19,039 9,618
Loan servicing fees, net............................... 61,670 135,090
Other operating income................................. 30,594 68,772
----------- -----------
$ 463,006 $ 746,925
=========== ===========
</TABLE>
Noninterest income decreased by $284,000 or 38.01% from 1997 to 1998. This
decrease was primarily related to decreases in service charges on deposit
accounts of $56,000, decreases in gains on sales of SBA loans of $126,000, and
decreases in loan servicing fees of $73,000. Service charges on deposit
accounts decreased due
52
<PAGE>
to decreased nonsufficient funds activity. Decreases in gains on sales of
loans and loan servicing fees are due to a decrease in the loan production of
SBA guaranteed loans. Bank Atlanta obtains guarantees on SBA qualifying loans
and sells the loans in the secondary market with servicing retained.
Therefore, as loan production in this area decreases, the gains on sales and
servicing fees decrease as well. During 1998, Bank Atlanta's SBA loan
originator resigned, causing the loan production to fall under budget by
$4,703,000. During 1998, Bank Atlanta closed $2,797,500 in SBA loans compared
to $6,226,000 in 1997.
Following is an analysis of noninterest expense for 1998 and 1997.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1998 1997
----------- -----------
<S> <C> <C>
Salaries and employee benefits......................... $ 822,213 $ 783,214
Equipment expense...................................... 94,115 83,918
Occupancy expense...................................... 87,093 85,894
Other expense.......................................... 707,728 625,516
----------- -----------
$ 1,711,149 $ 1,578,542
=========== ===========
</TABLE>
Noninterest expense increased by $133,000 or 8.40% from 1997 to 1998. During
1998 salaries and benefits increased $39,000. Normal increases in salaries are
the primary causes of the increase. Increase in equipment expense was due to
an increase in depreciation of $20,000 related to five year property added
during the course of 1997. A full year's depreciation on this equipment was
incurred in 1998. Increases in other operating expenses were primarily due to
increases of $84,000 in data processing supplies and expenses, $68,000 in
professional fees, and $58,000 in data processing conversion expenses in 1998
as compared to 1997. The increase in conversion expenses was related to Bank
Atlanta changing its data processing service provider during late 1998 and
early 1999. The increases were partially offset by decreases in provisions for
losses in other real estate owned of $61,000 and in expenses incurred to carry
other real estate owned of $50,000. These two decreases were the direct result
of decreased foreclosures during 1998 as well as sales of existing foreclosed
properties held by Bank Atlanta.
Bank Atlanta recognized an income tax provision of $694,000 for 1998,
compared to a provision of $405,000 during 1997, resulting in an effective tax
rate of 33% and 25% for the years ended December 31, 1998 and 1997,
respectively. During 1997, Bank Atlanta utilized operating loss carryforwards
which reduced its income tax expense. This utilization of operating loss
carryforwards allowed Bank Atlanta to reduce its statutory income tax expense.
BANK ATLANTA SECURITY OWNERSHIP
The following table sets forth certain information regarding the Bank
Atlanta common stock owned, as of the record date and after giving effect to
the merger by:
. each person who beneficially owned more than 5% of the shares of Bank
Atlanta common stock outstanding,
. each Bank Atlanta director,
. the executive officers of Bank Atlanta, and
. all Bank Atlanta directors and executive officers as a group.
Except as otherwise indicated, the persons named in the table have sole
voting and investment powers with respect to all shares shown as beneficially
owned by them. The information shown below is based upon information furnished
by the named persons and based upon "beneficial ownership" concepts set forth
in rules issued under the Securities Exchange Act of 1934. Under these rules,
a person is deemed to be a "beneficial
53
<PAGE>
owner" of a security if that person has or shares "voting power," which
includes the power to vote or to direct the voting of the security, or
"investment power," which includes the power to dispose or to direct the
disposition of the 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 60 days. More than one person may be deemed to be a
beneficial owner of the same securities.
<TABLE>
<CAPTION>
PERCENT OF
PREMIER
TOTAL COMMON
NUMBER NUMBER SHARES PERCENT OF STOCK
OF OF AND COMMON FOLLOWING
NAME OF BENEFICIAL OWNER SHARES OPTIONS OPTIONS STOCK THE MERGER
------------------------ ------- ------- ------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Directors and Executive Officers:
Albert M. Ashkouti(1)............ 74,880 6,000 80,880 11.3% *
Charles M. Bettis................ 36,283 0 36,283 5.1% *
James B. Hendry, Jr.............. 1,000 0 1,000 * *
Panos J. Kanes................... 3,000 6,000 9,000 1.3% *
Paul N. Rohrabaugh(2)............ 46,677 6,000 52,677 7.3% *
Jeff P. Silverberg............... 25,000 6,000 31,000 4.3% *
William E. Zachary, Jr.(2)....... 30,000 6,000 36,000 5.0% *
All Bank Atlanta directors and
executive officers, as a group
(7 persons)..................... 216,840 30,000 246,840 33.31% 1.18%
5% Beneficial Owners:
Diane M. Ashkouti(1)(2).......... 98,900 0 98,900 13.9% *
</TABLE>
- --------
* Represents less than one percent of the shares outstanding.
(1) Albert M. Ashkouti and Diane M. Ashkouti are husband and wife. Under the
Securities Exchange Act Rules, Albert Ashkouti's shares are attributable
to Diane Ashkouti and Diane Ashkouti's shares are attributable to Albert
Ashkouti. Accordingly, if their shares are attributed to each other,
Albert Ashkouti beneficially owns 179,780 shares, and Diane Ashkouti
beneficially owns 179,780 shares. The above table, however, does not
attribute each spouse's shares to the other.
(2) Includes shares as to which the named person shares voting power or
investment power, or both.
54
<PAGE>
REGULATORY CONSIDERATIONS
The following discussion sets forth the material elements of the regulatory
framework applicable to banks and bank holding companies and provides specific
information related to Premier and Bank Atlanta.
GENERAL
Premier is a bank holding company registered with the Federal Reserve Board
and the Georgia Department of Banking and Finance under the Bank Holding
Company Act and the Georgia Bank Holding Company Act, respectively. As a
result, Premier is subject to the supervision, examination and reporting
requirements of the Bank Holding Company Act and the regulations of the
Federal Reserve Board and the Georgia Department of Banking and Finance issued
under these acts. Bank Atlanta is a Georgia chartered commercial bank. As a
result, Bank Atlanta is subject to the supervision, examination and reporting
requirements of the Georgia Department of Banking and Finance and the FDIC.
The Bank Holding Company Act requires every bank holding company to obtain
the prior approval of the Federal Reserve Board before:
. it may acquire direct or indirect ownership or control of any voting
shares of any bank if, after the acquisition, the bank holding company
will directly or indirectly own or control more than 5% of the voting
shares of the bank;
. it or any of its subsidiaries, other than a bank, may acquire all or
substantially all of the assets of any bank; or
. it may merge or consolidate with any other bank holding company.
The Bank Holding Company Act further provides that the Federal Reserve Board
may not approve any transaction that would result in a monopoly or that would
substantially lessen competition in the banking business, unless the public
interest in meeting the needs of the communities to be served outweighs the
anti-competitive effects. The Federal Reserve Board is also required to
consider the financial and managerial resources and future prospects of the
bank holding companies and banks involved and the convenience and needs of the
communities to be served. Consideration of financial resources generally
focuses on capital adequacy, and consideration of convenience and needs issues
focuses, in part, on the parties' performance under the Community Reinvestment
Act of 1977, both of which are discussed in more detail below.
The Bank Holding Company Act, as amended by the interstate banking
provisions of the Riegle-Neal Interstate Banking and Branching Efficiency Act
of 1994, which became effective on September 29, 1995, repealed the prior
statutory restrictions on interstate acquisitions of banks by bank holding
companies. The effect of the Bank Holding Company Act is that Premier, and any
other bank holding company located in Georgia, may now acquire a bank located
in any other state, and any bank holding company located outside Georgia may
lawfully acquire any Georgia-based bank, regardless of state law to the
contrary, in either case subject to certain deposit-percentage, aging
requirements, and other restrictions. The Interstate Banking Act referred to
above also generally provides that, as of June 1, 1997, national and state-
chartered banks may branch interstate through acquisitions of banks in other
states.
In response to the Interstate Banking Act, the Georgia General Assembly
adopted the Georgia Interstate Banking Act, which was effective on July 1,
1995. The Georgia Interstate Banking Act provides that the Georgia Department
of Banking and Finance will permit
. interstate acquisitions by Georgia institutions in states which also
allow national interstate acquisitions, and
. interstate acquisitions of Georgia institutions by institutions located
in states which allow national interstate acquisitions.
55
<PAGE>
Additionally, on January 26, 1996, the Georgia General Assembly adopted the
Georgia Interstate Branching Act which permits Georgia-based banks and bank
holding companies owning or acquiring banks outside of Georgia and all non-
Georgia banks and bank holding companies owning or acquiring banks in Georgia
the right to merge any lawfully acquired bank into an interstate branch
network. The Georgia Interstate Branching Act also allows banks to establish
de novo branches.
The Bank Holding Company Act generally prohibits a bank holding company from
engaging in activities other than:
. banking;
. managing or controlling banks or other permissible subsidiaries; and
. acquiring or retaining direct or indirect control of any company engaged
in any activities other than activities closely related to banking or
managing or controlling banks.
In determining whether a particular activity is permissible, the Federal
Reserve Board considers whether performing the activity can be expected to
produce benefits to the public that outweigh possible adverse effects, such as
undue concentration of resources, decreased or unfair competition, conflicts
of interest or unsound banking practices. The Bank Holding Company Act does
not place territorial limitations on permissible non-banking activities of
bank holding companies. The Federal Reserve Board has the power to order a
bank holding company or its subsidiaries to terminate any activity or control
of any subsidiary when the continuation of the activity or control constitutes
a serious risk to the financial safety, soundness or stability of any bank
subsidiary of that bank holding company.
Bank Atlanta and Premier Bank are members of the FDIC. Consequently, the
FDIC insures their deposits to the maximum extent provided by law. Bank
Atlanta and Premier Bank are also subject to numerous state and federal
statutes and regulations that affect their business, activities and
operations, and each is supervised and examined by one or more state or
federal bank regulatory agencies.
Bank Atlanta and Premier Bank are subject to regulation, supervision, and
examination by the FDIC and the Georgia Department of Banking and Finance. The
FDIC and the Georgia Department of Banking and Finance regularly examine the
operations of Bank Atlanta and Premier Bank and are given the authority to
approve or disapprove mergers, consolidations, the establishment of branches
and similar corporate actions. The FDIC and the Georgia Department of Banking
and Finance also have the power to prevent the continuance or development of
unsafe or unsound banking practices or other violations of law.
PAYMENT OF DIVIDENDS
Premier is a legal entity separate and distinct from its banking and other
subsidiaries. The principal sources of cash flow of Premier, including cash
flow to pay dividends to its shareholders, are dividends from its banking and
other subsidiaries. Premier's banking subsidiary is subject to statutory and
regulatory limitations on the payment of dividends to Premier and Premier and
Bank Atlanta are subject to statutory and regulatory limitations on dividend
payments to its shareholders.
If, in the opinion of the federal banking regulators, a depository
institution under its jurisdiction is engaged in or is about to engage in an
unsafe or unsound practice, the regulatory authority may require, after notice
and hearing, that the institution cease and desist from the practice. The
federal banking agencies have indicated that paying dividends that deplete a
depository institution's capital base to an inadequate level would be an
unsafe and unsound banking practice. Under the Federal Deposit Insurance
Corporation Improvement Act of 1991, a depository institution may not pay any
dividend if payment would cause it to become undercapitalized or if it already
is undercapitalized. See "--Prompt Corrective Action." The federal agencies
have also issued policy statements that provide that bank holding companies
and insured banks should generally only pay dividends out of current operating
earnings.
56
<PAGE>
At March 31, 1999, under dividend restrictions imposed under federal and
state laws, Premier Bank, without obtaining governmental approvals, could
declare aggregate dividends to Premier of approximately $ . At March 31,
1999, Bank Atlanta, without obtaining governmental approvals, could declare
dividends to its shareholders of approximately $ .
The payment of dividends by Bank Atlanta, Premier and Premier Bank may also
be affected or limited by other factors, such as the requirement to maintain
adequate capital above regulatory guidelines.
CAPITAL ADEQUACY
Premier is required to comply with the capital adequacy standards
established by the Federal Reserve Board. Premier Bank and Bank Atlanta are
required to comply with the capital adequacy standards established by the
appropriate federal banking regulator. The Federal Reserve Board has
promulgated two basic measures of capital adequacy for bank holding companies:
a risk-based measure and a leverage measure. All applicable capital standards
must be satisfied for a bank holding company to be considered in compliance.
The risk-based capital standards are designed to:
. make regulatory capital requirements more sensitive to differences in
risk profile among banks and bank holding companies;
. account for off-balance-sheet exposure; and
. minimize disincentives for holding liquid assets.
Assets and off-balance-sheet items are assigned to broad risk categories, each
with appropriate weights. The resulting capital ratios represent capital as a
percentage of total risk-weighted assets and off-balance-sheet items.
The minimum guideline for the ratio of total capital to risk-weighted assets
is 8%. At least half of total capital must be comprised of Tier 1 Capital,
which is common stock, undivided profits, minority interests in the equity
accounts of consolidated subsidiaries and noncumulative perpetual preferred
stock, less goodwill and certain other intangible assets. The remainder may
consist of Tier 2 Capital, which is subordinated debt, other preferred stock,
and a limited amount of loan loss reserves. At March 31, 1999, Premier's
consolidated total risk-based capital ratio and its Tier 1 risk-based capital
ratio were 15.67% and 14.46% respectively.
In addition, the Federal Reserve Board has established minimum leverage
ratio guidelines for bank holding companies. These guidelines provide for a
minimum ratio of Tier 1 Capital to average assets, less goodwill and certain
other intangible assets, of 3.0% for bank holding companies that meet
specified criteria. All other bank holding companies generally are required to
maintain a leverage ratio of at least 3%, plus an additional cushion of 100 to
200 basis points. Premier's leverage ratio at March 31, 1999 was 11.48%. The
guidelines also provide that bank holding companies experiencing internal
growth or making acquisitions will be expected to maintain strong capital
positions substantially above the minimum supervisory levels without
significant reliance on intangible assets. Furthermore, the Federal Reserve
Board has indicated that it will consider a "tangible Tier 1 Capital leverage
ratio" and other indicia of capital strength in evaluating proposals for
expansion or new activities.
Bank Atlanta and Premier Bank are subject to risk-based and leverage capital
requirements adopted by their respective federal banking regulators, which are
substantially similar to those adopted by the Federal Reserve Board for bank
holding companies. Bank Atlanta and Premier Bank were in compliance with
applicable minimum capital requirements as of March 31, 1999. Neither Bank
Atlanta, Premier, nor Premier Bank has been advised by any federal banking
agency of any specific minimum capital ratio requirement applicable to it.
Failure to meet capital guidelines could subject a bank to a variety of
enforcement remedies, including issuance of a capital directive, the
termination of deposit insurance by the FDIC, a prohibition on taking brokered
deposits, and certain other restrictions on its business. As described below,
the FDIC can impose substantial
57
<PAGE>
additional restrictions can be imposed upon FDIC-insured depository
institutions that fail to meet applicable capital requirements. See "--Prompt
Corrective Action."
SUPPORT OF SUBSIDIARY INSTITUTIONS
Under Federal Reserve Board policy, Premier is expected to act as a source
of financial strength for, and to commit resources to support, Premier Bank.
This support may be required at times when, absent the Federal Reserve Board
policy, Premier may not be inclined to provide it. In addition, any capital
loans by a bank holding company to any of its depository institution
subsidiaries are subordinate in right of payment to deposits and to certain
other indebtedness of the banks. In the event of a bank holding company's
bankruptcy, the bankruptcy trustee will assume any commitment by a bank
holding company to a federal bank regulatory agency to maintain the capital of
a banking subsidiary, which commitment will be entitled to a priority of
payment.
Under the Federal Deposit Insurance Act, an FDIC-insured depository
institution can be held liable for any loss incurred by, or reasonably
expected to be incurred by, the FDIC after August 9, 1989, in connection with
the default of a commonly-controlled FDIC-insured depository institution or
any assistance the FDIC provides to any commonly-controlled FDIC-insured
depository institution "in danger of default." "Default" is defined generally
as the appointment of a conservator or receiver, and "in danger of default" is
defined generally as the existence of specified conditions indicating that a
default is likely to occur in the absence of regulatory assistance. The FDIC's
claim for damages is superior to claims of shareholders of the insured
depository institution or its holding company, but is subordinate to claims of
depositors, secured creditors and holders of subordinated debt of the
commonly-controlled FDIC insured depository institution. Premier Bank is
subject to these cross-guarantee provisions. As a result, any loss the FDIC
suffers with respect to Premier Bank would likely result in assertion of the
cross-guarantee provisions, the assessment of estimated losses against the
depository institution's banking or thrift affiliates and a potential loss of
Premier in its banking subsidiaries.
PROMPT CORRECTIVE ACTION
The Federal Deposit Insurance Corporation Improvement Act establishes a
system of prompt corrective action to resolve the problems of undercapitalized
institutions. Under this system, which became effective in December, 1992,
federal banking regulators established five capital categories (well
capitalized, adequately capitalized, undercapitalized, significantly
undercapitalized, and critically undercapitalized) and must take specified
mandatory supervisory actions. Federal banking regulators are also authorized
to take other discretionary actions with respect to institutions in the three
undercapitalized categories, the severity of the action depending upon the
capital category of the institution. Generally, subject to a narrow exception,
the Federal Deposit Insurance Corporation Improvement Act requires the banking
regulator to appoint a receiver or conservator for an institution that is
critically undercapitalized. The federal banking agencies have specified by
regulation the relevant capital level for each category.
Under the final agency rules implementing the prompt corrective action
provisions, an institution that has a total risk-based capital ratio of 10% or
greater, a Tier 1 risk-based capital ratio of 6.0% or greater, and a leverage
ratio of 5.0% or greater and is not subject to any written agreement, order,
capital directive or prompt corrective action directive issued by the
appropriate federal banking agency is deemed to be well capitalized. An
institution with a total risk-based capital ratio of 8.0% or greater, a Tier 1
risk-based capital ratio of 4.0% or greater, and a leverage ratio of 4.0% or
greater is considered to be adequately capitalized. A depository institution
that has a total risk-based capital ratio of less than 8.0%, a Tier 1 risk-
based capital ratio of less than 4.0%, or a leverage ratio of less than 4.0%
is considered to be undercapitalized. A depository institution that has a
total risk-based capital ratio of less than 6.0%, a Tier 1 risk-based capital
ratio of less than 3.0%, or a leverage ratio of less than 3.0% is considered
to be significantly undercapitalized, and an institution that has a tangible
equity capital to assets ratio equal to or less than 2.0% is deemed to be
critically undercapitalized. For purposes of the regulation, the term
"tangible equity" includes core capital elements counted as Tier 1 Capital
under the risk-based capital standards, plus the amount of outstanding
cumulative perpetual preferred stock, minus intangible assets with various
exceptions. A depository institution may be deemed to be in a capitalization
category that is lower than is indicated by its actual capital position if it
receives an unsatisfactory examination rating.
58
<PAGE>
An institution that is categorized as undercapitalized, significantly
undercapitalized or critically undercapitalized is required to submit an
acceptable capital restoration plan to its appropriate federal banking agency.
Under the Federal Deposit Insurance Corporation Improvement Act, a bank
holding company must guarantee that its subsidiary depository institution
meets its capital restoration plan, subject to certain limitations. The
obligation of a controlling bank holding company under the Federal Deposit
Insurance Corporation Improvement Act to fund a capital restoration plan is
limited to the lesser of 5% of an undercapitalized subsidiary's assets or the
amount required to meet regulatory capital requirements. An undercapitalized
institution is also generally prohibited from increasing its average total
assets, making acquisitions, establishing any branches, or engaging in any new
line of business, except in accordance with an accepted capital restoration
plan or with the approval of the FDIC. In addition, the appropriate federal
banking regulator may treat an undercapitalized institution in the same manner
as it treats a significantly undercapitalized institution if it determines
that those actions are necessary.
For those institutions that are significantly undercapitalized or
undercapitalized and either fail to submit an acceptable capital restoration
plan or fail to implement an approved capital restoration plan, the
appropriate federal banking agency must require the institution to take one or
more of the following actions:
. sell enough shares, including voting shares, to become adequately
capitalized;
. merge with or be sold to another institution, but only if grounds exist
for appointing a conservator or receiver;
. restrict certain transactions with banking affiliates as if the "sister
bank" exception to the requirements of Section 23A of the Federal
Reserve Act did not exist;
. otherwise restrict transactions with bank or non-bank affiliates;
. restrict interest rates that the institution pays on deposits to
"prevailing rates" in the institution's region;
. restrict asset growth or reduce total assets;
. alter, reduce or terminate activities;
. hold a new election of directors;
. dismiss any director or senior executive officer who held office for
more than 180 days immediately before the institution became
undercapitalized, provided that in requiring dismissal of a director or
senior executive officer, the regulator must comply with certain
procedural requirements, including the opportunity for an appeal in
which the director or officer will have the burden of proving his or her
value to the institution;
. employ "qualified" senior executive officers;
. cease accepting deposits from correspondent depository institutions;
. divest certain nondepository affiliates which pose a danger to the
institution; or
. be divested by a parent holding company.
In addition, without the prior approval of the appropriate federal banking
regulator, a significantly undercapitalized institution may not pay any bonus
to any senior executive officer or increase the rate of compensation for a
senior executive officer without regulatory approval.
At March 31, 1999, Bank Atlanta and Premier Bank had the requisite capital
levels to qualify as "well capitalized."
59
<PAGE>
FDIC INSURANCE ASSESSMENTS
Pursuant to the Federal Deposit Insurance Corporation Improvement Act, the
FDIC adopted a risk-based assessment system for insured depository
institutions that takes into account the risks attributable to different
categories and concentrations of assets and liabilities. The risk-based
assessment system, which went into effect on January 1, 1994, assigns an
institution to one of three capital categories:
. well capitalized;
. adequately capitalized; and
. undercapitalized.
These three categories are substantially similar to the prompt corrective
action categories described above, with the "undercapitalized" category
including institutions that are undercapitalized, significantly
undercapitalized, and critically undercapitalized for prompt corrective action
purposes. The FDIC also assigns an institution to one of three supervisory
subgroups within each capital group. The supervisory subgroup to which an
institution is assigned is based on a supervisory evaluation provided to the
FDIC by the institution's primary federal regulator and information which the
FDIC determines to be relevant to the institution's financial condition and
the risk posed to the deposit insurance funds. An institution's insurance
assessment rate is then determined based on the capital category and
supervisory category to which it is assigned. Under the final risk-based
assessment system, there are nine assessment risk classifications to which
different assessment rates are applied. Assessment rates for members of both
the Bank Insurance Fund ("BIF") and the Savings Association Insurance Fund
("SAIF") for the first half of 1995, as they had been during 1994, ranged from
23 basis points for an institution in the highest category to 31 basis points
for an institution in the lowest category. These rates were established for
both funds to achieve a designated ratio of reserves to insured deposits
within a specified period of time.
Once the designated ratio for the BIF was reached in May 1995, the FDIC
reduced the assessment rate applicable to BIF deposits in two stages, so that,
beginning in 1996, the deposit insurance premiums for 92% of all BIF members
in the highest capital and supervisory categories were set at $2,000 per year,
regardless of deposit size. The FDIC elected to retain the existing assessment
rate range of 23 to 31 basis points for SAIF members for the foreseeable
future given the undercapitalized nature of that insurance fund.
Recognizing that the disparity between the SAIF and BIF premium rates had
adverse consequences for the SAIF insured institutions and other banks with
SAIF assessed deposits, including reduced earnings and an impaired ability to
raise funds in capital markets and to attract deposits, in July 1995, the
FDIC, the Treasury Department, and the Office of Thrift Supervision released
statements outlining a proposed plan to recapitalize the SAIF, the principal
feature of which was a special one-time assessment on depository institutions
holding SAIF-insured deposits, which was intended to recapitalize the SAIF at
a reserve ratio of 1.25%. This proposal contemplated elimination of the
disparity between the assessment rates on BIF and SAIF deposits following
recapitalization of the SAIF.
Congress enacted a variation of this proposal, designated the Deposit
Insurance Funds Act of 1996 as part of the omnibus budget legislation and
President Clinton signed it into law on September 30, 1996. As directed by the
Deposit Insurance Funds Act, the FDIC implemented a special one-time
assessment of approximately 65.7 basis points on a depository institution's
SAIF-insured deposits held as of March 31, 1995. In addition, the FDIC has
implemented a revision in the SAIF assessment rate schedule which effected, as
of October 1, 1996:
. a widening in the assessment rate spread among institutions in the
different capital and risk assessment categories,
. an overall reduction of the assessment rate range assessable on SAIF
deposits of from 0 to 27 basis points, and
. a special interim assessment rate range for the last quarter of 1996 of
from 18 to 27 basis points on institutions subject to Financing
Corporation assessments.
60
<PAGE>
Effective January 1, 1997, the FDIC imposed assessments to help pay off the
$780 million in annual interest payments on the $8 billion Financing
Corporation bonds issued in the late 1980's as part of the government rescue
of the thrift industry. The FDIC will access BIF- and SAIF-insured deposits in
annual amounts presently estimated at 1.29 basis points and 6.44 basis points,
respectively. Beginning in January, 2000, BIF- and SAIF-insured institutions
will share the Financing Corporation interest costs at equal rates, currently
estimated at 2.43 basis points.
Under the Federal Deposit Insurance Act, the FDIC may terminate an
institution's deposit insurance it is finds that the institution has engaged
in unsafe and unsound practices, is in an unsafe or unsound condition to
continue operations or has violated any applicable law, regulation, rule,
order or condition the FDIC has imposed.
SAFETY AND SOUNDNESS STANDARDS
The Federal Deposit Insurance Act, as amended by the Federal Deposit
Insurance Corporation Improvement Act and the Riegle Community Development and
Regulatory Improvement Act of 1994, requires the federal bank regulatory
agencies to prescribe standards relating to certain operational and managerial
standards. The federal bank regulatory agencies have adopted, effective August
9, 1995, a set of guidelines relating to these managerial standards. The
guidelines require, among other things, appropriate systems and practices to
identify and manage certain risks and exposures specified in the guidelines.
The guidelines deem excessive compensation an unsafe and unsound practice and
consider compensation excessive when the amounts paid are unreasonable or
disproportionate to the services an executive officer, employee, director or
principal shareholder performs. In addition, the agencies adopted regulations
that authorize, but do not require, an agency to order an institution that has
received notice from an agency that it is not satisfying the safety and
soundness standards to submit a compliance plan. If, after being so notified,
an institution fails to submit an acceptable compliance plan or fails in any
material respect to implement an acceptable compliance plan, the agency must
issue an order directing action to correct the deficiency, and may issue an
order directing other actions to which an undercapitalized institution is
subject under the "prompt corrective action" provisions of the Federal Deposit
Insurance Corporation Improvement Act. See "--Prompt Corrective Action." If an
institution fails to comply with these orders, the agency may seek to enforce
these orders in judicial proceedings and to impose civil money penalties.
COMMUNITY REINVESTMENT ACT
The Community Reinvestment Act requires federal bank regulatory agencies to
encourage financial institutions to meet the credit needs of low- and
moderate-income borrowers in their local communities. In May 1995, the federal
bank regulatory agencies published final amended regulations issued under the
Community Reinvestment Act. The final regulations eliminate the 12 assessment
factors under the former regulation and replace them with performance tests.
Institutions are no longer required to prepare Community Reinvestment Act
Statements or extensively document director participation, marketing efforts
or the ascertainment of community credit needs. Under the final rule, an
institution's size and business strategy determines the type of examination
that it will receive. Large, retail-oriented institutions will be examined
using a performance-based lending, investment and service test. Small
institutions will be examined using a streamlined approach. All institutions
may opt to be evaluated under a strategic plan formulated with community input
and pre-approved by the bank regulatory agency.
Community Reinvestment Act regulations provide for certain disclosure
obligations. Each institution must post a notice advising the public of its
right to comment to the institution and its regulator on the institution's
Community Reinvestment Act performance and to review the institution's
Community Reinvestment Act public file. Each lending institution must maintain
for public inspection a public file that includes a listing of branch
locations and services, a summary of lending activity, a map of its
communities and any written comments from the public on its performance in
meeting community credit needs. The Community Reinvestment Act requires public
disclosure of a financial institution's written Community Reinvestment Act
evaluations. This promotes enforcement of Community Reinvestment Act
requirements by providing the public with the status of a particular
institution's community reinvestment record.
61
<PAGE>
EXPERTS
Ernst & Young LLP, independent auditors, have audited Premier's consolidated
financial statements for the two years ended December 31, 1998 and 1997,
included in its Annual Report on Form 10-K for the year ended December 31,
1998, as set forth in their report, which is incorporated by reference in this
document and elsewhere in the registration statement. Premier's financial
statements are incorporated by reference in reliance on Ernst & Young LLP's
report, given on their authority as experts in accounting and auditing.
Mauldin & Jenkins, LLC, independent auditors, have audited Premier's
consolidated financial statements for the year ended December 31, 1996,
included in Premier's Annual Report on Form 10-K for the year ended December
31, 1996, as set forth in their report, which is incorporated by reference in
this document and elsewhere in the registration statement. Premier's financial
statements are incorporated by reference in reliance on Mauldin & Jenkins,
LLC's report, given on their authority as experts in accounting and auditing.
Mauldin & Jenkins, LLC, independent auditors, have audited the financial
statements of Bank Atlanta at December 31, 1998 and 1997, and for the period
ended December 31, 1998, as set forth in their report. Bank Atlanta's
financial statements are included in this document and elsewhere in the
registration statement in reliance on Mauldin & Jenkins, LLC's report, given
on their authority as experts in accounting and auditing.
OPINIONS
The legality of the shares of the Premier common stock to be issued in the
merger and the federal income tax consequences of the merger will be passed
upon by Womble Carlyle Sandridge & Rice, PLLC, Atlanta, Georgia. In addition,
various other matters relating to the merger will be passed upon by Womble
Carlyle Sandridge & Rice, PLLC, Atlanta, Georgia, for Premier and by Powell
Goldstein Frazer & Murphy, LLP, Atlanta, Georgia, for Bank Atlanta.
WHERE YOU CAN FIND MORE INFORMATION
Premier files annual, quarterly and current reports, proxy statements and
other information with the Securities and Exchange Commission. You may read
and copy any reports, statements or the other information that Premier files
with the Securities and Exchange Commission at the Securities and Exchange
Commission's public reference rooms in Washington, D.C., New York, New York
and Chicago, Illinois. Please call the Securities and Exchange Commission at
1-800-SEC-0330 for further information on the public reference rooms. These
Securities and Exchange Commission filings are also available to the public
from commercial document retrieval services and at the Internet world wide web
site maintained by the Securities and Exchange Commission at
http://www.sec.gov. Reports, proxy statements and other information of Premier
are also available for inspection at the offices of the New York Stock
Exchange at 11 Wall Street, New York, New York 10005.
Premier has filed this Registration Statement to register with the
Securities and Exchange Commission the Premier common stock to be issued to
Bank Atlanta shareholders in the merger. This proxy statement/prospectus is a
part of that Registration Statement and constitutes a prospectus of Premier.
As allowed by Securities and Exchange Commission rules, this proxy
statement/prospectus does not contain all the information you can find in
Premier's Registration Statement or the exhibits to the Registration
Statement.
BB&T Corporation also files annual, quarterly and current reports, proxy
statements and other information with the Securities and Exchange Commission.
You may read and copy these reports, statements or the other information that
BB&T files with the Securities and Exchange Commission at the Security and
Exchange Commission's public reference rooms in Washington, D.C., New York,
New York and Chicago, Illinois. Please call the Securities and Exchange
Commission at 1-800-SEC-0330 for further information on the public reference
rooms. These Securities and Exchange Commission filings are also available to
the public from commercial document retrieval services and at the Internet
world wide web site maintained by the Securities and Exchange Commission at
http://www.sec.gov. Reports, proxy statements and other information of BB&T
are also available for inspection at the offices of the New York Stock
Exchange at 11 Wall Street, New York, New York 10005.
62
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
BANK ATLANTA
Unaudited Financial Statements--March 31, 1999............................. F-1
Balance Sheets........................................................... F-2
Statements of Income..................................................... F-3
Statement of Comprehensive Income........................................ F-4
Statements of Cash Flows................................................. F-5
Notes to Financial Statements............................................ F-7
Financial Statements--December 31, 1998 and 1997........................... F-8
Independent Auditor's Report............................................. F-9
Balance Sheets........................................................... F-10
Statements of Income..................................................... F-11
Statements of Comprehensive Income....................................... F-12
Statement of Stockholders' Equity........................................ F-13
Statements of Cash Flows................................................. F-14
Notes to Financial Statements............................................ F-15
</TABLE>
<PAGE>
BANK ATLANTA
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Balance Sheets--March 31, 1999 and December 31, 1998...................... 2
Statements of Income--Three Months Ended March 31, 1999 and 1998.......... 3
Statements of Comprehensive Income--Three Months Ended March 31, 1999 and
1998..................................................................... 4
Statements of Cash Flows--Three Months Ended March 31, 1999 and 1998...... 5
Notes to Financial Statements............................................. 7
</TABLE>
F-1
<PAGE>
BANK ATLANTA
BALANCE SHEETS
MARCH 31, 1999 AND DECEMBER 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
ASSETS
Cash and due from banks.............................. $ 913,919 $ 2,387,314
Federal funds sold................................... 11,140,000 8,950,000
Securities available-for-sale........................ 10,891,678 8,210,304
Securities held-to-maturity.......................... 3,901,204 4,205,124
Loans................................................ 52,052,181 54,680,499
Less allowance for loan losses....................... 991,799 981,153
----------- -----------
Loans, net......................................... 51,060,382 53,699,346
Premises and equipment............................... 1,123,246 1,085,535
Other assets......................................... 937,695 908,920
----------- -----------
TOTAL ASSETS..................................... $79,968,124 $79,446,543
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
Noninterest-bearing demand......................... $ 6,272,421 $ 6,607,940
Interest-bearing demand............................ 6,857,010 6,305,069
Savings............................................ 454,393 493,436
Time, $100,000 and over............................ 14,780,807 14,531,712
Other time......................................... 42,186,451 42,303,090
----------- -----------
Total deposits................................... 70,551,082 70,241,247
Other liabilities.................................... 1,823,349 1,897,239
----------- -----------
TOTAL LIABILITIES................................ 72,374,431 72,138,486
----------- -----------
Commitments and contingent liabilities
Stockholders' equity
Common stock, par value $1; 10,000,000 shares au-
thorized; 707,344 and 697,344 issued and outstand-
ing............................................... 707,344 707,344
Capital surplus.................................... 4,983,827 4,983,827
Retained earnings.................................. 1,967,133 1,623,663
Accumulated other comprehensive loss............... (64,611) (6,777)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY....................... 7,593,693 7,308,057
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY....... $79,968,124 $79,446,543
=========== ===========
</TABLE>
See Notes to Financial Statements.
F-2
<PAGE>
BANK ATLANTA
STATEMENTS OF INCOME
THREE MONTHS ENDED MARCH 31, 1999 AND 1998
(UNAUDITED)
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
INTEREST INCOME
Loans................................................... $1,359,523 $1,425,933
Taxable securities...................................... 164,460 145,983
Nontaxable securities................................... 33,057 22,669
Federal funds sold...................................... 120,427 46,424
---------- ----------
TOTAL INTEREST INCOME................................. 1,677,467 1,641,009
---------- ----------
INTEREST EXPENSE ON DEPOSITS.............................. 854,083 763,576
---------- ----------
NET INTEREST INCOME................................... 823,384 877,433
PROVISION FOR LOAN LOSSES................................. -- 75,000
---------- ----------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES... 823,384 802,433
---------- ----------
OTHER INCOME
Service charges on deposit accounts..................... 30,094 24,506
Other operating income.................................. 48,908 49,552
---------- ----------
TOTAL OTHER INCOME.................................... 79,002 74,058
---------- ----------
OTHER EXPENSES
Salaries and employee benefits.......................... 236,949 219,844
Occupancy and equipment expenses........................ 46,288 45,233
Other operating expenses................................ 172,679 127,485
---------- ----------
TOTAL OTHER EXPENSES.................................. 455,916 392,562
---------- ----------
INCOME BEFORE INCOME TAXES............................ 446,470 483,929
INCOME TAX EXPENSE........................................ 103,000 165,000
---------- ----------
NET INCOME............................................ $ 343,470 $ 318,929
========== ==========
BASIC EARNINGS PER COMMON SHARE........................... $ 0.49 $ 0.46
========== ==========
DILUTED EARNINGS PER COMMON SHARE......................... $ 0.47 $ 0.44
========== ==========
CASH DIVIDENDS PER COMMON SHARE........................... $ -- $ --
========== ==========
WEIGHTED AVERAGE SHARES OUTSTANDING....................... $ 707,344 $ 697,344
========== ==========
</TABLE>
See Notes to Financial Statements.
F-3
<PAGE>
BANK ATLANTA
STATEMENTS OF COMPREHENSIVE INCOME
THREE MONTHS ENDED MARCH 31, 1999 AND 1998
(UNAUDITED)
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
NET INCOME................................................. $343,470 $318,929
-------- --------
OTHER COMPREHENSIVE INCOME:
Unrealized gains (losses) on securities available-for-
sale:
Unrealized holding gains (losses) arising during peri-
od, net of taxes (benefits) of $(29,794) and $1,321,
respectively.......................................... (57,834) 2,564
Reclassification adjustment for gains realized in net
income, net of tax of $-- and $1,105, respectively.... -- (2,144)
-------- --------
OTHER COMPREHENSIVE INCOME (LOSS).......................... (57,834) 420
-------- --------
COMPREHENSIVE INCOME....................................... $285,636 $319,349
======== ========
</TABLE>
See Notes to Financial Statements.
F-4
<PAGE>
BANK ATLANTA
STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1999 AND 1998
(UNAUDITED)
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
OPERATING ACTIVITIES
Net income......................................... $ 343,470 $ 318,929
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation..................................... 22,545 20,476
Provision for loan losses........................ 0 75,000
Increase in interest receivable.................. (23,700) (89,193)
Increase (decrease) in interest payable.......... 97,190 (28,170)
Other operating activities....................... (218,122) 142,906
----------- -----------
Net cash provided by operating activities...... 221,383 439,948
----------- -----------
INVESTING ACTIVITIES
Purchases of securities available-for-sale......... (4,005,606) (1,772,000)
Proceeds from maturities of securities available-
for-sale.......................................... 1,236,604 1,491,438
Purchases of securities held-to-maturity........... 0 (1,675,000)
Proceeds from maturities of securities held-to-ma-
turity............................................ 303,920 53,085
Net (increase) decrease in Federal funds sold...... (2,190,000) 5,040,000
Net (increase) decrease in loans................... 2,638,964 (4,617,608)
Purchase of premises and equipment................. (60,256) (6,179)
Disposal of other real estate owned................ 142,495 381,444
----------- -----------
Net cash used in investing activities.......... (1,933,879) (1,104,820)
----------- -----------
FINANCING ACTIVITIES
Net increase in deposits........................... 309,835 24,740
Dividends paid..................................... (70,734) --
----------- -----------
Net cash provided by financing activities...... 239,101 24,740
----------- -----------
Net decrease in cash and due from banks.............. (1,473,395) (640,132)
Cash and due from banks at beginning of period....... 2,387,314 1,929,554
----------- -----------
Cash and due from banks at end of period............. $ 913,919 $ 1,289,422
=========== ===========
</TABLE>
See Notes to Financial Statements.
F-5
<PAGE>
BANK ATLANTA
STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1999 AND 1998
(UNAUDITED)
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
CASH FLOW INFORMATION
Cash paid during the period for:
Interest................................................ $756,893 $791,746
Income taxes............................................ $ 55,287 $120,405
NONCASH INVESTING TRANSACTIONS
Unrealized (gains) losses on securities available-for-
sale..................................................... $ 87,628 $ (636)
</TABLE>
See Notes to Financial Statements.
F-6
<PAGE>
BANK ATLANTA
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1. BASIS OF PRESENTATION
The financial information included herein is unaudited; however, such
information reflects all adjustments (consisting solely of normal recurring
adjustments) which are, in the opinion of management, necessary for a fair
statement of results for the interim period.
The results of operations for the three month period ended March 31, 1999
are not necessarily indicative of the results to be expected for the full
year.
NOTE 2. CURRENT ACCOUNTING DEVELOPMENTS
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities". This statement
is required to be adopted for fiscal years beginning after June 15, 1999.
However, the statement permits early adoption as of the beginning of any
fiscal quarter after its issuance. Bank Atlanta expects to adopt this
statement effective January 1, 2000. SFAS No. 133 requires Bank Atlanta to
recognize all derivatives as either assets or liabilities in the balance sheet
at fair value. For derivatives that are not designated as hedges, the gain or
loss must be recognized in earnings in the period of change. for derivatives
that are designated as hedges, changes in the fair value of the hedged assets,
liabilities, or firm commitments must be recognized in earnings or recognized
in other comprehensive income until the hedged item is recognized in earnings,
depending on the nature of the hedge. The ineffective portion of a
derivative's change in fair value must be recognized in earnings immediately.
Management has not yet determined what effect the adoption of SFAS No. 133
will have on Bank Atlanta's earnings or financial position.
There are no other recent accounting pronouncements that have had, or are
expected to have, a material effect on Bank Atlanta's financial statements.
F-7
<PAGE>
BANK ATLANTA
FINANCIAL REPORT
DECEMBER 31, 1998
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
INDEPENDENT AUDITOR'S REPORT............................................... F-9
FINANCIAL STATEMENTS
Balance sheets........................................................... F-10
Statements of income..................................................... F-11
Statements of comprehensive income....................................... F-12
Statements of stockholders' equity....................................... F-13
Statements of cash flows................................................. F-14
Notes to financial statements............................................ F-15
</TABLE>
F-8
<PAGE>
INDEPENDENT AUDITOR'S REPORT
TO THE BOARD OF DIRECTORS
BANK ATLANTA
DECATUR, GEORGIA
We have audited the accompanying balance sheets of BANK ATLANTA as of
December 31, 1998 and 1997, and the related statements of income,
comprehensive income, stockholders' equity, and cash flows for the years then
ended. These financial statements are the responsibility of the Bank's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Bank Atlanta as of
December 31, 1998 and 1997, and the results of its operations and its cash
flows for the years then ended, in conformity with generally accepted
accounting principles.
/s/ Mauldin & Jenkins, LLC
Atlanta, Georgia
April 15, 1999, except for Note 15 as to which
the date is May 20, 1999
F-9
<PAGE>
BANK ATLANTA
BALANCE SHEETS
DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
ASSETS
Cash and due from banks............................... $ 2,387,314 $ 1,929,554
Federal funds sold.................................... 8,950,000 6,870,000
Securities available-for-sale......................... 8,210,304 4,149,500
Securities held-to-maturity (fair value of $4,292,801
and $5,575,080)...................................... 4,205,124 5,544,350
Loans................................................. 54,680,499 50,554,368
Less allowance for loan losses........................ 981,153 849,007
----------- -----------
Loans, net.......................................... 53,699,346 49,705,361
Premises and equipment................................ 1,085,535 1,152,759
Other assets.......................................... 908,920 1,206,068
----------- -----------
Total assets...................................... $79,446,543 $70,557,592
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
Noninterest-bearing demand.......................... $ 6,607,940 $ 9,134,113
Interest-bearing demand............................. 6,305,069 5,808,181
Savings............................................. 493,436 677,629
Time, $100,000 and over............................. 14,531,712 12,580,252
Other time.......................................... 42,303,090 34,937,680
----------- -----------
Total deposits.................................... 70,241,247 63,137,855
Other liabilities..................................... 1,897,239 1,507,736
----------- -----------
Total liabilities................................. 72,138,486 64,645,591
----------- -----------
Commitments and contingent liabilities
Stockholders' equity
Common stock, par value $1; 10,000,000 shares
authorized; 707,344 and 697,344 issued and
outstanding........................................ 707,344 697,344
Capital surplus..................................... 4,983,827 4,919,716
Retained earnings................................... 1,623,663 289,085
Accumulated other comprehensive income (loss)....... (6,777) 5,856
----------- -----------
Total stockholders' equity........................ 7,308,057 5,912,001
----------- -----------
Total liabilities and stockholders' equity........ $79,446,543 $70,557,592
=========== ===========
</TABLE>
See Notes to Financial Statements.
F-10
<PAGE>
BANK ATLANTA
STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Interest income
Loans................................................... $6,019,928 $4,472,196
Taxable securities...................................... 533,398 500,017
Nontaxable securities................................... 110,659 4,598
Federal funds sold...................................... 218,824 292,656
---------- ----------
Total interest income................................. 6,882,809 5,269,467
---------- ----------
Interest expense on deposits.............................. 3,240,354 2,464,953
---------- ----------
Net interest income..................................... 3,642,455 2,804,514
Provision for loan losses................................. 295,000 350,000
---------- ----------
Net interest income after provision for loan losses..... 3,347,455 2,454,514
---------- ----------
Other income
Service charges on deposit accounts..................... 102,542 158,192
Gain on sale of loans................................... 249,161 375,253
Gains on sale of securities............................. 19,039 9,618
Loan servicing fees, net................................ 61,670 135,090
Other operating income.................................. 30,594 68,772
---------- ----------
Total other income.................................... 463,006 746,925
---------- ----------
Other expenses
Salaries and employee benefits.......................... 822,213 783,214
Equipment expenses...................................... 94,115 83,918
Occupancy expenses...................................... 87,093 85,894
Professional fees....................................... 94,864 27,131
Loan and collection expense............................. 84,469 51,074
Data processing conversion expenses..................... 80,000 22,280
Data processing supplies and expenses................... 136,567 52,865
Provision for other real estate losses.................. 14,192 75,000
Other operating expenses................................ 297,636 397,166
---------- ----------
Total other expenses.................................. 1,711,149 1,578,542
---------- ----------
Income before income taxes............................ 2,099,312 1,622,897
Income tax expense........................................ 694,000 405,000
---------- ----------
Net income............................................ $1,405,312 $1,217,897
========== ==========
Basic earnings per common share........................... $ 2.01 $ 1.75
========== ==========
Diluted earnings per common share......................... $ 1.96 $ 1.71
========== ==========
</TABLE>
See Notes to Financial Statements.
F-11
<PAGE>
BANK ATLANTA
STATEMENTS OF COMPREHENSIVE INCOME
YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
NET INCOME............................................ $1,405,312 $1,217,897
---------- ----------
OTHER COMPREHENSIVE INCOME:
Unrealized gains (losses) on securities available-
for-sale:
Unrealized holding gains (losses) arising during
period, net of taxes (benefits) of $(35) and
$6,737, respectively............................. (67) 55,595
Reclassification adjustment for gains realized in
net income, net of tax of $6,473 and $3,720,
respectively..................................... (12,566) (5,898)
---------- ----------
OTHER COMPREHENSIVE INCOME (LOSS)..................... (12,633) 49,697
---------- ----------
COMPREHENSIVE INCOME.................................. $1,392,679 $1,267,594
========== ==========
</TABLE>
See Notes to Financial Statements.
F-12
<PAGE>
BANK ATLANTA
STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
ACCUMULATED
COMMON STOCK RETAINED OTHER TOTAL
----------------- CAPITAL EARNINGS COMPREHENSIVE STOCKHOLDERS'
SHARES PAR VALUE SURPLUS (DEFICIT) INCOME (LOSS) EQUITY
------- --------- ---------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31,
1996................... 697,344 $697,344 $4,919,716 $ (928,812) $(43,841) $4,644,407
Net income............ -- -- -- 1,217,897 -- 1,217,897
Other comprehensive
income............... -- -- -- -- 49,697 49,697
------- -------- ---------- ---------- -------- ----------
Balance, December 31,
1997................... 697,344 697,344 4,919,716 289,085 5,856 5,912,001
Net income............ -- -- -- 1,405,312 -- 1,405,312
Cash dividends
declared, $.10 per
share................ -- -- -- (70,734) -- (70,734)
Issuance of common
stock................ 10,000 10,000 48,600 -- -- 58,600
Tax effect of stock-
based compensation... -- -- 15,511 -- -- 15,511
Other comprehensive
loss................. -- -- -- -- (12,633) (12,633)
------- -------- ---------- ---------- -------- ----------
Balance, December 31,
1998................... 707,344 $707,344 $4,983,827 $1,623,663 $ (6,777) $7,308,057
======= ======== ========== ========== ======== ==========
</TABLE>
See Notes to Financial Statements.
F-13
<PAGE>
BANK ATLANTA
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
----------- ------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income........................................ $ 1,405,312 $ 1,217,897
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation.................................... 83,959 63,584
Provision for loan losses....................... 295,000 350,000
Provision for losses on other real estate owned. 14,137 75,000
Deferred taxes.................................. (10,390) (28,758)
Gains on sales of securities available-for-sale. (19,039) (9,618)
Increase (decrease) in income taxes payable..... (39,515) 104,541
(Increase) decrease in interest receivable...... 18,702 (95,689)
Increase in interest payable.................... 110,151 538,164
Other operating activities...................... 260,902 25,529
----------- ------------
Net cash provided by operating activities..... 2,119,219 2,240,650
----------- ------------
INVESTING ACTIVITIES
Purchases of securities available-for-sale........ (9,798,607) (1,629,223)
Proceeds from sales of securities available-for-
sale............................................. 497,734 1,008,438
Proceeds from maturities of securities available-
for-sale......................................... 5,239,967 2,104,514
Purchases of securities held-to-maturity.......... (2,225,000) (4,092,776)
Proceeds from maturities of securities held-to-
maturity......................................... 3,564,226 41,402
Net increase in Federal funds sold................ (2,080,000) (3,380,000)
Net increase in loans............................. (4,781,560) (19,297,941)
Purchase of premises and equipment................ (16,735) (156,525)
Proceeds from sales of other real estate owned.... 776,524 598,357
----------- ------------
Net cash used in investing activities......... (8,823,451) (24,803,754)
----------- ------------
FINANCING ACTIVITIES
Net increase in deposits.......................... 7,103,392 21,934,409
Proceeds from issuance of common stock............ 58,600 --
----------- ------------
Net cash provided by financing activities..... 7,161,992 21,934,409
----------- ------------
Net increase (decrease) in cash and due from banks.. 457,760 (628,695)
Cash and due from banks at beginning of year........ 1,929,554 2,558,249
----------- ------------
Cash and due from banks at end of year.............. $ 2,387,314 $ 1,929,554
=========== ============
SUPPLEMENTAL DISCLOSURE
Cash paid for:
Interest........................................ $ 3,130,203 $ 1,926,789
Income taxes.................................... $ 743,905 $ 329,217
NONCASH TRANSACTIONS
Unrealized (gains) losses on securities available-
for-sale......................................... $ 19,141 $ (52,714)
Principal balances of loans transferred to other
real estate...................................... $ 492,575 $ 600,938
Principal balances of securities transferred from
available-for-sale to held-to-maturity........... $ -- $ 1,492,976
</TABLE>
See Notes to Financial Statements.
F-14
<PAGE>
BANK ATLANTA
NOTES TO FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS
Bank Atlanta is a commercial bank with operations in Decatur, DeKalb County,
Georgia. The Bank provides a full range of banking services in its primary
market area of DeKalb County and the metropolitan Atlanta area.
BASIS OF PRESENTATION
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
CASH AND DUE FROM BANKS
Cash on hand, cash items in process of collection, and amounts due from
banks are included in cash and due from banks.
The Bank maintains amounts due from banks which, at times, may exceed
Federally insured limits. The Bank has not experienced any losses in such
accounts.
SECURITIES
Securities are classified based on management's intention on the date of
purchase. Securities which management has the intent and ability to hold to
maturity are classified as held-to-maturity and reported at amortized cost.
All other debt securities are classified as available-for-sale and carried at
fair value with net unrealized gains and losses included in stockholders'
equity, net of tax. Equity securities without a readily determinable fair
value are classified as available-for-sale and carried at cost.
Interest and dividends on securities, including amortization of premiums and
accretion of discounts, are included in interest income. Realized gains and
losses from the sale of securities are determined using the specific
identification method.
LOANS
Loans are carried at their principal amounts outstanding less unearned
income and the allowance for loan losses. Interest income on loans is credited
to income based on the principal amount outstanding.
Nonrefundable loan fees in excess of certain direct loan origination costs
are deferred with the net amount recognized into interest income over the life
of the loans as a yield adjustment.
The allowance for loan losses is maintained at a level that management
believes to be adequate to absorb potential losses in the loan portfolio.
Management's determination of the adequacy of the allowance is based on an
evaluation of the portfolio, past loan loss experience, current economic
conditions, volume, growth, composition of the loan portfolio, and other risks
inherent in the portfolio. This evaluation is inherently subjective as it
requires material estimates that are susceptible to significant change
including the amounts and timing of future cash flows expected to be received
on impaired loans. In addition, regulatory agencies, as an integral part of
their examination process, periodically review the Bank's allowance for loan
losses, and may
F-15
<PAGE>
BANK ATLANTA
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
require the Bank to record additions to the allowance based on their judgment
about information available to them at the time of their examinations.
The accrual of interest on loans is discontinued when, in management's
opinion, the borrower may be unable to meet payments as they become due. When
accrual of interest is discontinued, all unpaid accrued interest is reversed.
Interest income is subsequently recognized only to the extent cash payments
are received.
A loan is considered to be impaired when it is probable the Bank will be
unable to collect all principal and interest payments due in accordance with
the terms of the loan agreement. Individually identified impaired loans are
measured based on the present value of payments expected to be received, using
the contractual loan rate as the discount rate. Alternatively, measurement may
be based on observable market prices or, for loans that are solely dependent
on the collateral for repayment, measurement may be based on the fair value of
the collateral. If the recorded investment in the impaired loan exceeds the
measure of fair value, a valuation allowance is established as a component of
the allowance for loan losses. Changes to the valuation allowance are recorded
as a component of the provision for loan losses.
SALE OF LOANS
The Bank originates and sells participations in certain loans in which it
retains the right to service those loans. The cost allocated to the servicing
rights retained has been recognized as a separate asset and is being amortized
on a straight-line basis over the expected life of the servicing contracts,
the results of which are not materially different from generally accepted
accounting principles. Servicing rights are evaluated for impairment based on
the fair value of those rights. Fair values are estimated using discounted
cash flows based on current market rates of interest.
The amount of gain recognized on the sale of a specific loan is equal to the
percentage resulting from determining the fair value of the portion of the
loan sold relative to the fair value of the entire loan including servicing
rights. In accordance with Statement of Financial Accounting Standards
("SFAS") No. 125, "Accounting for Transfers and Servicing of Financial Assets
and Extinguishments of Liabilities," gains are recognized at the time of sale.
Losses, if any, are recognized at the time the loan is identified as held for
sale if the loan's carrying value exceeds its market value.
PREMISES AND EQUIPMENT
Premises and equipment are stated at cost less accumulated depreciation.
Depreciation is computed principally by the straight-line method over the
estimated useful lives of the assets.
OTHER REAL ESTATE OWNED
Other real estate owned represents properties acquired through foreclosure.
Other real estate owned is held for sale and is carried at the lower of the
recorded amount of the loan or fair value of the properties less estimated
selling costs. Any write-down to fair value at the time of transfer to other
real estate owned is charged to the allowance for loan losses. Subsequent
gains or losses on sale and any subsequent adjustment to the value are
recorded in current operations.
INCOME TAXES
Income tax expense consists of current and deferred taxes. Current income
tax provisions approximate taxes to be paid or refunded for the applicable
year. Deferred income tax assets and liabilities are determined using the
balance sheet method. Under this method, the net deferred tax asset or
liability is determined based on the tax
F-16
<PAGE>
BANK ATLANTA
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
effects of the differences between the book and tax bases of the various
balance sheet assets and liabilities and gives current recognition to changes
in tax rates and laws.
Recognition of deferred tax balance sheet amounts is based on management's
belief that it is more likely than not that the tax benefit associated with
certain temporary differences, tax operating loss carryforwards and tax
credits will be realized. A valuation allowance is recorded for those deferred
tax items for which it is more likely than not that realization will not
occur.
EARNINGS PER COMMON SHARE
Basic earnings per common share are computed by dividing net income by the
weighted-average number of shares of common stock outstanding. Diluted
earnings per common share are computed by dividing net income by the sum of
the weighted-average number of shares of common stock outstanding and
potential common shares. Potential common shares consist of stock options.
COMPREHENSIVE INCOME
In 1998, the Bank adopted SFAS No. 130, "Reporting Comprehensive Income".
This statement establishes standards for reporting and display of
comprehensive income and its components in the financial statements. This
statement requires that all items that are required to be recognized under
accounting standards as components of comprehensive income be reported in a
financial statement that is displayed in equal prominence with the other
financial statements. The Bank has elected to report comprehensive income in a
separate financial statement titled "Statements of Comprehensive Income". SFAS
No. 130 describes comprehensive income as the total of all components of
comprehensive income including net income. This statement uses other
comprehensive income to refer to revenues, expenses, gains and losses that
under generally accepted accounting principles are included in comprehensive
income but excluded from net income. Currently, the Bank's other comprehensive
income consists of items previously reported directly in equity under SFAS No.
115, "Accounting for Certain Investments in Debt and Equity Securities". As
required by SFAS No. 130, the financial statements for the prior year have
been reclassified to reflect application of the provisions of this statement.
The adoption of this statement did not affect the Bank's financial position,
results of operations or cash flows.
RECENT DEVELOPMENTS
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities". This statement
is required to be adopted for fiscal years beginning after June 15, 1999.
However, the statement permits early adoption as of the beginning of any
fiscal quarter after its issuance. The Bank expects to adopt this statement
effective January 1, 2000. SFAS No. 133 requires the Bank to recognize all
derivatives as either assets or liabilities in the balance sheet at fair
value. For derivatives that are not designated as hedges, the gain or loss
must be recognized in earnings in the period of change. For derivatives that
are designated as hedges, changes in the fair value of the hedged assets,
liabilities, or firm commitments must be recognized in earnings or recognized
in other comprehensive income until the hedged item is recognized in earnings,
depending on the nature of the hedge. The ineffective portion of a
derivative's change in fair value must be recognized in earnings immediately.
Management has not yet determined what effect the adoption of SFAS No. 133
will have on the Bank's earnings or financial position.
F-17
<PAGE>
BANK ATLANTA
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
NOTE 2. SECURITIES
The amortized cost and fair value of securities are summarized as follows:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED
COST GAINS LOSSES FAIR VALUE
---------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Securities Available-for-Sale
December 31, 1998:
U.S. Government and agency
securities................ $6,498,142 $ 19,919 $ (24,474) $ 6,493,587
Mortgage-backed securities. 1,510,730 -- (5,713) 1,505,017
Equity securities.......... 211,700 -- -- 211,700
---------- -------- --------- -----------
$8,220,572 $ 19,919 $ (30,187) $ 8,210,304
========== ======== ========= ===========
December 31, 1997:
U.S. Government and agency
securities................ $4,000,927 $ 11,753 $ (2,880) $ 4,009,800
Equity securities.......... 139,700 -- -- 139,700
---------- -------- --------- -----------
$4,140,627 $ 11,753 $ (2,880) $ 4,149,500
========== ======== ========= ===========
Securities Held-to-Maturity
December 31, 1998:
U.S. Government and
agencysecurities.......... $ 500,040 $ 12,700 $ -- $ 512,740
State and municipal securi-
ties...................... 2,826,568 64,913 (2,502) 2,888,979
Mortgage-backed securities. 878,516 12,566 -- 891,082
---------- -------- --------- -----------
$4,205,124 $ 90,179 $ (2,502) $ 4,292,801
========== ======== ========= ===========
December 31, 1997:
U.S. Government and agency
securities................ $3,483,289 $ 16,084 $ (4,356) $ 3,495,017
State and municipal securi-
ties...................... 598,481 8,720 -- 607,201
Mortgage-backed securities. 1,462,580 10,282 -- 1,472,862
---------- -------- --------- -----------
$5,544,350 $ 35,086 $ (4,356) $ 5,575,080
---------- -------- --------- -----------
</TABLE>
The amortized cost and fair value of securities as of December 31, 1998 by
contractual maturity are shown below. Maturities may differ from contractual
maturities in mortgage-backed securities because the mortgages underlying the
securities may be called or prepaid with or without penalty. Therefore, these
securities and equity securities are not included in the maturity categories
in the following summary.
<TABLE>
<CAPTION>
SECURITIES AVAILABLE- SECURITIES HELD-TO-
FOR-SALE MATURITY
--------------------- ---------------------
AMORTIZED FAIR AMORTIZED FAIR
COST VALUE COST VALUE
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Due in one year or less.......... $ 501,412 $ 505,155 $ -- $ --
Due from one to five years....... 5,496,730 5,483,902 1,800,592 1,828,086
Due from five to ten years....... 500,000 504,530 978,224 995,659
Due after ten years.............. -- -- 547,792 577,974
Equity securities................ 211,700 211,700 -- --
Mortgage-backed securities....... 1,510,730 1,505,017 878,516 891,082
---------- ---------- ---------- ----------
$8,220,572 $8,210,304 $4,205,124 $4,292,801
========== ========== ========== ==========
</TABLE>
Securities with a carrying value of $2,519,965 and $3,999,136 at December
31, 1998 and 1997, respectively, were pledged to secure public deposits and
for other purposes.
F-18
<PAGE>
BANK ATLANTA
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
There were $19,039 and $9,618 of gross gains and no losses on sales of
securities for the years ended December 31, 1998 and 1997, respectively.
During 1997, the Bank began to classify certain purchases of securities as
held-to-maturity. Two securities previously purchased and classified as
available-for-sale were transferred to held-to-maturity. The securities were
transferred at book value, which amounted to $1,492,976. The unrealized loss,
net of tax, on the securities transferred was $15,474 on the date of transfer,
which was added back to accumulated other comprehensive income, a component of
stockholders' equity. The results of the accounting for the transfer of
securities was not materially different than generally accepted accounting
principles. There were no transfers during 1998.
NOTE 3. LOANS AND ALLOWANCE FOR LOAN LOSSES
The composition of loans is summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1998 1997
------------ -----------
<S> <C> <C>
Commercial and industrial......................... $ 10,916,000 $ 8,778,000
Real estate--construction......................... 14,226,000 13,723,000
Real estate--mortgage............................. 29,156,000 27,638,000
Consumer and other................................ 681,821 712,599
------------ -----------
54,979,821 50,851,599
Unearned income................................... (299,322) (297,231)
Allowance for loan losses......................... (981,153) (849,007)
------------ -----------
Loans, net........................................ $ 53,699,346 $49,705,361
============ ===========
Changes in the allowance for loan losses for the years ended December 31 are
as follows:
<CAPTION>
1998 1997
------------ -----------
<S> <C> <C>
BALANCE, BEGINNING OF YEAR........................ $ 849,007 $ 613,026
Provision for loan losses....................... 295,000 350,000
Loans charged off............................... (196,167) (136,667)
Recoveries of loans previously charged off...... 33,313 22,648
------------ -----------
BALANCE, END OF YEAR.............................. $ 981,153 $ 849,007
============ ===========
</TABLE>
There was no recorded investment in impaired loans at December 31, 1998. The
total recorded investment in impaired loans was $661,325 at December 31, 1997.
There were no impaired loans that had related allowances for loan losses
determined in accordance with Statement of Financial Accounting Standards No.
114 ("Accounting by Creditors for Impairment of a Loan"). The average recorded
investment in impaired loans for 1998 and 1997 was $351,844 and $467,673,
respectively. Interest income on impaired loans recognized for cash payments
received was not material for the years ended 1998 and 1997.
The Bank has granted loans to certain directors, executive officers, and
their related entities. The interest rates on these loans were substantially
the same as rates prevailing at the time of the transaction and repayment
terms are customary for the type of loan involved. Changes in related party
loans for the year ended December 31, 1998 are as follows:
<TABLE>
<S> <C>
BALANCE, BEGINNING OF YEAR......................................... $578,241
Advances......................................................... 699,465
Repayments....................................................... (561,632)
--------
BALANCE, END OF YEAR............................................... $716,074
========
</TABLE>
F-19
<PAGE>
BANK ATLANTA
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
NOTE 4. LOAN SERVICING
Loans serviced for others are not included in the accompanying balance
sheets. The unpaid principal balances of these loans are summarized as
follows:
<TABLE>
<CAPTION>
1998 1997
------------ -----------
<S> <C> <C>
Commercial loans serviced for other investors...... $ 10,269,371 $10,274,568
============ ===========
</TABLE>
The carrying amounts of capitalized servicing rights are included in other
assets in the accompanying balance sheets and totaled $142,573 and $154,215 at
December 31, 1998 and 1997, respectively. Net servicing rights in the amounts
of $23,377 and $83,416 were capitalized during the years ended December 31,
1998 and 1997, respectively. The Bank recognized amortization of the cost of
servicing rights in the amounts of $35,019 and $35,245 for the years ended
1998 and 1997, respectively. Because carrying amounts of the servicing rights
are based upon discounted cash flows of the servicing fee income, no reserve
for impairment in the carrying amounts was considered necessary at December
31, 1998 or 1997.
NOTE 5. PREMISES AND EQUIPMENT
Premises and equipment are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1998 1997
----------- ----------
<S> <C> <C>
Land and land improvements.......................... $ 203,043 $ 203,043
Buildings and improvements.......................... 977,372 971,192
Equipment........................................... 900,169 889,614
----------- ----------
2,080,584 2,063,849
Accumulated depreciation............................ (995,049) (911,090)
----------- ----------
$ 1,085,535 $1,152,759
=========== ==========
</TABLE>
NOTE 6. DEPOSITS
At December 31, 1998, the scheduled maturities of time deposits are as
follows:
<TABLE>
<S> <C>
1999............................................................. $54,125,935
2000............................................................. 1,391,450
2001............................................................. 643,715
2002............................................................. 168,073
2003............................................................. 505,629
-----------
$56,834,802
===========
</TABLE>
NOTE 7. EMPLOYEE BENEFIT PLANS
The Bank has a 401(K) profit sharing plan covering substantially all
employees, subject to certain minimum age and service requirements.
Contributions to the plan charged to expense during 1998 and 1997 amounted to
$9,892 and $6,038, respectively.
F-20
<PAGE>
BANK ATLANTA
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
NOTE 8. STOCK OPTIONS
The Bank has a stock option plan with common stock options available to
grant to executive officers and directors. Option prices are determined by a
Board of Directors appointed committee, but cannot be less than 85% of the
fair value of the Bank's common stock on the date of the grant. The options
are exercisable under varying terms as determined by the committee. At
December 31, 1998, the Bank had 27,000 options available to grant. Other
pertinent information related to the options is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------
1998 1997
------------------ -----------------
WEIGHTED- WEIGHTED-
AVERAGE AVERAGE
EXERCISE EXERCISE
NUMBER PRICE NUMBER PRICE
------- --------- ------ ---------
<S> <C> <C> <C> <C>
Under option, beginning of year......... 68,000 $ 5.88 73,000 $5.88
Granted............................... 41,000 8.88 --
Exercised............................. (10,000) 5.86 -- --
Terminated............................ (16,000) 6.82 (5,000) 5.86
------- ------
Under option, end of year............... 83,000 7.19 68,000 5.88
======= ======
Exercisable, end of year................ 34,667 5.99 20,000 5.86
======= ======
</TABLE>
<TABLE>
<CAPTION>
WEIGHTED-
AVERAGE
WEIGHTED- REMAINING
AVERAGE CONTRACTUAL
NUMBER PRICE RANGE EXERCISE PRICE LIFE IN YEARS
------ ------------ -------------- -------------
<S> <C> <C> <C> <C>
61,000 $5.86 - 7.21 $ 6.06 2.10
22,000 $ 10.33 $10.33 9.80
------
Under option, end of year... 83,000
======
Exercisable, end of year.... 34,667 $5.86 - 7.21 $ 5.99 2.07
======
</TABLE>
As permitted by SFAS No. 123, "Accounting for Stock-Based Compensation", the
Bank recognizes compensation cost for stock-based employee compensation awards
in accordance with APB Opinion No. 25, "Accounting for Stock Issued to
Employees". The Bank recognized no compensation cost for stock-based employee
compensation awards for the years ended December 31, 1998 and 1997. In
addition, the Bank does not recognize compensation expense for those options
granted at prices less than fair value on the date of grant, the results of
which are not materially different than generally accepted accounting
principles. If the Bank had recognized compensation cost in accordance with
SFAS No. 123, net income and earnings per share would have been reduced as
follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------------
1998 1997
-------------------- --------------------
DILUTED DILUTED
EARNINGS EARNINGS
NET PER NET PER
INCOME SHARE INCOME SHARE
---------- -------- ---------- --------
<S> <C> <C> <C> <C>
As reported....................... $1,405,312 $1.96 $1,217,897 $1.71
Stock-based compensation, net of
related tax effect............... (18,117) (.03) (9,878) (.02)
---------- ----- ---------- -----
As adjusted....................... $1,387,195 $1.93 $1,208,019 $1.69
========== ===== ========== =====
</TABLE>
F-21
<PAGE>
BANK ATLANTA
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The per share weighted-average value of stock options granted during 1998
was $3.44 using the Black Scholes option pricing model and the following
assumptions:
<TABLE>
<S> <C>
Risk-free interest rate................................................ 5.38%
Expected life of the options........................................... 8.10
Expected dividends (as a percent of the fair value of the stock)....... 1.00%
Volatility............................................................. --
</TABLE>
NOTE 9. INCOME TAXES
Income tax expense consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1998 1997
-------- ---------
<S> <C> <C>
Current................................................. $704,390 $ 590,807
Deferred................................................ 3,528 126,653
Valuation adjustment.................................... (13,918) (155,411)
Benefit of net operating loss carryforward.............. -- (157,049)
-------- ---------
Income tax expense.................................... $694,000 $ 405,000
======== =========
</TABLE>
The Bank's income tax expense differs from the amounts computed by applying
the Federal income tax statutory rates to income before income taxes. A
reconciliation of the differences is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------
1998 1997
----------------- ------------------
AMOUNT PERCENT AMOUNT PERCENT
-------- ------- --------- -------
<S> <C> <C> <C> <C>
Income taxes at statutory rate.......... $713,766 34% $ 551,785 34%
Tax exempt income..................... (37,624) (2) -- --
Disallowed expenses................... 8,164 -- 1,115 --
Valuation adjustment.................. (13,918) (1) (155,411) (10)
State income tax...................... 11,983 1 8,402 1
Other................................. 11,629 1 (891) --
-------- --- --------- ---
Income tax expense...................... $694,000 33% $ 405,000 25%
======== === ========= ===
</TABLE>
F-22
<PAGE>
BANK ATLANTA
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The components of deferred income taxes are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1998 1997
--------- ---------
<S> <C> <C>
Deferred tax assets:
Loan loss reserves................................... $ 243,616 $ 177,526
Deferred premiums on loan sales...................... 48,416 71,189
Accounting for other real estate..................... 9,556 50,974
Securities available-for-sale........................ 3,491 --
--------- ---------
305,079 299,689
Valuation allowance.................................... (207,819) (221,737)
--------- ---------
97,260 77,952
--------- ---------
Deferred tax liabilities:
Depreciation......................................... 44,277 38,850
Securities available-for-sale........................ -- 3,017
--------- ---------
44,277 41,867
--------- ---------
Net deferred tax assets................................ $ 52,983 $ 36,085
========= =========
</TABLE>
NOTE 10. EARNINGS PER COMMON SHARE
The following is a reconciliation of net income and weighted-average shares
outstanding used in determining basic and diluted earnings per common share
(EPS):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1998
-------------------------------
WEIGHTED-
NET AVERAGE PER SHARE
INCOME SHARES AMOUNT
----------- --------- ---------
<S> <C> <C> <C>
Basic EPS.................................... $ 1,405,312 697,810 $ 2.01
======
Effect of Dilutive Securities
Stock options.............................. -- 20,879
----------- -------
Diluted EPS.................................. $ 1,405,312 718,689 $ 1.96
=========== ======= ======
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
-------------------------------
WEIGHTED-
NET AVERAGE PER SHARE
INCOME SHARES AMOUNT
----------- --------- ---------
<S> <C> <C> <C>
Basic EPS.................................... $ 1,217,897 697,344 $ 1.75
======
Effect of Dilutive Securities
Stock options.............................. -- 15,214
----------- -------
Diluted EPS.................................. $ 1,217,897 712,558 $ 1.71
=========== ======= ======
</TABLE>
NOTE 11. COMMITMENTS AND CONTINGENT LIABILITIES
In the normal course of business, the Bank has entered into off-balance
sheet financial instruments which are not reflected in the financial
statements. These financial instruments include commitments to extend credit
and standby letters of credit. Such financial instruments are included in the
financial statements when funds are disbursed or the instruments become
payable. These instruments involve, to varying degrees, elements of credit
risk in excess of the amount recognized in the balance sheet.
F-23
<PAGE>
BANK ATLANTA
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The Bank's exposure to credit loss in the event of nonperformance by the
other party to the financial instrument for commitments to extend credit and
standby letters of credit is represented by the contractual amount of those
instruments. A summary of the Bank's commitments is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1998 1997
----------- -----------
<S> <C> <C>
Commitments to extend credit........................ $12,978,000 $19,071,000
Standby letters of credit........................... 30,000 126,853
----------- -----------
$13,008,000 $19,197,853
=========== ===========
</TABLE>
Commitments to extend credit generally have fixed expiration dates or other
termination clauses and may require payment of a fee. Since many of the
commitments are expected to expire without being drawn upon, the total
commitment amounts do not necessarily represent future cash requirements. The
credit risk involved in issuing these financial instruments is essentially the
same as that involved in extending loans to customers. The Bank evaluates each
customer's creditworthiness on a case-by-case basis. The amount of collateral
obtained, if deemed necessary by the Bank upon extension of credit, is based
on management's credit evaluation of the customer. Collateral held varies but
may include real estate and improvements, marketable securities, accounts
receivable, inventory, equipment, and personal property.
Standby letters of credit are conditional commitments issued by the Bank to
guarantee the performance of a customer to a third party. Those guarantees are
primarily issued to support public and private borrowing arrangements. The
credit risk involved in issuing letters of credit is essentially the same as
that involved in extending loans to customers. Collateral held varies as
specified above and is required in instances which the Bank deems necessary.
In the normal course of business, the Bank is involved in various legal
proceedings. In the opinion of management of the Bank, any liability resulting
from such proceedings would not have a material effect on the Bank's financial
statements.
YEAR 2000
The Year 2000 issue is the result of computer programs being written using
two digits rather than four to define the applicable year. Systems that do not
properly recognize the year "2000" could generate erroneous data or cause
systems to fail. The Bank is heavily dependent on computer processing and
telecommunication systems in the daily conduct of business activities. In
addition, the Bank must rely on intermediaries, vendors and customers to
appropriately modify their systems in order that all may continue normal
operations and operate without significant disruptions. The Bank has conducted
a review of its computer systems to identify the systems that could be
affected by the Year 2000 issue. The Bank presently believes that, with
modifications to its computer systems and conversions to new systems, the Year
2000 issue will not pose significant operational problems for the Bank or have
a material adverse effect on future operating results. However, absolute
assurance cannot be given that; (1) the modifications and conversions will
remedy all deficiencies, (2) failure of any of the Bank's systems will not
have a material impact on operations, or (3) failure of any other companies'
systems with whom the Bank conducts business will not have a material impact
on operations.
NOTE 12. CONCENTRATIONS OF CREDIT
The Bank originates primarily commercial, residential, and consumer loans to
customers in DeKalb County, the metro Atlanta area, and surrounding counties.
The ability of the majority of the Bank's customers to honor their contractual
loan obligations is dependent on the economy in the metro Atlanta area.
F-24
<PAGE>
BANK ATLANTA
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Seventy-nine percent of the Bank's loan portfolio is concentrated in loans
secured by real estate, of which a substantial portion is secured by real
estate in the Bank's primary market area. In addition, a substantial portion
of the other real estate owned is located in those same markets. Accordingly,
the ultimate collectibility of the loan portfolio and the recovery of the
carrying amount of other real estate owned are susceptible to changes in
market conditions in the Bank's primary market area. The other significant
concentrations of credit by type of loan are set forth in Note 3.
The Bank, as a matter of policy, does not generally extend credit to any
single borrower or group of related borrowers in excess of approximately
$1,423,000.
NOTE 13. REGULATORY MATTERS
The Bank is subject to certain restrictions on the amount of dividends that
may be declared without prior regulatory approval. Currently, approximately
$700,000 may be paid without prior regulatory approval.
The Bank is subject to various regulatory capital requirements administered
by the federal banking agencies. Failure to meet minimum capital requirements
can initiate certain mandatory, and possibly additional discretionary actions
by regulators that, if undertaken, could have a direct material effect on the
financial statements. Under capital adequacy guidelines and the regulatory
framework for prompt corrective action, the Bank must meet specific capital
guidelines that involve quantitative measures of the assets, liabilities, and
certain off-balance sheet items as calculated under regulatory accounting
practices. The Bank's capital amounts and classification are also subject to
qualitative judgments by the regulators about components, risk weightings and
other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain minimum amounts and ratios of Total and Tier I
capital to risk-weighted assets and of Tier I capital to average assets.
Management believes, as of December 31, 1998, the Bank meets all capital
adequacy requirements to which it is subject.
As of December 31, 1998, the most recent notification from the FDIC
categorized the Bank as well capitalized under the regulatory framework for
prompt corrective action. To be categorized as well capitalized, the Bank must
maintain minimum Total risk-based, Tier I risk-based, and Tier I leverage
ratios as set forth in the following table. There are no conditions or events
since that notification that management believes have changed the Bank's
category.
F-25
<PAGE>
BANK ATLANTA
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The Bank's actual capital amounts and ratios are presented in the following
table.
<TABLE>
<CAPTION>
TO BE WELL
FOR CAPITAL CAPITALIZED UNDER
ADEQUACY PROMPT CORRECTIVE
ACTUAL PURPOSES ACTION PROVISIONS
------------- ------------ -----------------
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
------ ------ ------ ----- -----------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
As of December 31, 1998:
Total Capital (to Risk
Weighted Assets):........... $8,097 12.97% $4,994 8.00% $ 6,243 10.00%
Tier I Capital (to
RiskWeighted Assets):....... $7,315 11.72% $2,497 4.00% $ 3,745 6.00%
Tier I Capital (to
AverageAssets):............. $7,315 9.24% $3,167 4.00% $ 3,958 5.00%
As of December 31, 1997:
Total Capital (to Risk
Weighted Assets):........... $6,626 11.53% $4,596 8.00% $ 5,745 10.00%
Tier I Capital (to Risk
Weighted Assets):........... $5,906 10.28% $2,298 4.00% $ 3,447 6.00%
Tier I Capital (to Average
Assets):.................... $5,906 8.35% $2,829 4.00% $ 3,537 5.00%
</TABLE>
NOTE 14. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used by the Bank in estimating
its fair value disclosures for financial instruments. In cases where quoted
market prices are not available, fair values are based on estimates using
discounted cash flow methods. Those methods are significantly affected by the
assumptions used, including the discount rates and estimates of future cash
flows. In that regard, the derived fair value estimates cannot be
substantiated by comparison to independent markets and, in many cases, could
not be realized in immediate settlement of the instrument. The use of
different methodologies may have a material effect on the estimated fair value
amounts. Also, the fair value estimates presented herein are based on
pertinent information available to management as of December 31, 1998 and
1997. Such amounts have not been revalued for purposes of these financial
statements since those dates and, therefore, current estimates of fair value
may differ significantly from the amounts presented herein.
CASH, DUE FROM BANKS, AND FEDERAL FUNDS SOLD:
The carrying amounts of cash, due from banks, and Federal funds sold
approximate their fair value.
SECURITIES:
Fair values for securities are based on quoted market prices. The carrying
values of equity securities with no readily determinable fair value
approximate fair values.
LOANS:
For variable-rate loans that reprice frequently and have no significant
change in credit risk, fair values are based on carrying values. For other
loans, the fair values are estimated using discounted cash flow methods, using
interest rates currently being offered for loans with similar terms to
borrowers of similar credit quality. Fair values for impaired loans are
estimated using discounted cash flow methods or underlying collateral values.
F-26
<PAGE>
BANK ATLANTA
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
DEPOSITS:
The carrying amounts of demand deposits and savings deposits approximate their
fair values. Fair values for fixed-rate certificates of deposit are estimated
using discounted cash flow methods, using interest rates currently being
offered on certificates
ACCRUED INTEREST:
The carrying amounts of accrued interest approximate their fair values.
OFF-BALANCE-SHEET INSTRUMENTS:
Fair values of the Bank's off-balance-sheet financial instruments are based
on fees charged to enter into similar agreements. However, commitments to
extend credit and standby letters of credit do not represent a significant
value to the Bank until such commitments are funded. The Bank has determined
that these instruments do not have a distinguishable fair value and no fair
value has been assigned.
The estimated fair values of the Bank's financial instruments were as
follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1998 DECEMBER 31, 1997
----------------------- -----------------------
CARRYING CARRYING
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Financial assets:.......... $11,337,314 $11,337,314 $ 8,799,554 $ 8,799,554
Cash, due from banks, and
Federal funds sold
Securities available-for-
sale.................... 8,210,304 8,210,304 4,149,500 4,149,500
Securities held-to-matu-
rity.................... 4,205,124 4,292,801 5,544,350 5,575,080
Loans.................... 53,699,346 54,840,000 49,705,361 50,690,000
Accrued interest receiv-
able.................... 536,273 536,273 554,975 554,975
Financial liabilities:
Deposits................. 70,241,247 70,106,445 63,137,855 63,139,923
Accrued interest payable. 1,187,646 1,187,646 1,077,495 1,077,495
</TABLE>
NOTE 15. BUSINESS COMBINATION
On May 20, 1999, the Bank entered into an Agreement and Plan of
Reorganization with Premier Bancshares, Inc. ("Premier") of Atlanta, Georgia.
Under this agreement, the Bank will merge with and into Premier. Upon
consummation of the merger, each share of Bank stock will be converted into
and exchanged for the right to receive 1.25 shares of Premier common stock,
subject to possible adjustment as defined in the agreement. Consummation is
subject to certain conditions, including regulatory and stockholder approval.
F-27
<PAGE>
APPENDIX A
AGREEMENT AND PLAN OF REORGANIZATION
BY AND BETWEEN
PREMIER BANCSHARES, INC.,
PMB ACQUISITION CORP. II
AND
BANK ATLANTA
Dated as of May 20, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Preamble ................................................................................ 1
ARTICLE I
- ---------
THE MERGER...................................................................... 2
----------
Merger ....................................................................... 2
Time and Place of Closing....................................................... 2
Effective Time.................................................................. 2
Execution of Support Agreement.................................................. 2
ARTICLE II
- ----------
TERMS OF MERGER................................................................. 2
---------------
Name ....................................................................... 2
Incorporation................................................................... 2
Bylaws ....................................................................... 3
Directors and Officers.......................................................... 3
Business of Surviving Bank...................................................... 3
Assumption of Rights............................................................ 3
Assumption of Liabilities....................................................... 3
ARTICLE III
- -----------
MANNER OF CONVERTING SHARES..................................................... 3
---------------------------
Conversion of Shares............................................................ 3
Anti-Dilution Provisions........................................................ 5
Shares Held By Bank Atlanta or Premier.......................................... 6
Conversion of Stock Options..................................................... 6
Fractional Shares............................................................... 7
ARTICLE IV
- ----------
EXCHANGE OF SHARES.............................................................. 7
------------------
Exchange Procedures............................................................. 7
Rights of Former Bank Atlanta Shareholders...................................... 7
ARTICLE V
- ---------
REPRESENTATIONS AND WARRANTIES OF BANK ATLANTA.................................. 8
----------------------------------------------
Organization, Standing, and Power............................................... 8
Authority; No Breach By Agreement............................................... 8
Capital Stock................................................................... 9
Bank Atlanta Subsidiaries....................................................... 10
Financial Statements............................................................ 10
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
Absence of Undisclosed Liabilities.................................................... 10
Absence of Certain Changes or Events.................................................. 10
Tax Matters........................................................................... 10
Allowance for Possible Loan Losses.................................................... 11
Assets ............................................................................. 12
Environmental Matters................................................................. 12
Compliance with Laws.................................................................. 12
Labor Relations....................................................................... 13
Employee Benefit Plans................................................................ 13
Material Contracts.................................................................... 15
Legal Proceedings..................................................................... 15
Reports ............................................................................. 16
Statements True and Correct........................................................... 16
Accounting, Tax and Regulatory Matters................................................ 16
Charter Provisions.................................................................... 17
Millennium Compliance................................................................. 17
ARTICLE VI
- ----------
REPRESENTATIONS AND WARRANTIES OF PREMIER AND PMB..................................... 17
-------------------------------------------------
Organization, Standing, and Power..................................................... 17
Authority; No Breach By Agreement..................................................... 18
Capital Stock......................................................................... 18
Financial Statements.................................................................. 19
Absence of Undisclosed Liabilities.................................................... 19
Absence of Certain Changes or Events.................................................. 20
Compliance with Laws.................................................................. 20
Legal Proceedings..................................................................... 20
Statements True and Correct........................................................... 21
Accounting, Tax and Regulatory Matters................................................ 21
Premier Subsidiaries.................................................................. 21
Reports ............................................................................. 22
Millennium Compliance................................................................. 22
Allowance for Possible Loan Losses.................................................... 22
ARTICLE VII
- -----------
CONDUCT OF BUSINESS PENDING CONSUMMATION.............................................. 23
----------------------------------------
Affirmative Covenants of Bank Atlanta................................................. 23
Negative Covenants of Bank Atlanta.................................................... 23
Affirmative Covenants of Premier...................................................... 25
Adverse Changes in Condition.......................................................... 25
Reports ............................................................................. 26
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
ARTICLE VIII
- ------------
ADDITIONAL AGREEMENTS....................................................................... 26
---------------------
Registration Statement; Proxy Statement; Shareholder Approval............................... 26
Exchange Listing............................................................................ 26
Applications................................................................................ 26
Agreement as to Efforts to Consummate....................................................... 27
Investigation and Confidentiality........................................................... 27
Press Releases.............................................................................. 27
Acquisition Proposals....................................................................... 28
Accounting and Tax Treatment................................................................ 28
Agreement of Affiliates..................................................................... 28
Employee Benefits and Contracts............................................................. 29
Other Acquisitions, Mergers, or Combinations involving a Premier Company.................... 29
Indemnification............................................................................. 29
ARTICLE IX
- ----------
CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE........................................... 30
-------------------------------------------------
Conditions to Obligations of Each Party..................................................... 30
Conditions to Obligations of Premier........................................................ 32
Conditions to Obligations of Bank Atlanta................................................... 33
ARTICLE X
- ---------
TERMINATION................................................................................. 34
-----------
Termination................................................................................. 34
Effect of Termination....................................................................... 36
Non-Survival of Representations and Covenants............................................... 36
ARTICLE XI
- ----------
MISCELLANEOUS............................................................................... 36
-------------
Definitions................................................................................. 36
Expenses ................................................................................... 43
Brokers and Finders......................................................................... 43
Entire Agreement............................................................................ 43
Amendments.................................................................................. 44
Waivers ................................................................................... 44
Assignment.................................................................................. 44
Notices ................................................................................... 45
Governing Law............................................................................... 46
Counterparts................................................................................ 46
Captions ................................................................................... 46
Enforcement of Agreement.................................................................... 46
Severability................................................................................ 46
</TABLE>
iii
<PAGE>
LIST OF EXHIBITS
- ----------------
Exhibit Number Description
- -------------- -----------
1. Form of Agreement of Affiliates of Bank Atlanta.
(Section 8.9).
2. Matters as to which Counsel for Bank Atlanta will
opine. (Section 9.2(d)).
3. Form of Claims/Indemnification Letter (Section
9.2(e)).
4. Matters as to which Counsel for Premier will
opine. (Section 9.3(d)).
5. Form of Support Agreement (Section 1.4).
iv
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
------------------------------------
THIS AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is made and
entered into as of May 20, 1999 by and between PREMIER BANCSHARES, INC.
("Premier"), a corporation organized and existing under the laws of the State of
Georgia, with its principal office located in Atlanta, Georgia; PMB ACQUISITION
CORP. II ("PMB"), a corporation organized and existing under the laws of the
State of Georgia and a wholly owned subsidiary of Premier; and BANK ATLANTA
("Bank Atlanta"), a commercial bank organized and existing under the laws of the
State of Georgia, with its principal office located in Decatur, Georgia.
PREAMBLE
--------
The Boards of Directors of Bank Atlanta and Premier are of the opinion that
the transactions described herein are in the best interests of the parties and
their respective shareholders. This Agreement provides for the acquisition of
Bank Atlanta by Premier pursuant to the merger (the "Merger") of PMB with and
into Bank Atlanta, and following the merger Bank Atlanta will become a wholly-
owned subsidiary of Premier. At the effective time of the Merger, the
outstanding shares of the common stock of Bank Atlanta shall be converted into
the right to receive shares of the common stock of Premier. As a result,
shareholders of Bank Atlanta will become shareholders of Premier. The
transactions described in this Agreement are subject to the approvals of the
Boards of Directors of Bank Atlanta, Premier and PMB, the shareholders of Bank
Atlanta and PMB, the Georgia Department of Banking and Finance, the Board of
Governors of the Federal Reserve System (or the Federal Reserve Bank of Atlanta
acting pursuant to delegated authority), the Federal Deposit Insurance
Corporation and the satisfaction of certain other conditions described in this
Agreement. It is the intention of the parties to this Agreement that the Merger
(i) for federal income tax purposes shall qualify as a "reorganization" within
the meaning of Section 368(a) of the Internal Revenue Code and (ii) for
accounting purposes shall be accounted for as a "pooling of interests"
transaction.
As a condition and inducement to Premier's willingness to consummate the
transactions contemplated by this Agreement, each member of the Board of
Directors of Bank Atlanta will execute and deliver to Premier an agreement (a
"Support Agreement") within ten (10) calendar days of the date of this
Agreement, in substantially the form of Exhibit 5 to this Agreement.
---------
Certain terms used in this Agreement are defined in Section 11.1 of this
Agreement.
NOW, THEREFORE, in consideration of the above and the mutual warranties,
representations, covenants and agreements set forth herein, the receipt and
legal sufficiency of which are hereby acknowledged, the Parties hereto agree as
follows:
<PAGE>
ARTICLE I
---------
THE MERGER
----------
1.1 Merger. Subject to the terms and conditions of this Agreement, at the
------
Effective Time, PMB shall be merged with and into Bank Atlanta as authorized by
Section 7-1-530 of the Financial Institutions Code of Georgia and in accordance
with the provisions of Sections 7-1-531, 7-1-532, and 7-1-533 of the Financial
Institutions Code of Georgia. Bank Atlanta shall be the Surviving Bank resulting
from the Merger and shall be operated as a wholly owned subsidiary of Premier.
At the Effective Time, the separate existence of PMB shall cease. The Merger
shall be consummated pursuant to the terms of this Agreement, which has been
approved and adopted by the respective Boards of Directors of Bank Atlanta,
Premier, and PMB.
1.2 Time and Place of Closing. The Closing will take place at 10:00 a.m.
-------------------------
on the date that the Effective Time occurs (or the immediately preceding day if
the Effective Time is earlier than 10:00 a.m.), or at such other time as the
Parties, acting through their duly authorized officers, may mutually agree. The
place of Closing shall be at the offices of Womble Carlyle Sandridge & Rice,
PLLC, Atlanta, Georgia, or such other place as may be mutually agreed upon by
the Parties.
1.3 Effective Time. The Merger and the other transactions contemplated by
--------------
this Agreement shall become effective on the date and at the time the Georgia
Certificate of Merger reflecting the Merger shall become effective with the
Secretary of State of the State of Georgia (the "Effective Time"). Subject to
the terms and conditions hereof, unless otherwise mutually agreed upon in
writing by the duly authorized officers of each Party, the Parties shall use
their reasonable efforts to cause the Effective Time to occur on the last
business day of the month in which occurs the last to occur of (a) the effective
date (including expiration of any applicable waiting period) of the last
required Consent of any Regulatory Authority having authority over and approving
or exempting the Merger, and (b) the date on which the shareholders of Bank
Atlanta approve this Agreement to the extent such approval is required by
applicable Law; or such later date as may be mutually agreed upon in writing by
the duly authorized officers of each Party.
1.4 Execution of Support Agreement. Within ten (10) calendar days of the
------------------------------
execution of this Agreement and as a condition hereto, each member of the Board
of Directors of Bank Atlanta will execute and deliver to Premier a Support
Agreement, in substantially the form of Exhibit 5 to this Agreement.
---------
ARTICLE II
----------
TERMS OF MERGER
---------------
2.1 Name. The name of the Surviving Bank resulting from the Merger shall
----
be "Bank Atlanta" or any other legally permissible name as Premier may in its
sole discretion select.
2.2 Articles of Incorporation. The Articles of Incorporation of Bank
--------------------------
Atlanta in effect immediately prior to the Effective Time shall be the Articles
of Incorporation of the Surviving Bank from and after the Effective Time until
otherwise amended or repealed.
2
<PAGE>
2.3 Bylaws. The Bylaws of Bank Atlanta in effect immediately prior to the
------
Effective Time shall be the Bylaws of the Surviving Bank from and after the
Effective Time until otherwise amended or repealed.
2.4 Directors and Officers. The directors of Bank Atlanta in office
----------------------
immediately prior to the Effective Time, together with such additional persons
as may thereafter be elected, shall serve as the directors of the Surviving Bank
from and after the Effective Time in accordance with the Articles of
Incorporation and Bylaws of the Surviving Bank. The officers of Bank Atlanta in
office immediately prior to the Effective Time, together with such additional
persons as may thereafter be elected, shall serve as the officers of the
Surviving Bank from and after the Effective Time in accordance with the Bylaws
of the Surviving Bank. In addition, as of the Effective Time, Premier may elect
additional directors to the board of directors of the Surviving Bank and the
board of directors may elect additional officers.
2.5 Business of Surviving Bank. The business of the Surviving Bank from
--------------------------
and after the Effective Time shall continue to be that of a commercial bank
organized under the laws of the State of Georgia. The business of the Surviving
Bank shall be conducted from its main office located in Decatur, Georgia.
2.6 Assumption of Rights. At the Effective Time, the separate existence
--------------------
and corporate organization of PMB shall be merged into and continued in the
Surviving Bank. All rights, franchises, and interests of both PMB and Bank
Atlanta in and to every type of property (real, personal, and mixed), and all
choses in action of both PMB and Bank Atlanta shall be transferred to and vested
in the Surviving Bank without any deed or other transfer. The Surviving Bank,
upon consummation of the Merger and without any order or other action on the
part of any court or otherwise, shall hold and enjoy all rights of property,
franchises, and interests, including appointments, designations, and
nominations, and all other rights and interests as trustee, executor,
administrator, registrar of stocks and bonds, guardian of estates, assignee,
receiver, and committee of estates of incompetent persons, and in every other
fiduciary capacity, in the same manner and to the same extent as such rights,
franchises and interests were held or enjoyed by either PMB or Bank Atlanta at
the Effective Time.
2.7 Assumption of Liabilities. All liabilities and obligations of both PMB
-------------------------
and Bank Atlanta of every kind and description shall be assumed by the Surviving
Bank, and the Surviving Bank shall be bound thereby in the same manner and to
the same extent that PMB and Bank Atlanta were so bound at the Effective Time.
ARTICLE III
-----------
MANNER OF CONVERTING SHARES
---------------------------
3.1 Conversion of Shares. Subject to the provisions of this Article III,
--------------------
at the Effective Time, by virtue of the Merger and without any action on the
part of the holders thereof, the shares of the constituent corporations or
banks, as applicable, shall be converted as follows:
3
<PAGE>
(a) Each share of Premier Common Stock issued and outstanding immediately
prior to the Effective Time shall remain issued and outstanding from and after
the Effective Time.
(b) Each share of PMB Common Stock issued and outstanding immediately
prior to the Effective Time shall be converted into one fully paid and non-
assessable share of Surviving Bank Common Stock.
(c) Each share of Bank Atlanta Common Stock (excluding shares held by Bank
Atlanta or by any Premier Company, which shares shall be canceled as provided in
Section 3.3 of this Agreement, in each case other than in a fiduciary capacity
or in satisfaction of debts previously contracted) issued and outstanding at the
Effective Time shall cease to be outstanding and shall be converted into and
exchanged for the right to receive 1.25 shares of Premier Common Stock, subject
to possible adjustment as provided in Section 3.1(d) (the "Exchange Ratio"):
(d) The Exchange Ratio shall be adjusted in the event both of the
following conditions are satisfied:
(1) the Average Closing Price shall be less than the product of (i)
0.80 and (ii) the Starting Price; and
(2) (i) the quotient obtained by dividing the Average Closing Price
by the Starting Price (such number being referred to herein as the "Premier
Ratio") shall be less than (ii) the quotient obtained by dividing the Index
Price on the Determination Date by the Index Price on the Starting Date
(such number being referred to herein as the "Index Ratio").
In the event both of the above conditions are satisfied, the Exchange Ratio
shall be increased to equal the quotient obtained by dividing (1) the sum of (i)
0.75 times the difference between the Starting Price and the Average Closing
Price, and (ii) the Average Closing Price multiplied by the Exchange Ratio by
(2) the Average Closing Price. Following any such adjustment to the Exchange
Ratio as provided in this Section 3.1(d), any references in this Agreement to
the "Exchange Ratio" shall thereafter be deemed to refer to the "Exchange Ratio"
as so adjusted. The provisions of this Section 3.1(d) are subject to the
provisions of Section 10.1(j).
For purposes of this Section 3.1(c), the following terms shall have the
meanings indicated.
"Average Closing Price" shall mean the average of the last sales
prices of Premier Common Stock as reported on the American Stock Exchange,
or such other stock exchange on which the Premier Common Stock is then
traded (as reported by The Wall Street Journal or, if not reported thereby,
any other authoritative source) for the 10 consecutive full trading days in
which such shares are traded ending at the close of trading on the
Determination Date.
"Determination Date" shall mean that date which is twenty-five (25)
days after the date on which the Registration Statement is declared
effective by the SEC.
4
<PAGE>
"Index Group"shall mean the 14 bank holding companies listed below,
the common stocks of all of which shall be publicly traded and as to which
there shall not have been, since the Starting Date and before the
Determination Date, any public announcement of a proposal for such to be
acquired or for such company to acquire another company or companies in
transactions with a value exceeding 25% of the acquiror's market
capitalization. In the event that any such company or companies are
removed from the Index Group, the weights (which shall be determined based
upon the number of outstanding shares of common stock) shall be
redistributed proportionately for purposes of determining the Index Price.
The 17 bank holding companies and the weights attributed to them are as
follows:
Bank Holding Companies Weighting
------------------------------ ---------
AmSouth Bancorporation 7.81%
BB&T Corporation 13.62%
CCB Financial 1.77%
Centura Banks, Inc. 1.26%
Compass Bancshares, Inc. 5.03%
Fifth Third Bancorp 11.90%
First Tennessee National Corporation 5.77%
First Virginia Banks, Inc. 2.22%
Huntington Bancshares, Inc. 9.30%
Mercantile Bankshares, Inc. 3.09%
SouthTrust Corporation 7.41%
Summit Bancorp 7.59%
SunTrust Banks, Inc. 14.24%
Wachovia Corporation 8.99%
-------
Total 100.00%
=======
"Index Price" on a given date shall mean the weighted average
(weighted in accordance with the factors listed above) of the last sale
prices of the companies composing the Index Group.
"Starting Date" with regard to the Index Price shall mean May 19,
1999.
"Starting Price" shall mean $20.75.
3.2 Anti-Dilution Provisions. In the event Premier or Bank Atlanta changes
------------------------
the number of shares of Premier Common Stock or Bank Atlanta Common Stock,
respectively, issued and outstanding prior to the Effective Time as a result of
a stock split, stock dividend or similar recapitalization with respect to such
stock and the record date therefor (in the case of a stock dividend) or the
effective date therefor (in the case of a stock split or similar
recapitalization) shall be prior to the Effective Time, the Exchange Ratio shall
be proportionately adjusted.
5
<PAGE>
3.3 Shares Held By Bank Atlanta or Premier. Each of the shares of Bank
---------------------------------------
Atlanta Common Stock held by Bank Atlanta or by any Premier Company, in each
case other than in a fiduciary capacity or in satisfaction of debts previously
contracted, shall be canceled and retired at the Effective Time, and no
consideration shall be issued in exchange therefor.
3.4 Conversion of Stock Options.
---------------------------
(a) At the Effective Time, all rights with respect to Bank Atlanta Common
Stock pursuant to stock options granted by Bank Atlanta ("Bank Atlanta Options")
under the Bank Atlanta Stock Plans, which are outstanding at the Effective Time,
whether or not exercisable, shall be converted into and become rights with
respect to Premier Common Stock, and Premier shall assume each Bank Atlanta
Option, in accordance with the terms of the Bank Atlanta Stock Plan and stock
option agreement by which it is evidenced. From and after the Effective Time,
(i) each Bank Atlanta Option assumed by Premier may be exercised solely for
shares of Premier Common Stock, (ii) the number of shares of Premier Common
Stock subject to such Bank Atlanta Option shall be equal to the number of shares
of Bank Atlanta Common Stock subject to such Bank Atlanta Option immediately
prior to the Effective Time multiplied by the Exchange Ratio, and (iii) the per
share exercise price under each such Bank Atlanta Option shall be adjusted by
dividing the per share exercise price under each such Bank Atlanta Option by the
Exchange Ratio and rounding down to the nearest cent. It is intended that the
foregoing assumption shall be undertaken in a manner that will not constitute a
"modification" as defined in Section 424 of the Internal Revenue Code, as to any
stock option which is an "incentive stock option." Bank Atlanta and Premier
agree to take all necessary steps to effect the provisions of this Section 3.4.
(b) Premier may, at its election, substitute, as of the Effective Time,
stock options under the Premier Bancshares, Inc. 1997 Stock Option Plan (the
"Premier Stock Option Plan") for all or a part of the Bank Atlanta Options,
subject to the following conditions: (i) the requirements of Section 3.4(a)
shall be met; (ii) such substitution shall not constitute a modification,
extension or renewal of any of the Bank Atlanta Options which are incentive
stock options; (iii) the substituted options shall continue in effect on
substantially the same terms and conditions as contained in the document
granting the Bank Atlanta Options; and (iv) each grant of a substitute option to
any individual who shall be deemed subject to Section 16 of the 1934 Act shall
have been specifically approved in advance by the full Board of Directors of
Premier or by a committee consisting solely of "non-employee" directors as
defined in Rule 16b-3. As soon as practicable following the Effective Time,
Premier shall deliver to the participants receiving substitute options under the
Premier Stock Option Plan an appropriate notice setting forth such
participant's rights pursuant thereto. Premier has reserved under the Premier
Stock Option Plan adequate shares of Premier Common Stock for delivery upon
exercise of any such substituted options.
6
<PAGE>
3.5 Fractional Shares. Notwithstanding any other provision of this
------------------
Agreement, each holder of shares of Bank Atlanta Common Stock exchanged pursuant
to the Merger, or of options to purchase shares of Bank Atlanta Common Stock,
who would otherwise have been entitled to receive a fraction of a share of
Premier Common Stock (after taking into account all certificates delivered by
such holder) shall receive, in lieu thereof, cash (without interest) in an
amount equal to such fractional part of a share of Premier Common Stock
multiplied by the market value of one share of Premier Common Stock at the
Effective Time, in the case of shares exchanged pursuant to the Merger, or the
date of exercise, in the case of options. The market value of one share of
Premier Common Stock at the Effective Time or the date of exercise, as the case
may be, shall be the last sale price of the Premier Common Stock on the American
Stock Exchange, or such other exchange on which the Premier Common Stock is
listed, (as reported by The Wall Street Journal or, if not reported thereby, any
other authoritative source) on the last trading day preceding the Effective
Time, in the case of shares exchanged pursuant to the Merger, or the date of
exercise, in the case of options. No such holder will be entitled to dividends,
voting rights, or any other rights as a shareholder in respect of any fractional
shares.
ARTICLE IV
----------
EXCHANGE OF SHARES
------------------
4.1 Exchange Procedures. Promptly after the Effective Time, Premier shall
-------------------
cause SunTrust Bank, Atlanta, or such other exchange agent selected by Premier
(the "Exchange Agent") to mail to the former holders of Bank Atlanta Common
Stock appropriate transmittal materials which shall specify that delivery shall
be effected, and risk of loss and title to the certificates theretofore
representing shares of Bank Atlanta Common Stock shall pass, only upon proper
delivery of such certificates to the Exchange Agent. After the Effective Time,
each holder of shares of Bank Atlanta Common Stock (other than shares to be
canceled pursuant to Section 3.3 of this Agreement) issued and outstanding at
the Effective Time shall surrender the certificate or certificates representing
such shares to the Exchange Agent and shall promptly upon surrender thereof
receive in exchange therefor the consideration provided in Article III of this
Agreement, together with all undelivered dividends or distributions in respect
of such shares (without interest thereon) pursuant to Section 4.2 of this
Agreement. Premier shall not be obligated to deliver the consideration to which
any former holder of Bank Atlanta Common Stock is entitled as a result of the
Merger until such holder surrenders his or her certificate or certificates
representing the shares of Bank Atlanta Common Stock for exchange as provided in
this Section 4.1. The certificate or certificates of Bank Atlanta Common Stock
so surrendered shall be duly endorsed as the Exchange Agent may require. Any
other provision of this Agreement notwithstanding, neither Premier, the
Surviving Bank, nor the Exchange Agent shall be liable to a holder of Bank
Atlanta Common Stock for any amounts paid or property delivered in good faith to
a public official pursuant to any applicable abandoned property Law.
4.2 Rights of Former Bank Atlanta Shareholders. At the Effective Time,
------------------------------------------
the stock transfer books of Bank Atlanta shall be closed as to holders of Bank
Atlanta Common Stock immediately prior to the Effective Time and no transfer of
Bank Atlanta Common Stock by any such holder shall thereafter be made or
recognized. Until surrendered for exchange in accordance with the provisions of
Section 4.1 of this Agreement, each certificate theretofore representing shares
of
7
<PAGE>
Bank Atlanta Common Stock (other than shares to be canceled pursuant to Section
3.3 of this Agreement) shall from and after the Effective Time represent for all
purposes only the right to receive the consideration provided in Article III of
this Agreement in exchange therefor. To the extent permitted by Law, former
holders of record of Bank Atlanta Common Stock shall be entitled to vote after
the Effective Time at any meeting of Premier shareholders the number of whole
shares of Premier Common Stock into which their respective shares of Bank
Atlanta Common Stock are converted, regardless of whether such holders have
exchanged their certificates representing Bank Atlanta Common Stock for
certificates representing Premier Common Stock in accordance with the provisions
of this Agreement. Whenever a dividend or other distribution is declared by
Premier on the Premier Common Stock, the record date for which is at or after
the Effective Time, the declaration shall include dividends or other
distributions on all shares issuable pursuant to this Agreement, but no dividend
or other distribution payable to the holders of record of Premier Common Stock
as of any time subsequent to the Effective Time shall be delivered to the holder
of any certificate representing shares of Bank Atlanta Common Stock issued and
outstanding at the Effective Time until such holder surrenders such certificate
for exchange as provided in Section 4.1 of this Agreement. However, upon
surrender of such Bank Atlanta Common Stock certificate, both the Premier Common
Stock certificate (together with all such undelivered dividends or other
distributions without interest) and any undelivered cash payments to be paid for
fractional share interests (without interest) shall be delivered and paid with
respect to each share represented by such certificate.
ARTICLE V
---------
REPRESENTATIONS AND WARRANTIES
------------------------------
OF BANK ATLANTA
---------------
Bank Atlanta hereby represents and warrants to Premier and PMB as follows:
5.1 Organization, Standing, and Power. Bank Atlanta is a commercial bank
---------------------------------
duly organized, validly existing, and in good standing under the Laws of the
State of Georgia. Bank Atlanta has the power and authority to carry on its
business as now conducted and to own, lease and operate its Assets. Bank Atlanta
is duly qualified or licensed to transact business as a foreign corporation in
good standing in the States of the United States and foreign jurisdictions where
the character of its Assets or the nature or conduct of its business requires it
to be so qualified or licensed, except for such jurisdictions in which the
failure to be so qualified or licensed is not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Bank Atlanta.
Bank Atlanta is an "insured institution" as such term is defined in the Federal
Deposit Insurance Act and applicable regulations thereunder, and the deposits
therein are insured by the Bank Insurance Fund to the maximum extent permitted
by Law.
5.2 Authority; No Breach By Agreement .
----------------------------------
(a) Bank Atlanta has the power and authority necessary to execute, deliver
and perform its obligations under this Agreement and to consummate the
transactions contemplated hereby and thereby, subject to the approval of this
Agreement by the holders of two-thirds of the outstanding
8
<PAGE>
shares of Bank Atlanta Common Stock. The execution, delivery and performance of
this Agreement and the consummation of the transactions contemplated herein,
including the Merger, have been duly and validly authorized by all necessary
corporate action in respect thereof on the part of Bank Atlanta, subject to the
approval of this Agreement by the holders of two-thirds of the outstanding
shares of Bank Atlanta Common Stock, which is the only shareholder vote required
for approval of this Agreement and consummation of the Merger by Bank Atlanta.
Subject to such requisite shareholder approval, this Agreement represents a
legal, valid and binding obligation of Bank Atlanta, enforceable against Bank
Atlanta in accordance with its terms (except in all cases as such enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium,
or similar Laws affecting the enforcement of creditors' rights generally and
except that the availability of the equitable remedy of specific performance or
injunctive relief is subject to the discretion of the court before which any
proceeding may be brought).
(b) Except as disclosed in Section 5.2(b) of the Bank Atlanta Disclosure
----------
Memorandum, neither the execution and delivery of this Agreement by Bank
- ----------
Atlanta, nor the consummation by Bank Atlanta of the transactions contemplated
hereby, nor compliance by Bank Atlanta with any of the provisions hereof will
(i) conflict with or result in a breach of any provision of Bank Atlanta's
Articles of Incorporation or Bylaws, or (ii) constitute or result in a Default
under, or require any Consent pursuant to, or result in the creation of any Lien
on any Asset of Bank Atlanta under, any Contract or Permit of Bank Atlanta,
where such Default or Lien, or any failure to obtain such Consent, is reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
Bank Atlanta, or (iii) subject to receipt of the requisite approvals referred to
in Section 9.1(b) of this Agreement, violate any Law or Order applicable to Bank
Atlanta or any of its Assets.
(c) Other than in connection or compliance with the provisions of the
Securities Laws, applicable state corporate and securities Laws, and rules of
the NASD, and other than Consents required from Regulatory Authorities, and
other than notices to or filings with the Internal Revenue Service or the
Pension Benefit Guaranty Corporation with respect to any employee benefit plans,
and other than Consents, filings or notifications which, if not obtained or
made, are not reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on Bank Atlanta, no notice to, filing with, or Consent
of any public body or authority is necessary for the consummation by Bank
Atlanta of the Merger and the other transactions contemplated in this Agreement.
5.3 Capital Stock.
--------------
(a) The authorized capital stock of Bank Atlanta consists of 10,000,000
shares of Bank Atlanta Common Stock, of which 707,344 shares are issued and
outstanding as of the date of this Agreement and not more than 787,010 shares
will be issued and outstanding at the Effective Time (as a result of the
exercise of outstanding options). All of the issued and outstanding shares of
common stock of Bank Atlanta are duly and validly issued and outstanding and are
fully paid and nonassessable. None of the outstanding shares of Bank Atlanta
Common Stock has been issued in violation of any preemptive rights of the
current or past shareholders of Bank Atlanta.
9
<PAGE>
(b) Except as set forth in Section 5.3(a) of this Agreement, or as
disclosed in Section 5.3 of the Bank Atlanta Disclosure Memorandum, there are no
---------------------
shares of capital stock or other equity securities of Bank Atlanta outstanding
and no outstanding Rights relating to the capital stock of Bank Atlanta.
5.4 Bank Atlanta Subsidiaries. Bank Atlanta has no Subsidiaries.
--------------------------
5.5 Financial Statements. Bank Atlanta will disclose in Section 5.5 of
---------------------
the Bank Atlanta Disclosure Memorandum, and will deliver to Premier copies of,
---------------------
all Bank Atlanta Financial Statements prepared for periods ended prior to the
date hereof and will deliver to Premier copies of all Bank Atlanta Financial
Statements prepared subsequent to the date hereof. The Bank Atlanta Financial
Statements (as of the dates thereof and for the periods covered thereby) (a)
are, or if dated after the date of this Agreement will be, in accordance with
the books and records of Bank Atlanta, which are or will be, as the case may be,
complete and correct and which have been or will have been, as the case may be,
maintained in accordance with good business practices, and (b) present or will
present, as the case may be, fairly, the financial position of Bank Atlanta as
of the dates indicated and the results of operations, changes in shareholders'
equity, and cash flows of Bank Atlanta for the periods indicated, in accordance
with GAAP (subject to any exceptions as to consistency specified therein or as
may be indicated in the notes thereto or, in the case of interim financial
statements, to normal recurring year-end adjustments that are not material in
amount or effect).
5.6 Absence of Undisclosed Liabilities. Bank Atlanta does not have any
-----------------------------------
Liabilities that are reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on Bank Atlanta except Liabilities which
are accrued or reserved against in the balance sheets of Bank Atlanta as of
December 31, 1998 and March 31, 1999, included in the Bank Atlanta Financial
Statements or reflected in the notes thereto. Bank Atlanta has not incurred or
paid any Liability since March 31, 1999, except for such Liabilities incurred or
paid in the ordinary course of business consistent with past business practice
and which are not reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on Bank Atlanta.
5.7 Absence of Certain Changes or Events. Since March 31, 1999, except as
------------------------------------
disclosed in Section 5.7 of the Bank Atlanta Disclosure Memorandum, (a) there
---------------------
have been no events, changes or occurrences which have had, or are reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
Bank Atlanta, and (b) Bank Atlanta has not taken any action, or failed to take
any action, prior to the date of this Agreement, which action or failure, if
taken after the date of this Agreement, would represent or result in a material
breach or violation of any of the covenants and agreements of Bank Atlanta
provided in Article VII of this Agreement.
5.8 Tax Matters.
------------
(a) All Tax returns required to be filed by or on behalf of Bank Atlanta
have been timely filed or requests for extensions have been timely filed,
granted, and have not expired for periods ended on or before March 31, 1999, and
on or before the date of the most recent fiscal year end immediately preceding
the Effective Time, except to the extent that all such failures to file, taken
10
<PAGE>
together, are not reasonably likely to have a Material Adverse Effect on Bank
Atlanta, and all returns filed are complete and accurate to the Knowledge of
Bank Atlanta. All Taxes shown on filed returns have been paid. As of the date
of this Agreement, there is no audit examination, deficiency or refund
Litigation with respect to any Taxes that is reasonably likely to result in a
determination that would have, individually or in the aggregate, a Material
Adverse Effect on Bank Atlanta, except as reserved against in the Bank Atlanta
Financial Statements delivered prior to the date of this Agreement or as
disclosed in Section 5.8(a) of the Bank Atlanta Disclosure Memorandum. All
---------------------
Taxes and other Liabilities due with respect to completed and settled
examinations or concluded Litigation have been paid.
(b) Except as disclosed in Section 5.8(b) of the Bank Atlanta Disclosure
----------
Memorandum, Bank Atlanta has not executed an extension or waiver of any statute
- ----------
of limitations on the assessment or collection of any Tax due that is currently
in effect, and no unpaid tax deficiency has been asserted in writing against or
with respect to Bank Atlanta, which deficiency is reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Bank Atlanta.
(c) Adequate provision for any Taxes due or to become due for Bank Atlanta
for the period or periods through and including the date of the respective Bank
Atlanta Financial Statements has been made and is reflected on such Bank Atlanta
Financial Statements.
(d) Deferred Taxes of Bank Atlanta have been provided for in accordance
with GAAP.
(e) Bank Atlanta is in compliance with, and its records contain all
information and documents (including, without limitation, properly completed IRS
Forms W-9) necessary to comply with, all applicable information reporting and
Tax withholding requirements under federal, state and local Tax Laws, and such
records identify with specificity all accounts subject to backup withholding
under Section 3406 of the Internal Revenue Code, except for such instances of
noncompliance and such omissions as are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Bank Atlanta.
(f) There are no Liens with respect to Taxes upon any of the assets of
Bank Atlanta.
5.9 Allowance for Possible Loan Losses. The allowance for possible loan
----------------------------------
or credit losses (the "Allowance") shown on the balance sheets of Bank Atlanta
included in the most recent Bank Atlanta Financial Statements dated prior to the
date of this Agreement was, and the Allowance shown on the balance sheets of
Bank Atlanta included in the Bank Atlanta Financial Statements as of dates
subsequent to the execution of this Agreement will be, as of the dates thereof,
adequate (within the meaning of GAAP and applicable regulatory requirements or
guidelines) to provide for losses relating to or inherent in the loan and lease
portfolios (including accrued interest receivables) of Bank Atlanta and other
extensions of credit (including letters of credit and commitments to make loans
or extend credit) by Bank Atlanta as of the dates thereof except where the
failure of such Allowance to be so adequate is not reasonably likely to have a
Material Adverse Effect on Bank Atlanta.
11
<PAGE>
5.10 Assets. Except as disclosed in Section 5.10 of the Bank Atlanta
------
Disclosure Memorandum or as disclosed or reserved against in the Bank Atlanta
- ---------------------
Financial Statements, Bank Atlanta has good and marketable title, free and clear
of all Liens, to all of its Assets. All material tangible properties used in
the businesses of Bank Atlanta are in good condition, reasonable wear and tear
excepted, and are usable in the ordinary course of business consistent with Bank
Atlanta's past practices. All Assets which are material to Bank Atlanta's
business or held under leases or subleases by Bank Atlanta, are held under valid
Contracts enforceable in accordance with their respective terms (except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other Laws affecting the enforcement of creditors'
rights generally and except that the availability of the equitable remedy of
specific performance or injunctive relief is subject to the discretion of the
court before which any proceedings may be brought), and each such Contract is in
full force and effect. The policies of fire, theft, liability and other
insurance maintained with respect to the Assets or businesses of Bank Atlanta
provide adequate coverage under current industry practices against loss or
Liability, and the fidelity and blanket bonds in effect as to which Bank Atlanta
is a named insured are reasonably sufficient. The Assets of Bank Atlanta
include all assets required to operate the business of Bank Atlanta as presently
conducted.
5.11 Environmental Matters. Except as disclosed in Section 5.11 of the
---------------------
Bank Atlanta Disclosure Memorandum:
---------------------
(a) to the Knowledge of Bank Atlanta, Bank Atlanta, its Participation
Facilities and its Loan Properties are, and have been, in compliance with all
Environmental Laws, except for noncompliance which is not reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on Bank
Atlanta.
(b) to the Knowledge of Bank Atlanta, there is no Litigation pending or
threatened before any court, governmental agency or authority or other forum in
which Bank Atlanta or any of its Loan Properties or Participation Facilities has
been or, with respect to threatened Litigation, may be named as a defendant or
potentially responsible party (i) for alleged noncompliance with any
Environmental Law or (ii) relating to the release into the Environment of any
Hazardous Material, whether or not occurring at, on, under or involving a site
owned, leased or operated by Bank Atlanta or any of its Loan Properties or
Participation Facilities, except for such Litigation pending or threatened the
resolution of which is not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on Bank Atlanta and to the Knowledge of
Bank Atlanta, there is no reasonable basis for any such Litigation.
(c) to the Knowledge of Bank Atlanta, there have been no releases of
Hazardous Material in, on, under or affecting any Participation Facility or Loan
Property, except such as are not reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on Bank Atlanta.
5.12 Compliance with Laws. Bank Atlanta has in effect all Permits necessary
--------------------
for it to own, lease or operate its Assets and to carry on its business as now
conducted, except for those Permits the absence of which are not reasonably
likely to have, individually or in the aggregate, a
12
<PAGE>
Material Adverse Effect on Bank Atlanta, and there has occurred no Default under
any such Permit, other than Defaults which are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Bank Atlanta.
Except as disclosed in Section 5.12 of the Bank Atlanta Disclosure Memorandum,
---------------------
Bank Atlanta:
(a) is not in violation of any Laws, Orders or Permits applicable to its
business or employees conducting its business, except for violations which are
not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on Bank Atlanta; and
(b) has not received any notification or communication from any agency or
department of federal, state, or local government or any Regulatory Authority or
the staff thereof (i) asserting that Bank Atlanta is not in compliance with any
of the Laws or Orders which such governmental authority or Regulatory Authority
enforces, where such noncompliance is reasonably likely to have, individually or
in the aggregate, a Material Adverse Effect on Bank Atlanta, (ii) threatening to
revoke any Permits, the revocation of which is reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Bank Atlanta, or
(iii) requiring Bank Atlanta to enter into or consent to the issuance of a cease
and desist order, formal agreement, directive, commitment or memorandum of
understanding, or to adopt any Board resolution or similar undertaking, which
restricts materially the conduct of its business, or in any manner relates to
its capital adequacy, its credit or reserve policies, its management, or the
payment of dividends.
5.13 Labor Relations. Bank Atlanta is not the subject of any Litigation
----------------
asserting that it has committed an unfair labor practice (within the meaning of
the National Labor Relations Act or comparable state law) or seeking to compel
it to bargain with any labor organization as to wages or conditions of
employment, nor is there any strike or other labor dispute involving Bank
Atlanta, pending or, to its Knowledge, threatened, nor, to its Knowledge, is
there any activity involving Bank Atlanta's employees seeking to certify a
collective bargaining unit or engaging in any other organization activity.
5.14 Employee Benefit Plans.
-----------------------
(a) Bank Atlanta will disclose in Section 5.14 of the Bank Atlanta
Disclosure Memorandum and will deliver or make available to Premier copies in
- ---------------------
each case of all pension, retirement, profit-sharing, deferred compensation,
stock option, employee stock ownership, severance pay, vacation, bonus, or other
incentive plans, all other written employee programs, arrangements, or
agreements, all medical, vision, dental, or other health plans, all life
insurance plans, and all other employee benefit plans or fringe benefit plans,
including, without limitation, "employee benefit plans" as that term is defined
in Section 3(3) of ERISA, currently adopted, maintained by, sponsored in whole
or in part by, or contributed to by Bank Atlanta or any Affiliate thereof for
the benefit of employees, retirees, dependents, spouses, directors, independent
contractors, or other beneficiaries and under which employees, retirees,
dependents, spouses, directors, independent contractors, or other beneficiaries
are eligible to participate (collectively, the "Bank Atlanta Benefit Plans").
Any of the Bank Atlanta Benefit Plans which is an "employee pension benefit
plan," as that term is defined in Section 3(2) of ERISA, is referred to herein
as a
13
<PAGE>
"Bank Atlanta ERISA Plan." Each Bank Atlanta ERISA Plan which is also a
"defined benefit plan" (as defined in Section 414(j) of the Internal Revenue
Code) is referred to herein as a "Bank Atlanta Pension Plan." No Bank Atlanta
Pension Plan is or has been a multi-employer plan within the meaning of Section
3(37) of ERISA.
(b) All Bank Atlanta Benefit Plans are in compliance with the applicable
terms of ERISA, the Internal Revenue Code, and any other applicable Laws the
breach or violation of which are reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on Bank Atlanta. Each Bank Atlanta
ERISA Plan which is intended to be qualified under Section 401(a) of the
Internal Revenue Code has received a favorable determination letter from the
Internal Revenue Service, and Bank Atlanta is not aware of any circumstances
likely to result in revocation of any such favorable determination letter. To
the Knowledge of Bank Atlanta, neither Bank Atlanta nor any other party has
engaged in a transaction with respect to any Bank Atlanta Benefit Plan that,
assuming the taxable period of such transaction expired as of the date hereof,
would subject Bank Atlanta to a tax or penalty imposed by either Section 4975 of
the Internal Revenue Code or Section 502(i) of ERISA in amounts which are
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on Bank Atlanta.
(c) Neither Bank Atlanta nor any ERISA Affiliate of Bank Atlanta has any
past, present or future obligation or liability to contribute to any multi-
employer plan, as defined in Section 3(37) of ERISA.
(d) Except as disclosed in Section 5.14(d) of the Bank Atlanta Disclosure
----------
Memorandum, (i) Bank Atlanta does not have any obligations for retiree health
- ----------
and life benefits under any of the Bank Atlanta Benefit Plans, except as
required by Section 6.01 of ERISA and Section 4980B of the Internal Revenue
Code; (ii) there are no restrictions on the rights of Bank Atlanta to amend or
terminate any such Plan; and (iii) any amendment or termination of any such Plan
will not cause Bank Atlanta to incur any Liability that is reasonably likely to
have a Material Adverse Effect on Bank Atlanta.
(e) Except as disclosed in Section 5.14(e) of the Bank Atlanta Disclosure
----------
Memorandum, neither the execution and delivery of this Agreement nor the
- ----------
consummation of the transactions contemplated hereby or thereby will (i) result
in any payment (including, without limitation, severance, unemployment
compensation, golden parachute or otherwise) becoming due to any director or any
employee of Bank Atlanta from Bank Atlanta under any Bank Atlanta Benefit Plan
or otherwise, (ii) increase any benefits otherwise payable under any Bank
Atlanta Benefit Plan, or (iii) result in any acceleration of the time of payment
or vesting of any such benefit.
(f) The actuarial present values of all accrued deferred compensation
entitlements (including, without limitation, entitlements under any executive
compensation, supplemental retirement, or employment agreement) of employees and
former employees of Bank Atlanta and their respective beneficiaries have been
fully reflected on the Bank Atlanta Financial Statements to the extent required
by and in accordance with GAAP.
14
<PAGE>
(g) Bank Atlanta and each ERISA Affiliate of Bank Atlanta has complied with
the continuation of coverage requirements of Section 1001 of the Consolidated
Omnibus Budget Reconciliation Act of 1985, as amended, and ERISA Sections 601
through 608.
(h) Neither Bank Atlanta nor any ERISA Affiliate of Bank Atlanta is
obligated, contingently or otherwise, under any agreement to pay any amount
which would be treated as a "parachute payment," as defined in Section 280G(b)
of the Internal Revenue Code (determined without regard to Section
280G(b)(2)(A)(ii) of the Internal Revenue Code).
(i) Other than routine claims for benefits, there are no actions, audits,
investigations, suits or claims pending, or threatened against any Bank Atlanta
Benefit Plan, any trust or other funding agency created thereunder, or against
any fiduciary of any Bank Atlanta Benefit Plan or against the assets of any Bank
Atlanta Benefit Plan.
5.15 Material Contracts. Except as disclosed in Section 5.15 of the Bank
-------------------
Atlanta Disclosure Memorandum or otherwise reflected in the Bank Atlanta
---------------------
Financial Statements, Bank Atlanta is not, nor are any of its respective Assets,
businesses or operations, a party to, or bound or affected by, or receives
benefits under, (a) any employment, severance, termination, consulting or
retirement Contract providing for aggregate payments to any Person in any
calendar year in excess of $10,000, excluding "at will" employment arrangements,
(b) any Contract relating to the borrowing of money by Bank Atlanta or the
guarantee by Bank Atlanta of any such obligation (other than Contracts
evidencing deposit liabilities, purchases of federal funds, Federal Home Loan
Bank advances, fully-secured repurchase agreements, trade payables, and
Contracts relating to borrowings or guarantees made in the ordinary course of
business), and (c) any other Contract (excluding this Agreement) or amendment
thereto that is required to be filed as an exhibit to a Form 10-K or Form 10-Q
filed by Bank Atlanta with the SEC as of the date of this Agreement if Bank
Atlanta were required to file a Form 10-K or Form 10-Q with the SEC (together
with all Contracts referred to in Sections 5.10 and 5.14(a) of this Agreement,
the "Bank Atlanta Contracts"). Bank Atlanta is not in Default under any Bank
Atlanta Contract, other than Defaults which are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Bank Atlanta. All
of the indebtedness of Bank Atlanta for money borrowed is prepayable at any time
by Bank Atlanta without penalty or premium.
5.16 Legal Proceedings. Except as disclosed in Section 5.16 of the Bank
------------------
Atlanta Disclosure Memorandum, there is no Litigation instituted or pending, or,
---------------------
to the Knowledge of Bank Atlanta, threatened (or unasserted but considered
probable of assertion and which if asserted would have at least a reasonable
probability of an unfavorable outcome) against Bank Atlanta, or against any
Asset, interest, or right of Bank Atlanta, that is reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Bank Atlanta, nor
are there any Orders of any Regulatory Authorities, other governmental
authorities, or arbitrators outstanding against Bank Atlanta, that are
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on Bank Atlanta.
15
<PAGE>
5.17 Reports. Since January 1, 1997, Bank Atlanta has timely filed all
--------
reports and statements, together with any amendments required to be made with
respect thereto, that it was required to file with (a) the Regulatory
Authorities, and (b) any applicable state securities or banking authorities
(except failures to file which are not reasonably likely to have, individually
or in the aggregate, a Material Adverse Effect on Bank Atlanta). As of their
respective dates, each of such reports and documents, including the financial
statements, exhibits, and schedules thereto, complied in all material respects
with all applicable Laws. As of its respective date, each such report and
document to Bank Atlanta's Knowledge did not, in any material respects, contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements made therein,
in light of the circumstances under which they were made, not misleading.
5.18 Statements True and Correct. No statement, certificate, instrument or
---------------------------
other writing furnished or to be furnished by Bank Atlanta or any Affiliate
thereof to Premier pursuant to this Agreement or any other document, agreement
or instrument referred to herein contains or will contain any untrue statement
of material fact or will omit to state a material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. None of the information supplied or to be supplied by Bank
Atlanta or any Affiliate thereof for inclusion in the Registration Statement to
be filed by Premier with the SEC will, when the Registration Statement becomes
effective, be false or misleading with respect to any material fact, or omit to
state any material fact necessary to make the statements therein not misleading.
None of the information supplied or to be supplied by Bank Atlanta or any
Affiliate thereof for inclusion in the Proxy Statement to be mailed to Bank
Atlanta's shareholders in connection with the Bank Atlanta Shareholders'
Meeting, and any other documents to be filed by Bank Atlanta or any Affiliate
thereof with the SEC or any other Regulatory Authority in connection with the
transactions contemplated hereby, will, at the respective time such documents
are filed, and with respect to the Proxy Statement, when first mailed to the
shareholders of Bank Atlanta, be false or misleading with respect to any
material fact, or omit to state any material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, or, in the case of the Proxy Statement or any amendment thereof
or supplement thereto, at the time of the Bank Atlanta Shareholders' Meeting, be
false or misleading with respect to any material fact, or omit to state any
material fact necessary to correct any statement in any earlier communication
with respect to the solicitation of any proxy for the Bank Atlanta Shareholders'
Meeting. All documents that Bank Atlanta or any Affiliate thereof is responsible
for filing with any Regulatory Authority in connection with the transactions
contemplated hereby will comply as to form in all material respects with the
provisions of applicable Law.
5.19 Accounting, Tax and Regulatory Matters. Neither Bank Atlanta nor
---------------------------------------
any Affiliate thereof has taken any action, or agreed to take any action, or has
any Knowledge of any fact or circumstance that is reasonably likely to (a)
prevent the transactions contemplated hereby, including the Merger, from
qualifying for pooling-of-interests accounting treatment or treatment as a
reorganization within the meaning of Section 368(a) of the Internal Revenue
Code, or (b) materially impede or delay receipt of any Consents of Regulatory
Authorities referred to in Section 9.1(b) of this Agreement or result in the
imposition of a condition or restriction of the type referred to in the
16
<PAGE>
second sentence of such Section. To the Knowledge of Bank Atlanta, there exists
no fact, circumstance, or reason why the requisite Consents referred to in
Sections 9.1(b) and (c) of this Agreement cannot be received in a timely manner
without the imposition of any condition or restriction of the type described in
the second sentence of such Sections 9.1(b) and (c).
5.20 Charter Provisions. Bank Atlanta has taken all action so that the
------------------
entering into of this Agreement and the consummation of the Merger and the other
transactions contemplated by this Agreement do not and will not result in the
grant of any rights to any Person under the Articles of Incorporation, Bylaws or
other governing instruments of Bank Atlanta or restrict or impair the ability of
Premier to vote, or otherwise to exercise the rights of a shareholder with
respect to, shares of Bank Atlanta that may be acquired or controlled by it.
5.21 Millennium Compliance. Bank Atlanta represents and warrants that it
---------------------
has tested and assessed its software, hardware, and other computer equipment to
ensure that there will not be a Year 2000 Problem. Bank Atlanta further
represents and warrants that it has prepared and implemented a written plan of
action to ensure that the software, hardware, and other computer equipment
owned, licensed, or used by Bank Atlanta will not be the subject of a failure in
any such software, hardware, or other computer equipment as a result of a Year
2000 Problem. Except as disclosed in Section 5.21 of the Bank Atlanta
Disclosure Memorandum, Bank Atlanta further represents and warrants that it has
- ---------------------
contacted and received assurances from all key suppliers of goods and services
to Bank Atlanta, including but not limited to suppliers of computer software,
computer hardware, and other computer equipment, that each of the software,
hardware, and other computer equipment owned, licensed, or used by such
suppliers will not be the subject of failures in any such software, hardware, or
other computer equipment as a result of a Year 2000 Problem.
ARTICLE VI
----------
REPRESENTATIONS AND WARRANTIES OF PREMIER AND PMB
-------------------------------------------------
Premier, and where applicable, PMB, hereby represents and warrants to Bank
Atlanta as follows:
6.1 Organization, Standing, And Power. Premier is a corporation duly
----------------------------------
organized, validly existing, and in good standing under the Laws of the State of
Georgia, and is duly registered as a bank holding company under the BHC Act.
PMB is a corporation duly organized, validly existing, and in good standing
under the laws of the State of Georgia. Premier has the corporate power and
authority to carry on its business as now conducted and to own, lease and
operate its Assets. Premier is duly qualified or licensed to transact business
as a foreign corporation in good standing in the States of the United States and
foreign jurisdictions where the character of its Assets or the nature or conduct
of its business requires it to be so qualified or licensed, except for such
jurisdictions in which the failure to be so qualified or licensed is not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on Premier.
17
<PAGE>
6.2 Authority; No Breach by Agreement.
----------------------------------
(a) Premier and PMB have the corporate power and authority necessary to
execute, deliver and perform their respective obligations under this Agreement
and to consummate the transactions contemplated hereby. The execution, delivery
and performance of this Agreement and the consummation of the transactions
contemplated herein, including the Merger, have been duly and validly authorized
by all necessary corporate action in respect thereof on the part of Premier and
PMB. This Agreement represents a legal, valid and binding obligation of both
Premier and PMB, enforceable against Premier and PMB in accordance with its
terms (except in all cases as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, or similar Laws affecting
the enforcement of creditors' rights generally and except that the availability
of the equitable remedy of specific performance or injunctive relief is subject
to the discretion of the court before which any proceeding may be brought).
(b) Except as set forth in Section 6.2(b) of the Premier Disclosure
----------
Memorandum, neither the execution and delivery of this Agreement by Premier, nor
- ----------
the consummation by Premier of the transactions contemplated hereby, nor
compliance by Premier with any of the provisions hereof will (i) conflict with
or result in a breach of any provision of Premier's Articles of Incorporation or
Bylaws, or (ii) constitute or result in a Default under, or require any Consent
pursuant to, or result in the creation of any Lien on any Asset of any Premier
Company under, any Contract or Permit of any Premier Company, where such Default
or Lien, or any failure to obtain such Consent, is reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Premier, or (iii)
subject to receipt of the requisite approvals referred to in Section 9.1(b) of
this Agreement, violate any Law or Order applicable to any Premier Company or
any of their respective Assets.
(c) Other than in connection or compliance with the provisions of the
Securities Laws, applicable state corporate and securities Laws, and rules of
the NASD, and other than Consents required from Regulatory Authorities, and
other than notices to or filings with the Internal Revenue Service or the
Pension Benefit Guaranty Corporation with respect to any employee benefit plans,
and other than Consents, filings or notifications which, if not obtained or
made, are not reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on Premier, no notice to, filing with, or Consent of any
public body or authority is necessary for the consummation by Premier and PMB of
the Merger and the other transactions contemplated in this Agreement.
(d) Neither the execution and delivery of this Agreement by PMB, nor the
consummation by PMB of the transactions contemplated hereby, nor compliance by
PMB with any of the provisions thereof, will conflict with or result in a breach
of any provision of PMB's Articles of Incorporation or Bylaws, or Contract or
agreement by which it or its Assets is bound, the breach of which would have a
Material Adverse Effect on PMB.
6.3 Capital Stock.
--------------
(a) The authorized capital stock of Premier consists of (i) 60,000,000
shares of Premier Common Stock, of which 26,113,676 shares were issued and
outstanding as of the date of this
18
<PAGE>
Agreement, and (ii) 2,000,000 shares of Premier Preferred Stock, of which 40,770
shares are issued and outstanding as of the date of this Agreement. All of the
issued and outstanding shares of Premier Common Stock are, and all of the shares
of Premier Common Stock to be issued in exchange for shares of Bank Atlanta
Common Stock upon consummation of the Merger, when issued in accordance with the
terms of this Agreement and the Registration Statement, will be duly and validly
issued and outstanding and fully paid and nonassessable under the GBCC. None of
the outstanding shares of Premier Common Stock has been, and none of the shares
of Premier Common Stock to be issued in exchange for shares of Bank Atlanta
Common Stock upon consummation of the Merger will be issued in violation of any
preemptive rights of the current or past shareholders of Premier.
(b) The authorized capital stock of PMB consists of 1,000 shares of PMB
Common Stock, of which 100 shares were issued and outstanding as of the date of
this Agreement.
(c) Premier has issued $29,639,175 of 9.00% Subordinated Debentures to
Premier Capital Trust I, a statutory business trust organized and existing under
the laws of the State of Delaware. The Subordinated Debentures will mature on
December 31, 2027. The Subordinated Debentures were purchased by Premier
Capital Trust I with the proceeds of the public offering of 1,150,000 shares of
9.00% Cumulative Trust Preferred Securities and sale of Common Securities to
Premier. Premier owns all of the Common Securities issued by Premier Capital
Trust I. The Common Securities and the Preferred Securities represent undivided
beneficial interests in the assets of Premier Capital Trust I.
(d) Except as set forth in Section 6.3(a) of this Agreement, or as
disclosed in Section 6.3(c) of the Premier Disclosure Memorandum there are no
---------------------
shares of capital stock or other equity securities of Premier outstanding and no
outstanding Rights relating to the capital stock of Premier.
6.4 Financial Statements. The Premier Financial Statements (as of the
---------------------
dates thereof and for the periods covered thereby) (a) are, or if dated after
the date of this Agreement will be, in accordance with the books and records of
the Premier Companies, which are or will be, as the case may be, complete and
correct and which have been or will have been, as the case may be, maintained in
accordance with good business practices, and (b) present or will present, as the
case may be, fairly the consolidated financial position of the Premier Companies
as of the dates indicated and the consolidated results of operations, changes in
shareholders' equity, and cash flows of the Premier Companies for the periods
indicated, in accordance with GAAP (subject to exceptions as to consistency
specified therein or as may be indicated in the notes thereto or, in the case of
interim financial statements, to normal recurring year-end adjustments that are
not Material in amount or effect).
6.5 Absence of Undisclosed Liabilities. No Premier Company has any
-----------------------------------
Liabilities that are reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on Premier, except Liabilities which are
accrued or reserved against in the consolidated balance sheets of Premier as of
December 31, 1998 and March 31, 1999, included in the Premier Financial
Statements or reflected in the notes thereto. No Premier Company has incurred
or paid any Liability since March
19
<PAGE>
31, 1999, except for such Liabilities incurred or paid in the ordinary course of
business consistent with past business practice and which are not reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
Premier.
6.6 Absence of Certain Changes or Events. Since March 31, 1999, except as
------------------------------------
disclosed in SEC Documents filed by Premier prior to the date of this Agreement
and except as disclosed in Section 6.6 of the Premier Disclosure Memorandum, (a)
---------------------
there have been no events, changes or occurrences which have had, or are
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on Premier, and (b) the Premier Companies have not taken any action, or
failed to take any action, prior to the date of this Agreement, which action or
failure, if taken after the date of this Agreement, would represent or result in
a Material breach or violation of any of the covenants and agreements of Premier
provided in Article VII of this Agreement.
6.7 Compliance with Laws. Premier is duly registered as a bank holding
---------------------
company under the BHC Act. Each Premier Company has in effect all Permits
necessary for it to own, lease or operate its Assets and to carry on its
business as now conducted, except for those Permits the absence of which are not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on Premier, and there has occurred no Default under any such Permit,
other than Defaults which are not reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on Premier. Except as disclosed in
Section 6.7 of the Premier Disclosure Memorandum, none of the Premier Companies:
---------------------
(a) is in violation of any Laws, Orders or Permits applicable to its
business or employees conducting its business, except for violations which are
not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on Premier; and
(b) has received any notification or communication from any agency or
department of federal, state, or local government or any Regulatory Authority or
the staff thereof (i) asserting that any Premier Company is not in compliance
with any of the Laws or Orders which such governmental authority or Regulatory
Authority enforces, where such noncompliance is reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Premier, (ii)
threatening to revoke any Permits, the revocation of which is reasonably likely
to have, individually or in the aggregate, a Material Adverse Effect on Premier,
or (iii) requiring any Premier Company to enter into or consent to the issuance
of a cease and desist order, formal agreement, directive, commitment or
memorandum of understanding, or to adopt any Board resolution or similar
undertaking, which restricts materially the conduct of its business, or in any
manner relates to its capital adequacy, its credit or reserve policies, its
management, or the payment of dividends.
6.8 Legal Proceedings. Except as disclosed in Section 6.8 of the Premier
-----------------
Disclosure Memorandum, there is no Litigation instituted or pending, or, to the
- ---------------------
Knowledge of Premier, threatened (or unasserted but considered probable of
assertion and which if asserted would have at least a reasonable probability of
an unfavorable outcome) against any Premier Company, or against any Asset,
interest, or right of any of them, that is reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Premier, nor are
there any Orders of any Regulatory
20
<PAGE>
Authorities, other governmental authorities, or arbitrators outstanding against
any Premier Company, that are reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on Premier.
6.9 Statements True And Correct. No statement, certificate, instrument
---------------------------
or other writing furnished or to be furnished by any Premier Company or any
Affiliate thereof to Bank Atlanta pursuant to this Agreement or any other
document, agreement or instrument referred to herein contains or will contain
any untrue statement of material fact or will omit to state a material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. None of the information supplied or to be
supplied by any Premier Company or any Affiliate thereof for inclusion in the
Registration Statement to be filed by Premier with the SEC, will, when the
Registration Statement becomes effective, be false or misleading with respect to
any material fact, or omit to state any material fact necessary to make the
statements therein not misleading. None of the information supplied or to be
supplied by any Premier Company or any Affiliate thereof for inclusion in any
documents to be filed by any Premier Company or any Affiliate thereof with the
SEC or any other Regulatory Authority in connection with the transactions
contemplated hereby, will, at the respective time such documents are filed, be
false or misleading with respect to any material fact, or omit to state any
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. All documents that any
Premier Company or any Affiliate thereof is responsible for filing with any
Regulatory Authority in connection with the transactions contemplated hereby
will comply as to form in all material respects with the provisions of
applicable Law.
6.10 Accounting, Tax And Regulatory Matters. No Premier Company or any
--------------------------------------
Affiliate thereof has taken any action, or agreed to take any action, or has any
Knowledge of any fact or circumstance that is reasonably likely to (a) prevent
the transactions contemplated hereby, including the Merger, from qualifying for
pooling-of-interests accounting treatment or treatment as a reorganization
within the meaning of Section 368(a) of the Internal Revenue Code, or (b)
materially impede or delay receipt of any Consents of Regulatory Authorities
referred to in Section 9.1(b) of this Agreement. To the Knowledge of Premier,
there exists no fact, circumstance, or reason why the requisite Consents
referred to in Sections 9.1(b) and (c) of this Agreement cannot be received in a
timely manner without the imposition of any condition or restriction of the type
described in the second sentence of such Sections 9.1(b) and (c).
6.11 Premier Subsidiaries. Premier has disclosed in Section 6.11 of the
--------------------
Premier Disclosure Memorandum all of the Premier Subsidiaries as of the date of
---------------------
this Agreement. Except as disclosed in Section 6.11 of the Premier Disclosure
----------
Memorandum, Premier or one of its Subsidiaries owns all of the issued and
- ----------
outstanding shares of capital stock of each Premier Subsidiary. No equity
securities of any Premier Subsidiary are or may become required to be issued
(other than to another Premier Company) by reason of any Rights, and there are
no Contracts by which any Premier Subsidiary is bound to issue (other than to
another Premier Company) additional shares of its capital stock or Rights, or by
which any Premier Company is or may be bound to transfer any shares of the
capital stock of any Premier Subsidiary (other than to another Premier Company).
There are no Contracts relating to the rights of any Premier Company to vote or
to
21
<PAGE>
dispose of any shares of the capital stock of any Premier Subsidiary. All of the
shares of capital stock of each Premier Subsidiary held by a Premier Company are
fully paid and nonassessable under the applicable Law of the jurisdiction in
which such Subsidiary is incorporated or organized. Each Premier Subsidiary is
either a bank, a savings association, a corporation or a limited liability
company and is duly organized, validly existing, and (as to corporations) in
good standing under the Laws of the jurisdiction in which it is organized and
has the corporate power and authority necessary for it to own, lease and operate
its Assets and to carry on its business as now conducted. Each Premier
Subsidiary is duly qualified or licensed to transact business as a foreign
corporation in good standing in the States of the United States and foreign
jurisdictions where the character of its Assets or the nature or conduct of its
business requires it to be so qualified or licensed, except for such
jurisdictions in which the failure to be so qualified or licensed is not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on Premier. Each Premier Subsidiary that is a depository institution is
an "insured institution" as defined in the Federal Deposit Insurance Act and
applicable regulations thereunder, and the deposits in which are insured by the
Bank Insurance Fund or the Savings Association Insurance Fund, as appropriate.
6.12 Reports. Since January 1, 1997, each Premier Company has timely
-------
filed all reports and statements, together with any amendments required to be
made with respect thereto, that it was required to file with (a) the SEC,
including, but not limited to, Forms 10-K, Forms 10-Q, Forms 8-K, and Proxy
Statements, (b) other Regulatory Authorities, and (c) any applicable state
securities or banking authorities (except failures to file which are not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on Premier). As of their respective dates, each of such reports and
documents, including the financial statements, exhibits, and schedules thereto,
complied in all material respect with all applicable Laws. As of its respective
date, each such report and document to Premier's Knowledge did not, in any
material respects, contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements made therein, in light of the circumstances under which they were
made, not misleading.
6.13 Millennium Compliance. Premier represents and warrants that it has
---------------------
tested and assessed its software, hardware, and other computer equipment to
ensure that there will not be a Year 2000 Problem. Premier further represents
and warrants that it has prepared and implemented a written plan of action to
ensure that the software, hardware, and other computer equipment owned,
licensed, or used by Premier will not be the subject of a failure in any such
software, hardware, or other computer equipment as a result of a Year 2000
Problem. Premier further represents and warrants that it has contacted and
received assurances from all key suppliers of goods and services to Premier,
including but not limited to suppliers of computer software, computer hardware,
and other computer equipment, that each of the software, hardware, and other
computer equipment owned, licensed, or used by such suppliers will not be the
subject of failures in any such software, hardware, or other computer equipment
as a result of a Year 2000 Problem.
6.14 Allowance For Possible Loan Losses. The allowance for possible loan
----------------------------------
or credit losses (the "Allowance") shown on the balance sheets of Premier
included in the most recent Premier Financial Statements dated prior to the date
of this Agreement was, and the Allowance shown on the
22
<PAGE>
balance sheets of Premier included in the Premier Financial Statements as of
dates subsequent to the execution of this Agreement will be, as of the dates
thereof, adequate (within the meaning of GAAP and applicable regulatory
requirements or guidelines) to provide for losses relating to or inherent in the
loan and lease portfolios (including accrued interest receivables) of Premier
and other extensions of credit (including letters of credit and commitments to
make loans or extend credit) by Premier as of the dates thereof except where the
failure of such Allowance to be so adequate is not reasonably likely to have a
Material Adverse Effect on Premier.
ARTICLE VII
-----------
CONDUCT OF BUSINESS PENDING CONSUMMATION
----------------------------------------
7.1 AFFIRMATIVE COVENANTS OF BANK ATLANTA. Unless the prior written
-------------------------------------
consent of Premier shall have been obtained, and except as otherwise
contemplated herein or disclosed in the Bank Atlanta Disclosure Memorandum, Bank
---------------------
Atlanta shall from the date of this Agreement until the Effective Time or
termination of this Agreement: (a) operate its business in the usual, regular
and ordinary course; (b) preserve intact its business organization and Assets
and maintain its rights and franchises; (c) use its reasonable efforts to cause
its representations and warranties to be correct at all times; and (d) take no
action which would (i) adversely affect the ability of any Party to obtain any
Consents required for the transactions contemplated hereby without imposition of
a condition or restriction of the type referred to in the last sentence of
Section 9.1(b) or 9.1(c) of this Agreement or (ii) adversely affect in any
material respect the ability of either Party to perform its covenants and
agreements under this Agreement.
7.2 NEGATIVE COVENANTS OF BANK ATLANTA. Except as disclosed in the Bank
----------------------------------
Atlanta Disclosure Memorandum, from the date of this Agreement until the earlier
---------------------
of the Effective Time or the termination of this Agreement, Bank Atlanta
covenants and agrees that it will not do or agree or commit to do any of the
following without the prior written consent of the chief executive officer of
Premier, which consent shall not be unreasonably withheld:
(a) amend the Articles of Incorporation, Bylaws or other governing
instruments of Bank Atlanta, or
(b) incur any additional debt obligation or other obligation for borrowed
money in excess of an aggregate of $50,000 except in the ordinary course of the
business of Bank Atlanta consistent with past practices (which shall include
creation of deposit liabilities, purchases of federal funds, advances from the
Federal Reserve Bank or Federal Home Loan Bank, and entry into repurchase
agreements fully secured by U.S. government or agency securities), or impose, or
suffer the imposition, on any Asset of Bank Atlanta of any material Lien or
permit any such Lien to exist (other than in connection with deposits,
repurchase agreements, bankers acceptances, Federal Home Loan Bank advances,
"treasury tax and loan" accounts established in the ordinary course of business,
the satisfaction of legal requirements in the exercise of trust powers, and
Liens in effect as of the date hereof that are disclosed in the Bank Atlanta
Disclosure Memorandum); or
- ---------------------
23
<PAGE>
(c) repurchase, redeem, or otherwise acquire or exchange (other than
exchanges in the ordinary course under employee benefit plans), directly or
indirectly, any shares, or any securities convertible into any shares, of the
capital stock of Bank Atlanta, or declare or pay any dividend or make any other
distribution in respect of the Bank Atlanta Common Stock; provided, however,
that Bank Atlanta shall be permitted to pay quarterly cash dividends to its
shareholders prior to the Effective Date, in an amount equal to the quarterly
dividend paid by Premier multiplied by the Exchange Ratio; provided, however,
that such dividends, or the amount of such dividends, will not cause the Merger
to be accounted for as a "purchase," as determined in the sole discretion of
Premier's independent public accountants prior to the payment of any such
dividend; or
(d) except for this Agreement, or pursuant to the exercise of stock
options outstanding as of the date hereof and pursuant to the terms thereof in
existence on the date hereof, or as disclosed in Section 7.2(d) of the Bank
Atlanta Disclosure Memorandum, issue, sell, pledge, encumber, authorize the
---------------------
issuance of or enter into any Contract to issue, sell, pledge, encumber, or
authorize the issuance of or otherwise permit to become outstanding, any
additional shares of Bank Atlanta Common Stock or any other shares of capital
stock of Bank Atlanta, or any stock appreciation rights, or any option, warrant,
conversion, or other right to acquire any such stock, or any security
convertible into any such stock; or
(e) except as disclosed in Section 7.2(e) of the Bank Atlanta Disclosure
----------
Memorandum, adjust, split, combine or reclassify any capital stock of Bank
- ----------
Atlanta or issue or authorize the issuance of any other securities in respect of
or in substitution for shares of Bank Atlanta Common Stock or sell, lease,
mortgage or otherwise dispose of or otherwise encumber any Asset having a book
value in excess of $50,000 other than in the ordinary course of business for
reasonable and adequate consideration; or
(f) except for purchases of U.S. Treasury securities or U.S. Government
agency securities or securities of like maturity or grade or general obligations
of states and municipalities, purchase any securities or make any material
investment, either by purchase of stock or securities, contributions to capital,
Asset transfers, or purchase of any Assets, in any Person; or otherwise acquire
direct or indirect control over any Person, other than in connection with (i)
foreclosures in the ordinary course of business, or (ii) acquisitions of control
by Bank Atlanta in its fiduciary capacity; or
(g) grant any increase in compensation or benefits to any employee of
Bank Atlanta whose annual salary exceeds $35,000 (including such discretionary
increases as may be contemplated by existing employment agreements), except in
accordance with past practice or previously approved by the Board of Directors
of Bank Atlanta, in each case as disclosed in Section 7.2(g) of the Bank Atlanta
Disclosure Memorandum or as required by Law; pay any severance or termination
- ---------------------
pay or any bonus other than pursuant to policies or written Contracts in effect
on the date of this Agreement and disclosed in Section 7.2(g) of the Bank
Atlanta Disclosure Memorandum; enter into or amend any severance agreements with
---------------------
officers of Bank Atlanta; grant any general increase in compensation to all
employees; grant any increase in fees or other increases in
24
<PAGE>
compensation or other benefits to directors of Bank Atlanta; or voluntarily
accelerate the vesting of any stock options or other stock-based compensation or
employee benefits; or
(h) enter into or amend any employment Contract between Bank Atlanta and
any Person (unless such amendment is required by Law) that Bank Atlanta does not
have the unconditional right to terminate without Liability (other than
Liability for services already rendered), at any time on or after the Effective
Time; or
(i) adopt any new employee benefit plan of Bank Atlanta or make any
material change in or to any existing employee benefit plans of Bank Atlanta
other than any such change that is required by Law or that, in the opinion of
counsel, is necessary or advisable to maintain the tax qualified status of any
such plan; or
(j) make any significant change in any Tax or accounting methods or
systems of internal accounting controls, except as may be appropriate to conform
to changes in Tax Laws or regulatory accounting requirements or GAAP; or
(k) except as disclosed in the Bank Atlanta Disclosure Memorandum,
---------------------
commence any Litigation other than in accordance with past practice, settle any
Litigation involving any Liability of Bank Atlanta for money damages in excess
of $50,000 or which imposes material restrictions upon the operations of Bank
Atlanta; or
(l) except in the ordinary course of business, modify, amend or terminate
any material Contract or waive, release, compromise or assign any material
rights or claims.
7.3 Affirmative Covenants Of Premier. Unless the prior written consent
---------------------------------
of Bank Atlanta shall have been obtained, and except as otherwise contemplated
herein or as disclosed in the Premier Disclosure Memorandum, Premier shall, and
---------------------
shall cause each of its Subsidiaries, from the date of this Agreement until the
Effective Time or termination of this Agreement: (a) to operate its business in
the usual, regular and ordinary course; (b) to preserve intact its business
organization and Assets and maintain its rights and franchises; (c) to use its
reasonable efforts to cause its representations and warranties to be correct at
all times; and (d) to take no action which would (i) adversely affect the
ability of any Party to obtain any Consents required for the transactions
contemplated hereby without imposition of a condition or restriction of the type
referred to in the last sentence of Section 9.1(b) or 9.1(c) of this Agreement
or (ii) adversely affect in any material respect the ability of either Party to
perform its covenants and agreements under this Agreement.
7.4 Adverse Changes In Condition. Each Party agrees to give written
----------------------------
notice promptly to the other Party upon becoming aware of the occurrence or
impending occurrence of any event or circumstance relating to it or any of its
Subsidiaries which (a) is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on it or (b) is reasonably likely to cause
or constitute a material breach of any of its representations, warranties, or
covenants contained herein, and to use its reasonable efforts to prevent or
promptly to remedy the same.
25
<PAGE>
7.5 Reports. Each Party and its Subsidiaries shall file all reports
-------
required to be filed by it with Regulatory Authorities between the date of this
Agreement and the Effective Time and shall deliver to the other Party copies of
all such reports promptly after the same are filed.
ARTICLE VII
-----------
ADDITIONAL AGREEMENTS
---------------------
8.1 Registration Statement; Proxy Statement; Shareholder Approval.
-------------------------------------------------------------
(a) As soon as reasonably practicable after execution of this Agreement,
Premier shall file the Registration Statement with the SEC, provided Bank
Atlanta has provided, on a reasonably timely basis, all information concerning
Bank Atlanta necessary for inclusion in the Registration Statement, and shall
use its reasonable efforts to cause the Registration Statement to become
effective under the 1933 Act as soon as reasonably practicable after the filing
thereof and take any action required to be taken under the applicable state Blue
Sky or securities Laws in connection with the issuance of the shares of Premier
Common Stock upon consummation of the Merger. Bank Atlanta shall furnish all
information concerning it and the holders of its capital stock as Premier may
reasonably request in connection with such action.
(b) Bank Atlanta shall call a Shareholders' Meeting, to be held within
forty-five (45) days after the Registration Statement is declared effective by
the SEC, for the purpose of voting upon approval of this Agreement and such
other related matters as Bank Atlanta deems appropriate.
(c) In connection with the Bank Atlanta Shareholders' Meeting, (i)
Premier shall prepare and file with the SEC, on Bank Atlanta's behalf, a Proxy
Statement (which shall be included in the Registration Statement); (ii) Bank
Atlanta shall mail the Proxy Statement to all of its shareholders; (iii) the
Parties shall furnish to each other all information concerning them that they
may reasonably request in connection with such Proxy Statement; (iv) the Board
of Directors of Bank Atlanta shall recommend (subject to compliance with the
fiduciary duties of the members of the Board of Directors as advised by counsel)
to its shareholders the approval of this Agreement; and (v) the Board of
Directors and officers of Bank Atlanta shall use their reasonable efforts to
obtain such shareholders' approval (subject to compliance with their fiduciary
duties as advised by counsel).
8.2 Exchange Listing. Premier shall use its reasonable efforts to list,
----------------
prior to the Effective Time, on the American Stock Exchange, or such other stock
exchange on which the Premier Common Stock is then listed, the shares of Premier
Common Stock to be issued to the holders of Bank Atlanta Common Stock pursuant
to the Merger.
8.3 Applications. Premier shall promptly prepare and file, and Bank
------------
Atlanta shall cooperate in the preparation and, where appropriate, filing of,
applications with all Regulatory Authorities having jurisdiction over the
transactions contemplated by this Agreement seeking the requisite Consents
necessary to consummate the transactions contemplated by this Agreement.
26
<PAGE>
8.4 Agreement As To Efforts To Consummate. Subject to the terms and
-------------------------------------
conditions of this Agreement, each Party agrees to use, and to cause its
Subsidiaries to use, its reasonable best efforts to take, or cause to be taken,
all actions, and to do, or cause to be done, all things necessary, proper or
advisable under applicable Laws, as promptly as practicable so as to permit
consummation of the Merger at the earliest possible date and to otherwise enable
consummation of the transactions contemplated hereby and shall cooperate fully
with the other Parties hereto to that end (it being understood that any
amendments to the Registration Statement filed by Premier in connection with the
Premier Common Stock to be issued in the Merger shall not violate this
covenant), including, without limitation, using its reasonable best efforts to
lift or rescind any Order adversely affecting its ability to consummate the
transactions contemplated herein and to cause to be satisfied the conditions
referred to in Article IX of this Agreement. Each Party shall use, and shall
cause each of its Subsidiaries to use, its reasonable best efforts to obtain all
Consents necessary or desirable for the consummation of the transactions
contemplated by this Agreement.
8.5 Investigation And Confidentiality.
---------------------------------
(a) Prior to the Effective Time, each Party will keep the other Parties
advised of all material developments relevant to its business and to
consummation of the Merger and shall permit the other Parties to make or cause
to be made such investigation of the business and properties of it and its
Subsidiaries and of their respective financial and legal conditions as the other
Parties reasonably request, provided that such investigation shall be reasonably
related to the transactions contemplated hereby and shall not interfere
unnecessarily with normal operations. No investigation by a Party shall affect
the representations and warranties of the other Parties.
(b) Each Party shall, and shall cause its advisers and agents to,
maintain the confidentiality of all confidential information furnished to it by
the other Parties concerning its and its Subsidiaries' businesses, operations,
and financial positions and shall not use such information for any purpose
except in furtherance of the transactions contemplated by this Agreement. If
this Agreement is terminated prior to the Effective Time, each Party shall
promptly return all documents and copies thereof and all work papers containing
confidential information received from the other Parties.
(c) Each Party agrees to give the other Parties notice as soon as
practicable after any determination by it of any fact or occurrence relating to
the other Parties which it has discovered and which represents, or is reasonably
likely to represent, either a material breach of any representation, warranty,
covenant or agreement of the other Parties or which has had or is reasonably
likely to have a Material Adverse Effect on the other Parties.
8.6 Press Releases. Prior to the Effective Time, Premier and Bank
--------------
Atlanta shall agree with each other as to the form and substance of any press
release or other public disclosure materially related to this Agreement or any
other transaction contemplated hereby; provided, however, that nothing in this
Section 8.6 shall be deemed to prohibit any Party from making any disclosure
which its counsel deems necessary or advisable in order to satisfy such Party's
disclosure obligations imposed by Law.
27
<PAGE>
8.7 Acquisition Proposals. Except with respect to this Agreement and
---------------------
the transactions contemplated hereby, neither Bank Atlanta nor any Affiliate of
Bank Atlanta nor any investment banker, attorney, accountant or other
representative (collectively, "Representatives") retained by Bank Atlanta shall
directly or indirectly solicit any Acquisition Proposal by any Person. Except to
the extent necessary to comply with the fiduciary duties of Bank Atlanta's Board
of Directors as advised by counsel, neither Bank Atlanta nor any Affiliate or
Representative of Bank Atlanta shall furnish any non-public information that it
is not legally obligated to furnish, negotiate with respect to, or enter into
any Contract with respect to, any Acquisition Proposal, but Bank Atlanta may
communicate information about such an Acquisition Proposal to its shareholders
if and to the extent that it is required to do so in order to comply with its
legal obligations as advised by counsel. Bank Atlanta shall promptly notify
Premier orally and in writing in the event that Bank Atlanta receives any
inquiry or proposal relating to any such transaction. Unless the prior written
consent of Premier is obtained, Bank Atlanta shall (a) immediately cease and
cause to be terminated any existing activities, discussions or negotiations with
any Persons conducted heretofore with respect to any of the foregoing, and (b)
direct and use its reasonable efforts to cause all of its Representatives not to
engage in any of the foregoing.
8.8 Accounting And Tax Treatment. Each of the Parties undertakes and
----------------------------
agrees to use its reasonable best efforts to cause the Merger to qualify, and to
take no action which would cause the Merger not to qualify, for treatment as a
"reorganization" within the meaning of Section 368(a) of the Internal Revenue
Code for federal income tax purposes. Each of the Parties further undertakes and
agrees to use its reasonable best efforts to cause the Merger to be eligible,
and to take no action which would cause the Merger not to be eligible, to be
accounted for as a "pooling of interests."
8.9 Agreement Of Affiliates. Bank Atlanta has disclosed in Section 8.9
-----------------------
of the Bank Atlanta Disclosure Memorandum all Persons whom it reasonably
---------------------
believes is an "affiliate" of Bank Atlanta for purposes of Rule 145 under the
1933 Act. Bank Atlanta shall use its reasonable best efforts to cause each such
Person to deliver to Premier and Bank Atlanta, not later than thirty (30) days
after the date of this Agreement, a written agreement, substantially in the form
of Exhibit "1", providing that such Person will not sell, pledge, transfer or
-----------
otherwise dispose of the shares of Bank Atlanta Common Stock held by such Person
except as contemplated by such agreement or by this Agreement and will not sell,
pledge, transfer or otherwise dispose of the shares of Premier Common Stock to
be received by such Person upon consummation of the Merger except in compliance
with applicable provisions of the 1933 Act and the rules and regulations
thereunder. Premier shall be entitled to place restrictive legends upon
certificates for shares of Premier Common Stock issued to Affiliates of Bank
Atlanta pursuant to this Agreement to enforce the provisions of this Section
8.9. Premier shall not be required to maintain the effectiveness of the
Registration Statement under the 1933 Act for the purposes of resale of Premier
Common Stock by such Affiliates.
28
<PAGE>
8.10 EMPLOYEE BENEFITS AND CONTRACTS.
-------------------------------
(a) Following the Effective Time, Premier shall provide generally to
officers and employees of Bank Atlanta who, at or after the Effective Time,
become employees of a Premier Company, employee benefits under employee benefit
plans, on terms and conditions which when taken as a whole are substantially
similar to those currently provided by the Premier Companies to their similarly
situated officers and employees. For purposes of participation under such
employee benefit plans, the service of the employees of Bank Atlanta prior to
the Effective Time shall be treated as service with a Premier Company
participating in such employee benefit plans, provided that, with respect to any
employee benefit plan where the benefits are funded through insurance, the
granting of such service shall be subject to the consent of the appropriate
insurer and may be conditioned upon an employee's participation in a Bank
Atlanta Benefit Plan of the same type immediately prior to the Effective Time.
(b) Premier and its Subsidiaries also shall honor in accordance with
their terms all employment, severance, consulting and other compensation
Contracts disclosed in Section 8.10(b) of the Bank Atlanta Disclosure Memorandum
---------------------
between Bank Atlanta and any current or former director, officer, or employee
thereof and all provisions for vested benefits accrued through the Effective
Time under the Bank Atlanta Benefit Plans.
8.11 Other Acquisitions, Mergers, Or Combinations Involving A Premier
----------------------------------------------------------------
Company. Notwithstanding anything contained in this Agreement to the contrary,
- -------
Premier or any Premier Company may enter into and consummate an acquisition,
merger, or combination of, with, or involving any bank, bank holding company,
thrift, thrift holding company, mortgage company, or other financial services
company without the prior consent of Bank Atlanta.
8.12 Indemnification.
---------------
(a) Subject to the conditions set forth in paragraph (b) below, for a
period of six (6) years after the Effective Time, Premier shall indemnify,
defend, and hold harmless the present and former directors, officers, employees,
and agents of Bank Atlanta (each, an "Indemnified Party") against all
Liabilities arising out of actions or omissions occurring at or prior to the
Effective Time (including the transactions contemplated by this Agreement) to
the full extent permitted under Georgia Law and by Bank Atlanta's Articles of
Incorporation and Bylaws as in effect on the date hereof, including provisions
relating to advances of expenses incurred in the defense of any Litigation.
Without limiting the foregoing, in any case in which approval by Premier is
required to effect any indemnification, Premier shall direct, at the election of
the Indemnified Party, that the determination of any such approval shall be made
by independent counsel mutually agreed upon between Premier and the Indemnified
Party.
(b) Any Indemnified Party wishing to claim indemnification under
paragraph (a) above, upon learning of any such Liability or Litigation within
the six (6) year period after the Effective Time, shall promptly notify Premier
within ten (10) days thereof. In the event of any such Litigation (whether
arising before or after the Effective Time), (i) Premier shall have the right to
assume the
29
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defense thereof and Premier shall not be liable to such Indemnified Parties for
any legal expenses of other counsel or any other expenses subsequently incurred
by such Indemnified Parties in connection with the defense thereof, except that
if Premier elects not to assume such defense or counsel for the Indemnified
Parties and advises that there are substantive issues which raise conflicts of
interest between Premier and the Indemnified Parties, the Indemnified Parties
may retain counsel satisfactory to them, and Premier shall pay all reasonable
fees and expenses of such counsel for the Indemnified Parties promptly as
statements therefor are received; provided, however, that Premier shall be
obligated pursuant to this paragraph (b) to pay for only one firm of counsel for
all Indemnified Parties in any jurisdiction, (ii) the Indemnified Parties will
cooperate in the defense of any such Litigation; and (iii) Premier shall not be
liable for any settlement effected without its prior written consent; and
provided further that Premier shall not have any obligation hereunder to any
Indemnified Party when and if a court of competent jurisdiction shall determine,
and such determination shall have become final, that the indemnification of such
Indemnified Party in the manner contemplated hereby is prohibited by applicable
Law.
(c) If Premier or any of its successors or assigns shall consolidate with
or merge into any other Person and shall not be the continuing or surviving
Person of such consolidation or merger or shall transfer all or substantially
all of its assets to any Person, then and in each case, proper provision shall
be made so that the successors and assigns of Premier shall assume the
obligations set forth in this Section 8.12.
(d) The provisions of this Section 8.12 are intended to be for the
benefit of and shall be enforceable by, each Indemnified Party, his or her heirs
and representatives.
ARTICLE IX
----------
CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE
-------------------------------------------------
9.1 Conditions To Obligations Of Each Party. The respective obligations
---------------------------------------
of each Party to perform this Agreement and consummate the Merger and the other
transactions contemplated hereby are subject to the satisfaction of the
following conditions, unless waived by both Parties pursuant to Section 11.6 of
this Agreement:
(a) Shareholder Approval. The shareholders of Bank Atlanta shall have
--------------------
approved this Agreement, and the consummation of the transactions contemplated
hereby, including the Merger, as and to the extent required by Law, the American
Stock Exchange, Inc., or other stock exchange on which the Premier Common Stock
is then listed, or by the provisions of any governing instruments.
(b) Regulatory Approvals. All Consents of, filings and registrations
--------------------
with, and notifications to all Regulatory Authorities required for consummation
of the Merger shall have been obtained or made and shall be in full force and
effect and all waiting periods required by Law shall have expired. No Consent
obtained from any Regulatory Authority which is necessary to consummate the
transactions contemplated hereby shall be conditioned or restricted in a manner
30
<PAGE>
(including, without limitation, requirements relating to the raising of
additional capital or the disposition of Assets) which in the reasonable
judgment of the Board of Directors of either Party would so materially adversely
impact the economic or business benefits of the transactions contemplated by
this Agreement as to render inadvisable the consummation of the Merger.
(c) Consents and Approvals. Each Party shall have obtained any and
----------------------
all Consents required for consummation of the Merger (other than those referred
to in Section 9.1(b) of this Agreement) or for the preventing of any Default
under any Contract or Permit of such Party which, if not obtained or made, is
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on such Party. No Consent so obtained which is necessary to consummate
the transactions contemplated hereby shall be conditioned or restricted in a
manner which in the reasonable judgment of the Board of Directors of either
Party would so materially adversely impact the economic or business benefits of
the transactions contemplated by this Agreement as to render inadvisable the
consummation of the Merger.
(d) Registration Statement. The Registration Statement shall be
----------------------
effective under the 1933 Act, no stop orders suspending the effectiveness of the
Registration Statement shall have been issued, no action, suit, proceeding or
investigation by the SEC to suspend the effectiveness thereof shall have been
initiated and be continuing, and all necessary approvals under state securities
Laws or the 1933 Act or 1934 Act relating to the issuance or trading of the
shares of the Premier Common Stock issuable pursuant to the Merger shall have
been received.
(e) Exchange Listing. The shares of Premier Common Stock issuable
----------------
pursuant to the Merger shall have been approved for listing on the American
Stock Exchange, or such other stock exchange on which the Premier Common Stock
is then listed.
(f) Tax Matters. Premier and Bank Atlanta shall have received a
-----------
written opinion of counsel from Womble Carlyle Sandridge & Rice, PLLC, in form
reasonably satisfactory to them (the "Tax Opinion"), to the effect that for
federal income tax purposes (i) the Merger will constitute a reorganization
within the meaning of Section 368(a) of the Internal Revenue Code, (ii) the
exchange in the Merger of Bank Atlanta Common Stock for Premier Common Stock
will not give rise to gain or loss to the shareholders of Bank Atlanta with
respect to such exchange (except to the extent of any cash received), and (iii)
neither Premier nor Bank Atlanta will recognize gain or loss as a consequence of
the Merger. In rendering such Tax Opinion, counsel shall be entitled to rely
upon representations of officers of Premier and Bank Atlanta reasonably
satisfactory in form and substance to such counsel.
(g) Affiliate Agreements. The Parties shall have received from each
--------------------
affiliate of Bank Atlanta the affiliates agreement referred to in Section 8.9
hereof.
(h) Pooling of Interests Letter. The Parties shall have received a
---------------------------
letter from Ernst & Young, L.L.P., and from Mauldin & Jenkins, LLC dated as of
the Effective Time, to the effect that the Merger will qualify for pooling-of-
interests accounting treatment under Accounting Principles Board Opinion No. 16
if closed and consummated in accordance with this Agreement.
31
<PAGE>
9.2 Conditions to Obligations of Premier. The obligations of Premier
------------------------------------
to perform this Agreement and consummate the Merger and the other transactions
contemplated hereby are subject to the satisfaction of the following conditions,
unless waived by Premier pursuant to Section 11.6(a) of this Agreement:
(a) Representations and Warranties. For purposes of this Section
------------------------------
9.2(a), the accuracy of the representations and warranties of Bank Atlanta set
forth or referred to in this Agreement shall be assessed as of the date of this
Agreement and as of the Effective Time with the same effect as though all such
representations and warranties had been made on and as of the Effective Time
(provided that representations and warranties which are confined to a specified
date shall speak only as of such date). The representations and warranties of
Bank Atlanta set forth in Section 5.3 of this Agreement shall be true and
correct (except for inaccuracies which are de minimis in amount). The
representations and warranties of Bank Atlanta set forth in Section 5.19,
Section 5.20 and Section 5.21 of this Agreement shall be true and correct in all
Material respects. There shall not exist inaccuracies in the representations and
warranties of Bank Atlanta set forth in this Agreement (excluding the
representations and warranties set forth in Sections 5.3, 5.19, 5.20 and 5.21)
such that the aggregate effect of such inaccuracies would have, or is reasonably
likely to have, a Material Adverse Effect on Bank Atlanta; provided that, for
purposes of this sentence only, those representations and warranties which are
qualified by references to "Material" or "Material Adverse Effect" shall be
deemed not to include such qualifications.
(b) Performance of Agreements and Covenants. Each and all of the
---------------------------------------
agreements and covenants of Bank Atlanta to be performed and complied with
pursuant to this Agreement and the other agreements contemplated hereby prior to
the Effective Time shall have been duly performed and complied with in all
Material respects.
(c) Certificates. Bank Atlanta shall have delivered to Premier (i) a
------------
certificate, dated as of the Effective Time and signed on its behalf by its
president and its chief financial officer, to the effect that the conditions of
its obligations set forth in Sections 9.2(a) and 9.2(b) of this Agreement have
been satisfied, and (ii) a certificate, dated as of the Effective Time and
signed on its behalf by its secretary, which certificate shall include certified
copies of resolutions duly adopted by Bank Atlanta's Board of Directors and
shareholders evidencing the taking of all corporate action necessary to
authorize the execution, delivery and performance of this Agreement, and the
consummation of the transactions contemplated hereby, certified copies of Bank
Atlanta's Articles of Incorporation, and certified copies of Bank Atlanta's
Bylaws, all in such reasonable detail as Premier and its counsel shall request.
(d) Opinion of Counsel. Bank Atlanta shall have delivered to Premier
------------------
an opinion of Powell, Goldstein, Frazer & Murphy, LLP, counsel to Bank Atlanta,
dated as of the Effective Time, in form reasonably satisfactory to Premier, as
to the matters set forth in Exhibit "2" hereto.
-----------
(e) Claims/Indemnification Letters. Each of the directors and
------------------------------
officers of Bank Atlanta shall have executed and delivered to Premier letters in
substantially the form of Exhibit "3" hereto.
-----------
32
<PAGE>
(f) Litigation. No preliminary or permanent injunction or other order
----------
by any federal or state court which prevents the consummation of the Merger
shall have been issued and shall remain in effect, nor any action therefor
initiated which, in the good faith judgment of the Board of Directors of
Premier, it is not in the best interests of the shareholders of Premier to
contest; and there shall not have been instituted or be pending any action or
proceeding by any United States federal or state government or governmental
agency or instrumentality (i) challenging or seeking to restrain or prohibit the
consummation of the Merger or seeking material damages in connection with the
Merger; or (ii) seeking to prohibit Premier's ownership or operation of all or a
material portion of Premier's or Bank Atlanta's business or assets, or compel
Premier to dispose of or hold separate all or a material portion of Premier's or
Bank Atlanta's business or assets as a result of the Merger, which, in any case,
in the reasonable judgment of Premier based upon a legal opinion from counsel,
could result in the relief sought being obtained.
(g) Support Agreements. Within ten (10) calendar days of the
------------------
execution of this Agreement, each member of the Board of Directors of Bank
Atlanta shall have executed and delivered to Premier a Support Agreement
substantially in the form of Exhibit 5 to this Agreement.
---------
9.3 Conditions to Obligations of Bank Atlanta. The obligations of
-----------------------------------------
Bank Atlanta to perform this Agreement and consummate the Merger and the other
transactions contemplated hereby are subject to the satisfaction of the
following conditions, unless waived by Bank Atlanta pursuant to Section 11.6(b)
of this Agreement:
(a) Representations and Warranties. For purposes of this Section
------------------------------
9.3(a), the accuracy of the representations and warranties of Premier and PMB
set forth or referred to in this Agreement shall be assessed as of the date of
this Agreement and as of the Effective Time with the same effect as though all
such representations and warranties had been made on and as of the Effective
Time (provided that representations and warranties which are confined to a
specified date shall speak only as of such date). The representations and
warranties of Premier set forth in Section 6.10 and Section 6.13 of this
Agreement shall be true and correct in all material respects. There shall not
exist inaccuracies in the representations and warranties set forth in this
Agreement (excluding the representations and warranties set forth in Sections
6.10) such that the aggregate effect of such inaccuracies would have, or is
reasonably likely to have a Material Adverse Effect on Premier; provided that,
for purposes of this sentence only, those representations and warranties which
are qualified by reference to "Material" or "Material Adverse Effect" shall be
deemed not to include such qualifications.
(b) Performance of Agreements and Covenants. Each and all of the
---------------------------------------
agreements and covenants of Premier to be performed and complied with pursuant
to this Agreement and the other agreements contemplated hereby prior to the
Effective Time shall have been duly performed and complied with in all material
respects.
(c) Certificates. Premier shall have delivered to Bank Atlanta (i) a
------------
certificate, dated as of the Effective Time and signed on its behalf by its
chief executive officer and its chief financial officer, to the effect that the
conditions of its obligations set forth in Section 9.3(a) and 9.3(b) of this
33
<PAGE>
Agreement have been satisfied, and (ii) a certificate, dated as of the Effective
Time and signed on its behalf by its secretary, which certificate shall include
certified copies of resolutions duly adopted by Premier's Board of Directors
evidencing the taking of all corporate action necessary to authorize the
execution, delivery and performance of this Agreement, and the consummation of
the transactions contemplated hereby, certified copies of Premier's Articles of
Incorporation, and certified copies of Premier's Bylaws, all in such reasonable
detail as Bank Atlanta and its counsel shall request.
(d) Opinion of Counsel. Premier shall have delivered to Bank Atlanta
------------------
an opinion of Womble Carlyle Sandridge & Rice, PLLC, counsel to Premier, dated
as of the Effective Time, in form reasonably acceptable to Bank Atlanta, as to
matters set forth in Exhibit "4" hereto.
----------
(e) Litigation. No preliminary or permanent injunction or other order
----------
by any federal or state court which prevents the consummation of the Merger
shall have been issued and shall remain in effect, nor any action therefor
initiated which, in the good faith judgment of the Board of Directors of Bank
Atlanta, it is not in the best interests of the shareholders of Bank Atlanta to
contest; and there shall not have been instituted or be pending any action or
proceeding by any United States federal or state government or governmental
agency or instrumentality (i) challenging or seeking to restrain or prohibit the
consummation of the Merger or seeking material damages in connection with the
Merger; or (ii) seeking to prohibit Premier's ownership or operation of all or a
material portion of Premier's or Bank Atlanta's business or assets, or compel
Premier to dispose of or hold separate all or a material portion of Premier's or
Bank Atlanta's business or assets as a result of the Merger, which, in any case,
in the reasonable judgment of Bank Atlanta based upon a legal opinion from
counsel, could result in the relief sought being obtained.
(f) Bank Atlanta Fairness Opinion. Bank Atlanta shall have received
-----------------------------
from The Carson Medlin Company, a letter, dated not more than five (5) business
days prior to the date of the Registration Statement, to the effect that, in the
opinion of such firm, the consideration to be paid to Bank Atlanta shareholders
in connection with the Merger is fair, from a financial point of view, to the
shareholders of Bank Atlanta.
ARTICLE X
---------
TERMINATION
-----------
10.1 Termination. Notwithstanding any other provision of this
-----------
Agreement, and notwithstanding the approval of this Agreement by the
shareholders of Bank Atlanta, this Agreement may be terminated and the Merger
abandoned at any time prior to the Effective Time:
(a) By mutual consent of the Board of Directors of Bank Atlanta and
the Board of Directors of Premier; or
(b) By the Board of Directors of either Premier or Bank Atlanta in
the event of a Material breach by the other Party of any representation or
warranty contained in this Agreement which cannot be or has not been cured
within thirty (30) days after the giving of written notice to the
34
<PAGE>
breaching Party of such breach and which breach would provide the non-breaching
Party the ability to refuse to consummate the Merger; or
(c) By the Board of Directors of either Premier or Bank Atlanta in
the event of a Material breach by the other Party of any covenant or agreement
contained in this Agreement which cannot be or has not been cured within thirty
(30) days after the giving of written notice to the breaching Party of such
breach and which breach would provide the non-breaching Party the ability to
refuse to consummate the Merger; or
(d) By the Board of Directors of either Premier or Bank Atlanta in
the event (i) any Consent of any Regulatory Authority required for consummation
of the Merger and the other transactions contemplated hereby shall have been
denied by final nonappealable action of such authority or if any action taken by
such authority is not appealed within the time limit for appeal, or (ii) if the
shareholders of Bank Atlanta fail to vote their approval of this Agreement and
the transactions contemplated hereby as required by the Financial Institutions
Code of Georgia and the GBCC at the Shareholders' Meeting where the transactions
were presented to such shareholders for approval and voted upon; or
(e) By the Board of Directors of either Premier or Bank Atlanta in
the event that the Merger shall not have been consummated on or before November
30, 1999, but only if the failure to consummate the transactions contemplated
hereby on or before such date is not caused by any breach of this Agreement by
the Party electing to terminate pursuant to this Section 10.1(e); or
(f) By the Board of Directors of either Premier or Bank Atlanta
(provided that the terminating Party is not then in breach of any representation
or warranty contained in this Agreement or in the material breach of any
covenant or other agreement contained in this Agreement) in the event that any
of the conditions precedent to the obligations of such Party to consummate the
Merger (other than as contemplated by Section 10.1(d) of this Agreement) cannot
be satisfied or fulfilled by the date specified in Section 10.1(e) of this
Agreement; or
(g) By the Board of Directors of Premier, at any time, if it is
determined by Ernst & Young, LLP or Mauldin & Jenkins, LLC that the Merger
cannot be accounted for as a "pooling of interests" transaction; or
(h) By the Board of Directors of either Premier or Bank Atlanta, at
any time on or prior to May 28, 1999, without any Liability, in the event that
the review of the Assets, business, financial condition, results of operations,
and prospects of the other Party or any of the disclosures contained in the
other Party's Disclosure Memorandum causes the Board of Directors of the Party
---------------------
seeking to terminate to determine, in its reasonable good faith judgment, that a
fact or circumstance exists or is likely to exist or result which materially and
adversely impacts one or more of the economic benefits to such Party of the
transactions contemplated by this Agreement so as to render inadvisable the
consummation of the Merger; or
35
<PAGE>
(i) By the Board of Directors of Premier or Bank Atlanta, if, after
the date hereof, a Material adverse change in the financial condition or
business of the other Party shall have occurred or the other Party shall have
suffered a Material loss or damage to any of its properties or Assets, which
change, loss or damage will result in a Material Adverse Effect on the ability
of such Party to conduct its business; or
(j) By the Board of Directors of Premier or Bank Atlanta in the event
that the Premier Ratio (as defined in Section 3.1(d)) is less than 0.70.
10.2 Effect of Termination. In the event of the termination and
---------------------
abandonment of this Agreement pursuant to Section 10.1 of this Agreement, this
Agreement shall become void and have no effect, except that the provisions of
this Section 10.2 and Article XI and Section 8.5(b) of this Agreement shall
survive any such termination and abandonment.
10.3 Non-Survival of Representations and Covenants. The respective
---------------------------------------------
representations, warranties, obligations, covenants, and agreements of the
Parties shall not survive the Effective Time except for this Section 10.3 and
Articles II, III, IV and XI and Section 8.9, Section 8.10 and Section 8.12 of
this Agreement.
ARTICLE XI
----------
MISCELLANEOUS
-------------
11.1 Definitions. Except as otherwise provided herein, the capitalized
-----------
terms set forth below (in their singular and plural forms as applicable) shall
have the following meanings:
"1933 Act" shall mean the Securities Act of 1933, as amended.
"1934 Act" shall mean the Securities Exchange Act of 1934, as amended.
"Acquisition Proposal" shall mean any tender offer or exchange offer
or any proposal for a merger (other than the Merger), acquisition of all of the
stock or Assets of, or other business combination involving Bank Atlanta or the
acquisition of a substantial equity interest in, or a substantial portion of the
Assets of Bank Atlanta.
"Affiliate" of a Person shall mean: (i) any other Person directly, or
indirectly through one or more intermediaries, controlling, controlled by or
under common control with such Person; (ii) any officer, director, partner,
employer, or direct or indirect beneficial owner of any 10% or greater equity or
voting interest of such Person; or (iii) any other Person for which a Person
described in clause (ii) acts in such capacity.
"Agreement" shall mean this Agreement and Plan of Reorganization and
the other Exhibits delivered pursuant hereto and incorporated herein by
reference.
"Allowance" shall have the meaning provided in Sections 5.9 and 6.14
of this Agreement.
36
<PAGE>
"Assets" of a Person shall mean all of the assets, properties,
businesses and rights of such Person of every kind, nature, character and
description, whether real, personal or mixed, tangible or intangible, accrued or
contingent, or otherwise relating to or utilized in such Person's business,
directly or indirectly, in whole or in part, whether or not carried on the books
and records of such Person, and whether or not owned in the name of such Person
or any Affiliate of such Person and wherever located.
"Bank Atlanta Benefit Plans" shall have the meaning set forth in
Section 5.14 of this Agreement.
"Bank Atlanta Common Stock" shall mean the $1.00 par value common
stock of Bank Atlanta.
"Bank Atlanta Disclosure Memorandum" shall mean the written
information entitled "Bank Atlanta Disclosure Memorandum" delivered to Premier
---------------------
on or prior to the date specified in Section 10.1(h) of this Agreement
describing in reasonable detail the matters contained therein, specifically
referencing each Section of this Agreement under which such disclosure is being
made.
"Bank Atlanta ERISA Plan" shall have the meaning provided in Section
5.14 of this Agreement.
"Bank Atlanta Financial Statements" shall mean (a) the balance sheets
(including related notes and schedules, if any) of Bank Atlanta as of March 31,
1999 and as of December 31, 1998 and as of December 31, 1997, and the related
statements of income, changes in shareholders' equity, and cash flows (including
related notes and schedules, if any) for the three months ended March 31, 1999,
and for each of the two fiscal years ended December 31, 1998 included in the
Bank Atlanta Disclosure Memorandum, and (b) the balance sheets (including
---------------------
related notes and schedules, if any) of Bank Atlanta and related statements of
income, changes in shareholders' equity, and cash flows (including related notes
and schedules, if any) filed with respect to periods ended subsequent to March
31, 1999.
"Bank Atlanta Stock Plans" shall mean the existing stock option and
other stock-based compensation plans of Bank Atlanta disclosed in Section 5.14
of the Bank Atlanta Disclosure Memorandum.
---------------------
"BHC Act" shall mean the federal Bank Holding Company Act of 1956, as
amended.
"Closing" shall mean the closing of the transactions contemplated
hereby, as described in Section 1.2 of this Agreement.
"Closing Date" shall mean the date on which the Closing occurs.
"Consent" shall mean any consent, approval, authorization, clearance,
exemption, waiver, or similar affirmation by any Person pursuant to any
Contract, Law, Order, or Permit.
37
<PAGE>
"Contract" shall mean any written or oral agreement, arrangement,
authorization, commitment, contract, indenture, instrument, lease, obligation,
plan, practice, restriction, understanding or undertaking of any kind or
character, or other document to which any Person is a party or that is binding
on any Person or its capital stock, Assets or business.
"Default" shall mean (a) any breach or violation of or default under
any Contract, Order or Permit, (b) any occurrence of any event that with the
passage of time or the giving of notice or both would constitute a breach or
violation of or default under any Contract, Order or Permit, or (c) any
occurrence of any event that with or without the passage of time or the giving
of notice would give rise to a right to terminate or revoke, change the current
terms of, or renegotiate, or to accelerate, increase, or impose any Liability
under, any Contract, Order or Permit.
"Effective Time" shall mean the date and time at which the Merger
becomes effective as defined in Section 1.3 of this Agreement.
"Environment" shall have the meaning specified in the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C. (S) 9601(8).
"Environmental Laws" shall mean all Laws pertaining to pollution or
protection of the environment and which are administered, interpreted or
enforced by the United States Environmental Protection Agency and state and
local agencies with primary jurisdiction over pollution or protection of the
environment, including, without limitation, the Comprehensive Environmental
Response, Compensation and Liability Act, 42 U.S.C. (S) 9601 et. seq., the
-------
Resource, Conservation and Recovery Act, 42 U.S.C. (S) 6901 et. seq., the Toxic
-------
Substance Control Act, 15 U.S.C. (S) 2601, et. seq., and all implementing
-------
regulations and state counterparts of such acts.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"ERISA Affiliate" shall refer to a relationship between entities such
that the entities would, now or at any time in the past, constitute a "single
employer" within the meaning of Section 414 of the Internal Revenue Code.
"Exchange Ratio" shall have the meaning provided in Section 3.1 of
this Agreement.
"Exhibits" 1 through 5, inclusive, shall mean the Exhibits so marked,
copies of which are attached to this Agreement. Such Exhibits are hereby
incorporated by reference herein and made a part hereof and may be referred to
in this Agreement and any other related instrument or document without being
attached hereto or thereto.
"GAAP" shall mean generally accepted accounting principles,
consistently applied during the periods involved.
"GBCC" shall mean the Georgia Business Corporation Code (Chapter 2 of
Title 14 of the Official Code of Georgia).
38
<PAGE>
"Georgia Certificate of Merger" shall mean the Certificate of Merger
to be executed by the Surviving Bank and filed with the Secretary of State of
the State of Georgia relating to the Merger as contemplated by Sections 1.1 and
1.3 of this Agreement.
"Hazardous Material" shall mean any substance which is a "hazardous
substance"or "toxic substance" as defined in the Comprehensive Environmental
Response, Compensation, and Liability Act, 42 U.S.C. (S) 9601 et seq., or any
------
other substance or material defined, designated, classified or regulated as
hazardous or toxic under any Environmental Law, specifically including asbestos
requiring abatement, removal or encapsulation pursuant to the requirements of
Environmental Laws, polychlorinated biphenyls, and petroleum and petroleum
products).
"Indemnified Party" shall have the meaning set forth in Section 8.12.
"Internal Revenue Code" shall mean the Internal Revenue Code of 1986,
as amended, and the rules and regulations promulgated thereunder.
"Knowledge" as used with respect to a Person shall mean the knowledge
after due inquiry of the Chairman, President, Chief Financial Officer, Chief
Accounting Officer, Chief Credit Officer, or any Senior or Executive Vice
President of such Person.
"Law" shall mean any code, law, ordinance, regulation, reporting or
licensing requirement, rule, or statute applicable to a Person or its Assets,
Liabilities or business, including, without limitation, those promulgated,
interpreted or enforced by any of the Regulatory Authorities.
"Liability" shall mean any direct or indirect, primary or secondary,
liability, indebtedness, obligation, penalty, cost or expense (including,
without limitation, costs of investigation, collection and defense), claim,
deficiency, guaranty or endorsement of or by any Person (other than endorsements
of notes, bills, checks, and drafts presented for collection or deposit in the
ordinary course of business) of any type, whether accrued, absolute or
contingent, liquidated or unliquidated, matured or unmatured, or otherwise.
"Lien" shall mean any conditional sale agreement, easement,
encroachment, encumbrance, hypothecation, infringement, lien, mortgage, pledge,
reservation, restriction, security interest, title retention or other security
arrangement, or any adverse right or interest, charge, or claim of any nature
whatsoever on, or with respect to, any property or property interest, other than
(i) Liens for current property Taxes not yet due and payable; (ii) for
depository institution Subsidiaries of a Party, pledges to secure deposits and
(iii) other Liens incurred in the ordinary course of the banking business.
"Litigation" shall mean any action, arbitration, cause of action,
claim, complaint, criminal prosecution, demand letter, governmental or other
examination or investigation, hearing, inquiry, administrative or other
proceeding, or notice (written or oral) by any Person alleging potential
Liability or requesting information relating to or affecting a Party, its
business, its Assets (including, without limitation, Contracts related to it),
or the transactions contemplated by this Agreement, but
39
<PAGE>
shall not include regular, periodic examinations of depository institutions and
their Affiliates by Regulatory Authorities.
"Loan Property" shall mean any property owned by the Party in question
or by any of its Subsidiaries or in which such Party or Subsidiary holds a
security interest, and, where required by the context, includes the owner or
operator of such property, but only with respect to such property.
"Material" for purposes of this Agreement shall be determined in light
of the facts and circumstances of the matter in question; provided that any
specific monetary amount stated in this Agreement shall determine materiality in
that instance.
"Material Adverse Effect" on a Party shall mean an event, change or
occurrence which has a material adverse impact on (a) the financial position,
business, or results of operations of such Party and its Subsidiaries, taken as
a whole, or (b) the ability of such Party to perform its obligations under this
Agreement or to consummate the Merger or the other transactions contemplated by
this Agreement, provided that "material adverse impact" shall not be deemed to
include the impact of (w) changes in banking and similar Laws of general
applicability or interpretations thereof by courts or governmental authorities,
(x) changes in GAAP or regulatory accounting principles generally applicable to
banks and their holding companies, (y) actions and omissions of a Party (or any
of its Subsidiaries) taken with the prior informed consent of the other Party in
contemplation of the transactions contemplated hereby, or (z) the Merger and
compliance with the provisions of this Agreement on the operating performance of
the Parties.
"Merger" shall mean the merger of PMB with and into Bank Atlanta
referred to in Section 1.1 of this Agreement.
"NASD" shall mean the National Association of Securities Dealers, Inc.
"Order" shall mean any administrative decision or award, decree,
injunction, judgment, order, quasi-judicial decision or award, ruling, or writ
of any federal, state, local or foreign or other court, arbitrator, mediator,
tribunal, administrative agency or Regulatory Authority.
"Participation Facility" shall mean any facility or property in which
the Party in question or any of its Subsidiaries participates in the management
(including any property or facility held in a joint venture) and, where required
by the context, said term means the owner or operator of such facility or
property, but only with respect to such facility or property.
"Party" shall mean either Premier, PMB or Bank Atlanta, and "Parties"
shall mean all of Premier, PMB and Bank Atlanta.
"Permit" shall mean any federal, state, local, and foreign
governmental approval, authorization, certificate, easement, filing, franchise,
license, notice, permit, or right to which any Person is a party or that is or
may be binding upon or inure to the benefit of any Person or its securities,
Assets, Liabilities, or business.
40
<PAGE>
"Person" shall mean a natural person or any legal, commercial or
governmental entity, such as, but not limited to, a corporation, general
partnership, joint venture, limited partnership, limited liability company,
trust, business association, group acting in concert, or any person acting in a
representative capacity.
"PMB Common Stock" shall mean the no par value common stock of PMB.
"Premier Common Stock" shall mean the $1.00 par value common stock of
Premier.
"Premier Companies" shall mean, collectively, Premier and all Premier
Subsidiaries.
"Premier Disclosure Memorandum" shall mean the written information entitled
"Premier Disclosure Memorandum" delivered to Bank Atlanta on or prior to the
---------------------
date specified in Section 10.1(h) of this Agreement describing in reasonable
detail the matters contained therein, specifically referencing each Section of
this Agreement under which such disclosure is being made.
"Premier Financial Statements" shall mean (a) the consolidated balance
sheets (including related notes and schedules, if any) of Premier as of March
31, 1999 and as of December 31, 1998, 1997 and 1996, and the related statements
of income, changes in shareholders' equity, and cash flows (including related
notes and schedules, if any) as of March 31, 1999 and for each of the three
years ended December 31, 1998, as filed by Premier in SEC Documents and (b) the
consolidated balance sheets (including related notes and schedules, if any) of
Premier and related statements of income, changes in shareholders' equity, and
cash flows (including related notes and schedules, if any) included in SEC
Documents filed with respect to periods ended subsequent to March 31, 1999.
"Premier Subsidiaries" shall mean the Subsidiaries of Premier at the
Effective Time.
"Proxy Statement" shall mean the proxy statement used by Bank Atlanta to
solicit the approval of its shareholders of the transactions contemplated by
this Agreement, which shall be included in the Registration Statement of Premier
relating to shares of Premier Common Stock to be issued to the shareholders of
Bank Atlanta.
"Registration Statement" shall mean the Registration Statement on Form S-4,
or other appropriate form, filed with the SEC by Premier under the 1933 Act with
respect to the shares of Premier Common Stock to be issued to the shareholders
of Bank Atlanta in connection with the transactions contemplated by this
Agreement and which shall include the Proxy Statement.
"Regulatory Authorities" shall mean, collectively, the Federal Trade
Commission, the United States Department of Justice, the Board of the Governors
of the Federal Reserve System, the Office of Thrift Supervision (including its
predecessor, the Federal Home Loan Bank Board), the Office of the Comptroller of
the Currency, the Federal Deposit Insurance Corporation, all state regulatory
agencies having jurisdiction over the Parties and their respective Subsidiaries,
the NASD and the SEC.
41
<PAGE>
"Representatives" shall have the meaning provided in Section 8.7 of this
Agreement.
"Rights" shall mean all arrangements, calls, commitments, Contracts,
options, rights to subscribe to, scrip, understandings, warrants or other
binding obligations of any character whatsoever relating to, or securities or
rights convertible into or exchangeable for, shares of the capital stock of a
Person or by which a Person is or may be bound to issue additional shares of its
capital stock or other Rights.
"SEC" shall mean the United States Securities and Exchange Commission.
"SEC Documents" shall mean all forms, proxy statements, registration
statements, reports, schedules and other documents filed, or required to be
filed, by a Party or any of its Subsidiaries with any Regulatory Authority
pursuant to the Securities Laws.
"Securities Laws" shall mean the 1933 Act, the 1934 Act, the Investment
Company Act of 1940, as amended, the Investment Advisors Act of 1940, as
amended, the Trust Indenture Act of 1939, as amended, and the rules and
regulations of any Regulatory Authority promulgated thereunder.
"Shareholders' Meeting" shall mean the meeting of the shareholders of Bank
Atlanta to be held pursuant to Section 8.1 of this Agreement, including any
adjournment or adjournments thereof.
"Subsidiaries" shall mean all those corporations, banks, associations or
other entities of which the entity in question owns or controls 50% or more of
the outstanding equity securities either directly or through an unbroken chain
of entities as to each of which 50% or more of the outstanding equity securities
is owned directly or indirectly by its parent; provided, however, there shall
not be included any such entity acquired through foreclosure or any such entity
the equity securities of which are owned or controlled in a fiduciary capacity.
"Support Agreement" shall mean the Support Agreement in substantially the
form of Exhibit 5 to this Agreement.
"Surviving Bank" shall mean Bank Atlanta, as the surviving bank resulting
from the Merger.
"Tax" or "Taxes" shall mean any federal, state, county, local or foreign
income, profits, franchise, gross receipts, payroll, sales, employment, use,
property, withholding, excise, occupancy and other taxes, assessments, charges,
fares or impositions, including interest, penalties and additions imposed
thereon or with respect thereto.
"Year 2000 Problem" shall mean any problem affecting the ability of a Party
to continue operation as an ongoing business or to provide its usual and
customary services, relating to the failure of software, hardware or other
computer equipment to: (a) store all date-related information and process all
data interfaces involving dates in a manner that unambiguously identifies the
century,
42
<PAGE>
for all date values before, during or after the Year 2000; (b) calculate, sort,
report and otherwise operate correctly and in a consistent manner for all date
information processed by any software, hardware or other computer equipment,
whether before, during or after the Year 2000; (c) calculate, sort, report and
otherwise operate correctly, in a consistent manner and without interruption
regardless whether the date on which the software, hardware or other computer
equipment is operated or executed is before, during or after the Year 2000; (d)
report and display all dates with a four-digit date so that the century is
unambiguously identified; and (e) handle all leap years, including but not
limited to the Year 2000 leap year, correctly.
Any singular term in this Agreement shall be deemed to include the plural, and
any plural term the singular. Whenever the words "include," "includes," or
"including" are used in this Agreement, they shall be deemed followed by the
words "without limitation."
11.2 Expenses.
--------
(a) Except as otherwise provided in this Section 11.2, each of the
Parties shall bear and pay all direct costs and expenses incurred by it or on
its behalf in connection with the transactions contemplated hereunder, including
fees and expenses of its own financial or other consultants, investment bankers,
accountants and counsel.
(b) Notwithstanding the provisions of Section 11.2(a) of this Agreement,
if for any reason this Agreement is terminated pursuant to Sections 10.1(b) or
10.1(c) of this Agreement, the breaching Party agrees to pay the non-breaching
Party (i) $200,000 if the breach is not willful or (ii) $500,000 if the breach
is willful or this Agreement is terminated in contemplation of an Acquisition
Proposal, which sums represent compensation for the non-breaching Party's loss
as a result of the transactions contemplated by this Agreement not being
consummated. Final settlement with respect to payment of such fees shall be made
within thirty (30) days after the termination of this Agreement. This Section
11.2(b) shall be the non-breaching Party's sole and exclusive remedy for
actionable breach by the breaching Party under this Agreement.
11.3 Brokers and Finders. Each of the Parties represents and warrants that
-------------------
neither it nor any of its officers, directors, employees or Affiliates has
employed any broker or finder or incurred any Liability for any financial
advisory fees, investment bankers' fees, brokerage fees, commissions, or
finders' fees in connection with this Agreement or the transactions contemplated
hereby, other than The Robinson-Humphrey Company, LLC, employed by Premier, and
The Carson Medlin Company employed by Bank Atlanta. In the event of a claim by
any broker or finder based upon his or its representing or being retained by or
allegedly representing or being retained by Premier or Bank Atlanta, each of
Premier and Bank Atlanta, as the case may be, agrees to indemnify and hold the
other Party harmless of and from any Liability in respect of any such claim.
11.4 Entire Agreement. Except as otherwise expressly provided herein, this
----------------
Agreement (including the documents and instruments referred to herein)
constitutes the entire agreement between the Parties with respect to the
transactions contemplated hereunder and supersedes all prior arrangements or
understandings with respect thereto, written or oral. Nothing in this Agreement
43
<PAGE>
expressed or implied, is intended to confer upon any Person, other than the
Parties or their respective successors, any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, other than as provided in
Section 8.10 of this Agreement.
11.5 Amendments. To the extent permitted by Law, this Agreement may be
----------
amended by a subsequent writing signed by each of the Parties upon the approval
of the Boards of Directors of each of the Parties; provided, however, that after
any such approval by the holders of Bank Atlanta Common Stock, there shall be
made no amendment that pursuant to the Financial Institutions Code of Georgia or
the GBCC requires further approval by such shareholders without the further
approval of such shareholders.
11.6 Waivers.
-------
(a) Prior to or at the Effective Time, Premier, acting through its Board
of Directors, chief executive officer or other authorized officer, shall have
the right to waive any Default in the performance of any term of this Agreement
by Bank Atlanta, to waive or extend the time for the compliance or fulfillment
by Bank Atlanta of any and all of its obligations under this Agreement, and to
waive any or all of the conditions precedent to the obligations of Premier under
this Agreement, except any condition which, if not satisfied, would result in
the violation of any Law. No such waiver shall be effective unless in writing
and signed by a duly authorized officer of Premier.
(b) Prior to or at the Effective Time, Bank Atlanta, acting through its
Board of Directors, president or other authorized officer, shall have the right
to waive any Default in the performance of any term of this Agreement by
Premier, to waive or extend the time for the compliance or fulfillment by
Premier of any and all of its obligations under this Agreement, and to waive any
or all of the conditions precedent to the obligations of Bank Atlanta under this
Agreement, except any condition which, if not satisfied, would result in the
violation of any Law. No such waiver shall be effective unless in writing and
signed by a duly authorized officer of Bank Atlanta.
(c) The failure of any Party at any time or times to require performance
of any provision hereof shall in no manner affect the right of such Party at a
later time to enforce the same or any other provision of this Agreement. No
waiver of any condition or of the breach of any term contained in this Agreement
in one or more instances shall be deemed to be or construed as a further or
continuing waiver of such condition or breach or a waiver of any other condition
or of the breach of any other term of this Agreement.
11.7 Assignment. Except as expressly contemplated hereby, neither this
----------
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by any Party hereto (whether by operation of Law or otherwise) without
the prior written consent of the other Party. Subject to the preceding sentence,
this Agreement will be binding upon, inure to the benefit of and be enforceable
by the Parties and their respective successors and assigns.
44
<PAGE>
11.8 Notices. All notices or other communications which are required or
-------
permitted hereunder shall be in writing and sufficient if delivered by hand, by
facsimile transmission, or by courier or overnight carrier, to the persons at
the addresses set forth below (or at such other address as may be provided
hereunder), and shall be deemed to have been delivered as of the date so
delivered:
Premier: Premier Bancshares, Inc.
2180 Atlanta Plaza
950 East Paces Ferry Road
Atlanta, Georgia 30326
Telecopy Number: (404) 814-3672
Attention: Darrell D. Pittard
Chairman and Chief Executive Officer
Copy to Counsel: Womble Carlyle Sandridge & Rice, PLLC
One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309
Telecopy Number: (404) 888-7490
Attention: Steven S. Dunlevie, Esq.
PMB: PMB Acquisition Corp.
2180 Atlanta Plaza
950 East Paces Ferry Road
Atlanta, Georgia 30326
Telecopy Number: (404) 814-3672
Attention: Darrell D. Pittard
Chairman and Chief Executive Officer
Copy to Counsel: Womble Carlyle Sandridge & Rice, PLLC
One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309
Telecopy Number: (404) 888-7490
Attention: Steven S. Dunlevie, Esq.
Bank Atlanta: Bank Atlanta
1221 Clairmont Road
Decatur, Georgia 30030
Telecopy Number: (404) 320-1508
Attention: James B. Hendry, Jr.
President and Chief Executive Officer
45
<PAGE>
Copy to Counsel: Powell Goldstein Frazer & Murphy, LLP
191 Peachtree Street, N.E.
Atlanta, Georgia 30303
Telecopy Number: (404) 572-6999
Attention: Kathryn L. Knudson, Esq.
11.9 Governing Law. This Agreement shall be governed by and construed
-------------
in accordance with the Laws of the State of Georgia, without regard to any
applicable conflicts of Laws, except to the extent that the federal laws of the
United States may apply to the Merger.
11.10 Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
11.11 Captions. The captions contained in this Agreement are for reference
--------
purposes only and are not part of this Agreement.
11.12 Enforcement of Agreement. The Parties hereto agree that irreparable
------------------------
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with its specific terms or were otherwise
breached. It is accordingly agreed that the Parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof in any court of the United States
or any state having jurisdiction, this being in addition to any other remedy to
which they are entitled at law or in equity.
11.13 Severability. Any term or provision of this Agreement which is
------------
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.
46
<PAGE>
IN WITNESS WHEREOF, each of the Parties has caused this Agreement to be
executed on its behalf and its corporate seal to be hereunto affixed and
attested by officers thereunto as of the day and year first above written.
ATTEST: PREMIER BANCSHARES, INC.
/s/ Barbara J. Burtt By: /s/ Darrell D. Pittard
- ------------------------- ----------------------------------------
Barbara J. Burtt Darrell D. Pittard
Secretary Chairman and Chief Executive Officer
[CORPORATE SEAL]
ATTEST: BANK ATLANTA
/s/ James B. Hendry, Jr. By: /s/ William Zachary, Jr.
- ------------------------- -----------------------------------------
Asst. Secretary William Zachary, Jr.
Chairman of the Board
[BANK SEAL]
ATTEST: PMB ACQUISITION CORP.
/s/ Barbara J. Burtt By: /s/ Darrell D. Pittard
- ------------------------- -----------------------------------------
Barbara J. Burtt Darrell D. Pittard
Secretary Chairman and Chief Executive Officer
[CORPORATE SEAL]
47
<PAGE>
EXHIBIT 1
---------
AFFILIATE AGREEMENT
Premier Bancshares, Inc.
2180 Atlanta Plaza
950 East Paces Ferry Road
Atlanta, Georgia 30326
Bank Atlanta
1221 Clairmont Road
Decatur, Georgia 30030
Ladies and Gentlemen:
The undersigned is a shareholder of Bank Atlanta ("Bank Atlanta"), a
commercial bank organized and existing under the laws of the State of Georgia,
and will become a shareholder of Premier Bancshares, Inc. ("Premier") pursuant
to the transactions described in the Agreement and Plan of Reorganization, dated
as of May 20, 1999 (the "Agreement"), by and between Bank Atlanta, Premier and
PMB Acquisition Corp. ("PMB"). Under the terms of the Agreement, PMB and Bank
Atlanta will be merged (the "Merger") and the shares of common stock of Bank
Atlanta ("Bank Atlanta Common Stock") will be converted into shares of common
stock of Premier ("Premier Common Stock"). This Affiliate Agreement represents
an agreement between the undersigned and Premier regarding certain rights and
obligations of the undersigned in connection with the shares of Premier to be
received by the undersigned as a result of the Merger.
In consideration of the Merger and the mutual covenants contained herein,
the undersigned and Premier hereby agree as follows:
Affiliate Status. The undersigned understands and agrees that as
----------------
to Bank Atlanta the undersigned is an "affiliate" under Rule 145(c) as defined
in Rule 405 of the Rules and Regulations of the Securities and Exchange
Commission ("SEC") under the Securities Act of 1933, as amended ("1933 Act"),
and the undersigned anticipates that the undersigned will be such an "affiliate"
at the time of the Merger.
Initial Restriction on Disposition. The undersigned agrees that
----------------------------------
the undersigned will not, except by operation of law, by will or under the laws
of descent and distribution, sell, transfer, or otherwise dispose of the
undersigned's interests in, or reduce the undersigned's risk relative to, any of
the shares of Premier Common Stock into which the undersigned's shares of Bank
Atlanta Common Stock are converted upon consummation of the Merger until such
time as Premier notifies the undersigned that the requirements of SEC Accounting
Series Release Nos. 130 and 135 ("ASR 130 and 135") have been met. The
undersigned understands that ASR 130 and 135 relate to
<PAGE>
publication of financial results of post-Merger combined operations of Premier
and Bank Atlanta. Premier agrees that it will publish such results within 45
days after the end of the first fiscal quarter of Premier containing the
required period of post-Merger combined operations and that it will notify the
undersigned promptly following such publication.
Covenants and Warranties of Undersigned. The undersigned represents,
---------------------------------------
warrants and agrees that:
(a) During the 30 days immediately preceding the effective time of
the Merger, the undersigned will not, except by operation of law, by will,
or under the laws of descent and distribution, sell, transfer, or otherwise
dispose of the undersigned's interests in, or reduce the undersigned's risk
relative to, any of the shares of Bank Atlanta Common Stock beneficially
owned by the undersigned as of the date of the shareholders' meeting of
Bank Atlanta held to approve the Merger.
(b) The Premier Common Stock received by the undersigned as a result
of the Merger will be taken for the undersigned's own account and not for
others, directly or indirectly, in whole or in part.
(c) The undersigned understands that any distribution by the
undersigned of the Premier Common Stock has not been registered under the
1933 Act and that shares of Premier Common Stock received pursuant to the
Merger can only be sold by the undersigned (1) following registration under
the 1933 Act, or (2) in conformity with the volume and other requirements
of Rule 145(d) promulgated by the SEC as the same now exist or may
hereafter be amended, or (3) to the extent some other exemption from
registration under the 1933 Act might be available. The undersigned
---------------
understands that Premier is under no obligation to file a registration
----------------------------------------------------------------------
statement with the SEC covering the disposition of the undersigned's shares
---------------------------------------------------------------------------
of Premier Common Stock.
-----------------------
4. Restrictions on Transfer. The undersigned understands and agrees that
------------------------
stop transfer instructions with respect to the shares of Premier Common Stock
received by the undersigned pursuant to the Merger will be given to Premier's
transfer agent and that there will be placed on the certificates for such
shares, or shares issued in substitution thereof, a legend stating in substance:
"The shares represented by this certificate were issued pursuant
to a business combination which is accounted for as a "pooling
of interests" and may not be sold, nor may the owner thereof
reduce his risks relative thereto in any way, until such time as
Premier has published the financial results covering at least 30
days of combined operations after the effective date of the
merger through which the business combination was effected. In
addition, the shares represented by this certificate may not be
sold, transferred or otherwise disposed of except or unless (a)
covered by an effective registration statement under the
Securities Act of 1933, as amended, (b) in accordance with (i)
Rule
2
<PAGE>
145(d) (in the case of shares issued to an individual who is not
an affiliate of Premier) or (ii) Rule 144 (in the case of shares
issued to an individual who is an affiliate of Premier) of the
Rules and Regulations of such Act, or (c) in accordance with a
legal opinion satisfactory to counsel for Premier that such sale
or transfer is otherwise exempt from the registration
requirements of such Act."
Such legend will also be placed on any certificate representing Premier
securities issued subsequent to the original issuance of Premier Common
Stock pursuant to the Merger as a result of any stock dividend, stock
split or other recapitalization as long as Premier Common Stock issued to
the undersigned pursuant to the Merger has not been transferred in such
manner to justify the removal of the legend therefrom. If the provisions
of Rules 144 and 145 are amended to eliminate restrictions applicable to
the Premier Common Stock received by the undersigned pursuant to the
Merger, or at the expiration of the restrictive period set forth in Rule
145(d), Premier, upon the request of the undersigned, will cause the
certificates representing the shares of Premier Common Stock issued to the
undersigned in connection with the Merger to be reissued free of any
legend relating to the restrictions set forth in Rules 144 and 145(d) upon
receipt by Premier of an opinion of its counsel to the effect that such
legend may be removed.
5. Understanding of Restrictions on Dispositions. The undersigned has
---------------------------------------------
carefully read the Agreement and this Affiliate Agreement and discussed
their requirements and impact upon his or her ability to sell, transfer or
otherwise dispose of the shares of Premier Common Stock received by the
undersigned, to the extent the undersigned believes necessary, with the
undersigned's counsel or counsel for Bank Atlanta.
6. Filing of Reports by Premier. Premier agrees, for a period of
----------------------------
two years after the effective date of the Merger, to file on a timely
basis all reports required to be filed by it pursuant to Section 13 of the
Securities Exchange Act of 1934, as amended, so that the public
information provisions of Rule 145(d) promulgated by the SEC as the same
are presently in effect will be available to the undersigned in the event
the undersigned desires to transfer any shares of Premier Common Stock
issued to the undersigned pursuant to the Merger.
7. Transfer Under Rule 145(d). If the undersigned desires to sell
--------------------------
or otherwise transfer the shares of Premier Common Stock received by the
undersigned in connection with the Merger at any time during the
restrictive period set forth in Rule 145(d), the undersigned will provide
the necessary representation letter to the transfer agent for the Premier
Common Stock together with such additional information as the transfer
agent may reasonably request. If Premier's counsel concludes that such
proposed sale or transfer complies with the requirements of Rule 145(d),
Premier shall cause such counsel to provide such opinions as may be
necessary to Premier's transfer agent so that the undersigned may complete
the proposed sale or transfer.
8. Acknowledgments. The undersigned recognizes and agrees that the
---------------
foregoing provisions also apply to (a) the undersigned's spouse, (b) any
relative of the undersigned or of the
3
<PAGE>
undersigned's spouse who has the same home as the undersigned, (c) any trust or
estate in which the undersigned, the undersigned's spouse, and any such relative
collectively own at least a 10% beneficial interest or of which any of the
foregoing serves as trustee, executor or in any similar capacity and (d) any
corporation or other organization in which the undersigned, the undersigned's
spouse and any such relative who collectively owns at least 10% of any class of
equity securities or of the equity interest. The undersigned further recognizes
that, in the event that the undersigned is a director or officer of Premier or
becomes a director or officer of Premier upon consummation of the Merger, among
other things, any sale of Premier Common Stock by the undersigned within a
period of less than six months following the effective time of the Merger may
subject the undersigned to liability pursuant to Section 16(b) of the Securities
Exchange Act of 1934, as amended.
9. Miscellaneous. This Affiliate Agreement is the complete agreement
-------------
between Premier and the undersigned concerning the subject matter hereof. Any
notice required to be sent to any party hereunder shall be sent by registered or
certified mail, return receipt requested, using the addresses set forth herein
or such other address as shall be furnished in writing by the parties. This
Affiliate Agreement shall be governed by the laws of the State of Georgia.
4
<PAGE>
This Affiliate Agreement is executed as of the_____ day of May, 1999.
Very truly yours,
___________________________________
Signature
___________________________________
Print Name
AGREED TO AND ACCEPTED as of
May __, 1999.
PREMIER BANCSHARES, INC.
By:__________________________________
Darrell D. Pittard, Chairman and
Chief Executive Officer
AGREED TO AND ACCEPTED as of
May __, 1999.
BANK ATLANTA
By:__________________________________
James B. Hendry, Jr., President and
Chief Executive Officer
5
<PAGE>
EXHIBIT 2
---------
MATTERS AS TO WHICH
COUNSEL TO BANK ATLANTA WILL OPINE*
1. Bank Atlanta is a commercial bank existing and in good standing
under the laws of the State of Georgia with corporate power and authority to
conduct its business as now conducted and to own and use its Assets.
2. Bank Atlanta's authorized capital stock consists of 10,000,000
shares of Bank Atlanta Common Stock, of which 707,344 shares are outstanding as
of the date hereof. The outstanding shares of Bank Atlanta Common Stock have
been duly authorized, validly issued, and are fully paid and nonassessable. None
of the outstanding shares of Bank Atlanta Common Stock has been issued in
violation of any statutory preemptive rights. Except as disclosed in Bank
Atlanta's Disclosure Memorandum to our knowledge, there are no options,
---------------------
subscriptions, warrants, calls, rights or commitments obligating Bank Atlanta to
issue equity securities or acquire its equity securities.
3. The execution and delivery by Bank Atlanta of the Agreement do
not, and if Bank Atlanta were now to perform its obligations under the Agreement
such performance would not, result in any violation of the Articles of
Incorporation or Bylaws of Bank Atlanta, or, to our knowledge, result in any
breach of, or default or acceleration under, any material Contract or Order to
which Bank Atlanta is a party or by which Bank Atlanta is bound.
4. Bank Atlanta has duly authorized the execution and delivery of
the Agreement and all performance by Bank Atlanta thereunder, and has duly
executed and delivered the Agreement.
5. The Agreement is enforceable against Bank Atlanta in accordance
with its respective terms.
______________________________
*Pursuant to the January 1, 1992 edition of the Interpretive Standards
Applicable to Legal Opinions to Third Parties in Corporate Transactions adopted
by the Legal Opinion Committee of the Corporate and Banking Law Section of the
State Bar of Georgia.
<PAGE>
EXHIBIT 3
---------
CLAIMS/INDEMNIFICATION LETTER
May __, 1999
Premier Bancshares, Inc.
2180 Atlanta Plaza
950 East Paces Ferry Road
Atlanta, Georgia 30326
Ladies and Gentlemen:
This letter is delivered pursuant to Section 9.2(e) of the Agreement
and Plan of Reorganization (the "Agreement"), dated as of May 20, 1999, by and
between Bank Atlanta ("Bank Atlanta"), Premier Bancshares, Inc. ("Premier") and
PMB Acquisition Corp. ("PMB") which provides for the merger (the "Merger") of
PMB with and into Bank Atlanta.
Concerning claims which I may have against Bank Atlanta in my capacity
as an officer or director:
(a) Premier shall assume all liability (to the extent Bank
Atlanta was so liable) for claims for indemnification arising under
Bank Atlanta's Articles of Incorporation or Bylaws or under any
indemnification contract disclosed to Premier, as existing at the
effective time of the Merger, and for claims for salaries, wages or
other compensation, employee benefits, reimbursement of expenses, or
worker's compensation arising out of employment through the effective
time of the Merger;
(b) In my capacity as an officer or a director, I am not aware
that I have any claims (other than those referred to in paragraph (a)
above) against Bank Atlanta (other than routine deposit, loan and
other banking services conducted in the ordinary course of business
with Bank Atlanta); and
(c) I hereby release Bank Atlanta from any and all claims which
I am aware that I have against it in my capacity as an officer or a
director, other than those referred to in paragraph (a) above.
By executing this letter on behalf of Premier, you shall acknowledge
the assumption by Premier of the liabilities described in paragraph (a) above.
<PAGE>
Sincerely,
__________________________________
Signature of Officer or Director
__________________________________
Printed Name of Officer or Director
On behalf of Premier, I hereby acknowledge receipt of this letter and
affirm the assumption by Premier of the liabilities described in paragraph (a)
above, as of this ______ day of May, 1999.
PREMIER BANCSHARES, INC.
By: ________________________________________
Darrell D. Pittard, Chairman and Chief
Executive Officer
2
<PAGE>
EXHIBIT 4
---------
MATTERS AS TO WHICH
COUNSEL TO PREMIER WILL OPINE*
1. Premier is a corporation in existence under the laws of the State
of Georgia with corporate power to carry on its business as now conducted.
2. Premier's authorized capital stock consists of 60,000,000 common
shares, of which 26,113,676 shares are issued and outstanding as of the date
hereof and 2,000,000 preferred shares of which 40,770 shares are issued and
outstanding as of the date hereof. The outstanding shares of Premier Common
Stock are duly authorized by all necessary corporate action on the part of
Premier and are validly issued, fully paid and nonassessable. None of the
outstanding shares of Premier Common Stock has been issued in violation of any
statutory preemptive rights.
3. The shares of Premier Common Stock to be issued in exchange for
North Fulton Common Stock upon consummation of the Merger have been duly
authorized by all necessary corporate action and, when issued as provided for in
the Agreement, will be validly issued, fully paid and nonassessable. None of the
shares of Premier Common Stock to be exchanged for North Fulton Common Stock
upon consummation of the Merger will be issued in violation of any statutory
preemptive rights.
4. The execution and delivery by Premier of the Agreement and the
consummation by Premier of the transactions provided in the Agreement: (a) do
not violate any provision of the Articles of Incorporation or Bylaws of any
Premier Company, and (b) do not violate or constitute a breach of, or a default
under, any material Contract or Order to which a Premier Company is a party.
5. The Agreement has been duly executed and delivered by Premier and
is enforceable against Premier.
* subject to customary assumptions and limitations
<PAGE>
EXHIBIT 5
---------
SUPPORT AGREEMENT
THIS SUPPORT AGREEMENT ("Agreement") is made and entered into as of
the _____ day of May, 1999, by and between the undersigned,
_____________________, a resident of ____________, Georgia, and Premier
Bancshares, Inc., a corporation organized and existing under the laws of the
State of Georgia ("Premier").
Premier, PMB Acquisition Corp. II ("PMB") and Bank Atlanta, a
commercial bank organized and existing under the laws of the State of Georgia
("Bank Atlanta"), have entered into an Agreement and Plan of Reorganization,
dated as of May 20, 1999 (the "Merger Agreement"). The Merger Agreement
generally provides for the merger of PMB into Bank Atlanta (the "Merger") and
the conversion of the issued and outstanding shares of the $1.00 par value
common stock of Bank Atlanta ("Bank Atlanta Common Stock") into shares of the
$1.00 par value common stock of Premier. The Merger Agreement is subject to the
affirmative vote of the shareholders of Bank Atlanta, the receipt of certain
regulatory approvals, and the satisfaction of other conditions.
The undersigned is a member of the Board of Directors of Bank Atlanta
and is the owner of ________ shares of Bank Atlanta Common Stock and has rights
by option or otherwise to acquire _______ additional shares of Bank Atlanta
Common Stock (collectively, the "Shares"). In order to induce Premier to enter
into the Merger Agreement, the undersigned is entering into this Agreement with
Premier to set forth certain terms and conditions governing the actions to be
taken by the undersigned solely in his capacity as a shareholder of Bank Atlanta
with respect to the Shares until consummation of the Merger.
NOW, THEREFORE, in consideration of the transactions contemplated by
the Merger Agreement and the mutual promises and covenants contained herein, the
parties agree as follows:
1. Without the prior written consent of Premier, which consent shall not
be unreasonably withheld, the undersigned shall not transfer, sell, assign,
convey, or encumber any of the Shares during the term of this Agreement except
for transfers (i) by operation of law, by will, or pursuant to the laws of
descent and distribution, (ii) in which the transferee shall agree in writing to
be bound by the provisions of paragraphs 1, 2, and 3 of this Agreement as fully
as the undersigned, or (iii) to Premier pursuant to the terms of the Merger
Agreement. Without limiting the generality of the foregoing, the undersigned
shall not grant to any party any option or right to purchase the Shares or any
interest therein. Further, except with respect to the Merger, the undersigned
shall not during the term of this Agreement approve or ratify any agreement or
contract pursuant to which the Shares would be transferred to any other party as
a result of a consolidation, merger, share exchange, or acquisition.
<PAGE>
2. The undersigned intends to, and will, vote (or cause to be voted) all
of the Shares over which the undersigned has voting authority (other than in a
fiduciary capacity) in favor of the Merger Agreement and the Merger at any
meeting of shareholders of Bank Atlanta called to vote on the Merger Agreement
or the Merger or the adjournment thereof or in any other circumstance upon which
a vote, consent, or other approval with respect to the Merger Agreement or the
Merger is sought. Further, the undersigned intends to, and will, surrender the
certificate or certificates representing the Shares over which the undersigned
has dispositive authority to Premier upon consummation of the Merger as
described in the Merger Agreement and hereby waives any rights of appraisal, or
rights to dissent from the Merger, that the undersigned may have.
3. Except as otherwise provided in this Agreement, at any meeting of
shareholders of Bank Atlanta or at any adjournment thereof or any other
circumstances upon which their vote, consent, or other approval is sought, the
undersigned will vote (or cause to be voted) all of the Shares over which the
undersigned has voting authority (other than in a fiduciary capacity) against
(i) any merger agreement, share exchange, or merger (other than the Merger
Agreement and the Merger), consolidation, combination, sale of substantial
assets, merger, recapitalization, dissolution, liquidation, or winding-up of or
by Bank Atlanta or (ii) any amendment of Bank Atlanta's Articles of
Incorporation or Bylaws or other proposal or transaction involving Bank Atlanta
or any of its subsidiaries, which amendment or other proposal or transaction
would in any manner impede, frustrate, prevent, or nullify the Merger, the
Merger Agreement, or any of the other transactions contemplated thereby.
4. The undersigned acknowledges and agrees that Premier could not be made
whole by monetary damages in the event of any default by the undersigned of the
terms and conditions set forth in this Agreement. It is accordingly agreed and
understood that Premier, in addition to any other remedy which it may have at
law or in equity, shall be entitled to an injunction or injunctions to prevent
breaches of this Agreement and specifically to enforce the terms and provisions
hereof in any action instituted in any court of the United States or in any
state having appropriate jurisdiction.
5. Any term or provision of this Agreement which is invalid or
unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective
to the extent of such invalidity or unenforceability without rendering invalid
or unenforceable the remaining terms and provisions of this Agreement or
affecting the validity or enforceability of any of the terms or provisions of
this Agreement in any other jurisdiction. If any provision of this Agreement is
so broad as to be unenforceable, the provision shall be interpreted to be only
so broad as is enforceable.
6. The covenants and obligations set forth in this Agreement shall expire
and be of no further force and effect on the earlier of: (i) November 30, 1999,
or such date to which the Merger Agreement is extended; or (ii) the date on
which the Merger Agreement is terminated under Section 10.1 thereof.
5
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by the undersigned as of the day and year first above written.
As to the undersigned,
signed in the presence of:
____________________________ _____________________________________
Name: ______________________________
(Please print or type)
PREMIER BANCSHARES, INC.
By: _______________________________________
Darrell D. Pittard, Chairman of the
Board and Chief Executive Officer
6
<PAGE>
APPENDIX B
SECTION 7-1-537 OF THE FINANCIAL INSTITUTIONS CODE OF GEORGIA
AND
TITLE 14, CHAPTER 2, ARTICLE 13 OF THE
GEORGIA BUSINESS CORPORATION CODE
RELATING TO RIGHTS OF DISSENTING SHAREHOLDERS
<PAGE>
SECTION 7-1-537 OF THE FINANCIAL INSTITUTIONS CODE OF GEORGIA
(S) 7-1-537 - Rights of dissenting shareholders; surrender of certificates
(a) A shareholder of a bank or trust company which is a party to a plan of
proposed merger or consolidation under this part who objects to the plan shall
be entitled to the rights and remedies of a dissenting shareholder as determined
under Chapter 2 of Title 14, known as the "Georgia Business Corporation Code."
(b) The bank or trust company into which the other or others have been merged or
consolidated, as the case may be, shall have the right to require the return of
the original certificates of stock held by each shareholder in each or either of
the institutions and in lieu thereof:
(1) To issue to each shareholder new certificates for such number of shares
of the institution into which the others shall have been merged or consolidated;
or
(2) To cause to be paid or delivered to each shareholder the amount of cash
or securities of any other corporation or combination of cash and such
securities as, under the plan of merger or consolidation, the said shareholder
may be entitled to receive.
CHAPTER 2 OF TITLE 14 OF THE GEORGIA BUSINESS CORPORATION CODE
Part 1. Right to Dissent And Obtain Payment For Shares
(S) 14-2-1301. Definitions.
As used in this article, the term:
a. "Beneficial shareholder" means the person who is a beneficial owner of
shares held in a voting trust or by a nominee as the record shareholder.
b. "Corporate Action" means the transaction or other action by the
corporation that creates dissenters' rights under the Code Section 14-2-1302.
c. "Corporation" means the issuer of shares held by a dissenter before
the corporate action, or the surviving or acquiring corporation by merger or
share exchange of that issuer.
d. "Dissenter" means a shareholder who is entitled to dissent from
corporate action under Code Section 14-2-1302 and who exercises that right when
and in the manner required by Code Sections 14-2-1320 through 14-2-1327.
e. "Fair value," with respect to a dissenter's shares, means the value of
the shares immediately before the effectuation of the corporate action to which
the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action.
<PAGE>
f. "Interest" means interest from the effective date of the corporate
action until the date of payment, at a rate that is fair and equitable under all
the circumstances.
g. "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares to
the extent of the rights granted by a nominee certificate on file with a
corporation.
h. "Shareholder" means the record shareholder or the beneficial
shareholder.
(S) 14-2-1302. Right to Dissent.
a. A record shareholder of the corporation is entitled to dissent from,
and obtain payment of the fair value of his shares in the event of, any of the
following corporate actions:
(1) Consummation of a plan of merger to which the corporation is a
party:
(A) If approval of the shareholders of the corporation is
required for the merger by Code Section 14-2-1103 or 14-2-1104 or the
articles of incorporation and the shareholder is entitled to vote on
the merger; or
(B) If the corporation is a subsidiary that is merged with its
parent under Code Section 14-2-1104;
(2) Consummation of a plan of share exchange to which the corporation
is a party as the corporation whose shares will be acquired, if the
shareholder is entitled to vote on the plan;
(3) Consummation of a sale or exchange of all or substantially all of
the property of the corporation if a shareholder vote is required on the
sale or exchange pursuant to Code Section 14-2-1202, but not including a
sale pursuant to court order or a sale for cash pursuant to a plan by which
all or substantially all of the net proceeds of the sale will be
distributed to the shareholders within one year after the date of sale;
(4) An amendment of the articles of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because it:
(A) Alters or abolishes a preferential right of the shares;
(B) Creates, alters, or abolishes a right in respect of
redemption, including a provision respecting a sinking fund for the
redemption or repurchase, of the shares;
(C) Alters or abolishes a preemptive right of the holder of the
shares to acquire shares or other securities;
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<PAGE>
(D) Excludes or limits the right of the shares to vote on any
matter, or to cumulate votes, other than a limitation by dilution
through issuance of shares or other securities with similar voting
rights;
(E) Reduces the number of shares owned by the shareholder to a
fraction of a share if the fractional share so created is to be
acquired for cash under Code Section 14-2-604; or
(F) Cancels, redeems, or repurchases all or part of the shares of
the class; or
(5) Any corporate action taken pursuant to a shareholder vote to the
extent that Article 9 of this chapter, the articles of incorporation,
bylaws, or a resolution of the board of directors provides that voting or
nonvoting shareholders are entitled to dissent and obtain payment for their
shares.
(b) A shareholder entitled to dissent and obtain payment for his shares
under this article may not challenge the corporate action creating his
entitlement unless the corporate action fails to comply with the procedural
requirements of this chapter or the articles of incorporation or bylaws of the
corporation or the vote required to obtain approval of the corporation action
was obtained by fraudulent and deceptive means, regardless of whether the
shareholder has exercised dissenter's rights.
(c) Notwithstanding any other provision of this article, there shall be no
right of dissent in favor of the holder of shares of any class or series which,
at the record date fixed to determine the shareholders entitled to receive
notice of and to vote at a meeting at which a plan of merger or share exchange
or a sale or exchange of property or an amendment of the articles of
incorporation is to be acted on, were either listed on a national securities
exchange or held of record by more than 2,000 shareholders, unless:
(1) In the case of a plan of merger or share exchange, the holders of
shares of the class or series are required under the plan of merger or
share exchange to accept for their shares anything except shares of the
surviving corporation or another publicly held corporation which at the
effective date of the merger or share exchange are either listed on a
national securities exchange or held of record by more than 2,000
shareholders, except for scrip or cash payments in lieu of fractional
shares; or
(2) The articles of incorporation or a resolution of the board of
directors approving the transaction provides otherwise.
(S) 14-2-1303. Dissent by Nominees and Beneficial Owners.
B-3
<PAGE>
A record shareholder may assert dissenters' rights as to fewer than all the
shares registered in his name only if he dissents with respect to all shares
beneficially owned by any one beneficial shareholder and notifies the
corporation in writing of the name and address of each person on whose behalf he
asserts dissenters' rights. The rights of a partial dissenter under this Code
section are determined as if the shares as to which he dissents and his other
shares were registered in the names of different shareholders.
Part 2. Procedure For Exercise of Dissenters' Rights
(S) 14-2-1320. Notice of Dissenters' Rights.
(a) If proposed corporate action creating dissenters' rights under Code
Section 14-2-1302 is submitted to a vote at a shareholders' meeting, the meeting
notice must state that shareholders are or may be entitled to assert dissenters'
rights under this article and be accompanied by a copy of this article.
(b) If corporate action creating dissenter's rights under Code Section 14-
2-1302 is taken without a vote of shareholders, the corporation shall notify in
writing all shareholders entitled to assert dissenters' rights that the action
was taken and send them the dissenter's notice described in Code Section 14-2-
1322 no later than ten days after the corporate action was taken.
(S) 14-2-1321. Notice of Intent to Demand Payment.
(a) If proposed corporate action creating dissenters' rights under Code
Section 14-2-1302 is submitted to a vote at a shareholders' meeting, a record
shareholder who wishes to assert dissenters' rights:
(1) must deliver to the corporation before the vote is taken written
notice of his intent to demand payment for his shares if the proposed
action is effectuated; and
(2) must not vote his shares in favor of the proposed action.
(b) A record shareholder who does not satisfy the requirements of
subsection (a) of this Code section is not entitled to payment for his shares
under this article.
(S) 14-2-1322. Dissenters' Notice.
(a) If proposed corporate action created dissenters' rights under Code
Section 14-2-1302 is authorized at a shareholders' meeting, the corporation
shall deliver a written dissenters' notice to all shareholders who satisfied the
requirements of Code Section 14-2-1321.
B-4
<PAGE>
(b) The dissenters' notice must be sent no later than ten days after the
corporate action was taken and must;
(1) State where the payment demand must be sent and where and when
certificates for certificated shares must be deposited;
(2) Inform holders of uncertificated shares to what extent transfer of
the shares will be restricted after the payment demand is received;
(3) Set a date by which the corporation must receive the payment
demand, which date may not be fewer than 30 nor more than 60 days after the
date the notice required in subsection (a) of this Code section is
delivered; and
(4) Be accompanied by a copy of this article.
(S) 14-2-1323. Duty to Demand Payment.
(a) A record shareholder sent a dissenters' notice described in Code
Section 14-2-1322 must demand payment and deposit his certificates in accordance
with the terms of the notice.
(b) A record shareholder who demands payment and deposits his shares under
subsection (a) of this Code section retains all other rights of a shareholder
until these rights are cancelled or modified by the taking of the proposed
corporate action.
(c) A record shareholder who does not demand payment or deposit his share
certificates where required, each by the date set in the dissenters' notice, is
not entitled to payment for his shares under this article.
(S) 14-2-1324. Share Restrictions.
(a) The corporation may restrict the transfer of uncertificated shares from
the date the demand for their payment is received until the proposed corporate
action is taken or the restrictions released under Code Section 14-2-1326.
(b) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until these
rights are cancelled or modified by the taking of the proposed corporate action.
(S) 14-2-1325. Offer of Payment.
(a) Except as provided in Code Section 14-2-1327, within ten days of the
later of the date the proposed corporate action is taken or receipt of a payment
demand, the corporation shall by
B-5
<PAGE>
notice to each dissenter who complied with Code Section 14-2-1323 offer to pay
to such dissenter the amount the corporation estimates to be the fair value of
his or her shares, plus accrued interest.
(b) The offer of payment must be accompanied by:
(1) The corporation's balance sheet as of the end of a fiscal year
ending not more than 16 months before the date of payment, an income
statement for that year, a statement of changes in shareholders' equity for
that year, and the latest available interim financial statements, if any;
(2) A statement of the corporation's estimate of the fair value of the
shares;
(3) An explanation of how the interest was calculated;
(4) A statement of the dissenter's right to demand payment under Code
Section 14-2-1327; and
(5) A copy of this article.
(c) If the shareholder accepts the corporation's offer by written notice to
the corporation within 30 days after the corporation's offer or is deemed to
have accepted such offer by failure to respond within said 30 days, payment for
his or her shares shall be made within 60 days after the making of the offer or
the taking of the proposed corporate action, whichever is later.
(S) 14-2-1326. Failure to Take Action.
(a) If the corporation does not take the proposed action within 60 days
after the date set for demanding payment and depositing share certificates, the
corporation shall return the deposited certificates and release the transfer
restrictions imposed on uncertified shares.
(b) If, after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it must send a new
dissenters' notice under Code Section 14-2-1322 and repeat the payment demand
procedure.
(S) 14-2-1327. Procedure if Shareholder Dissatisfied With Payment or Offer.
(a) A dissenter may notify the corporation in writing of his own estimate
of the fair value of his shares and amount of interest due, and demand payment
of his estimate of the fair value of his shares and interest due, if:
(1) The dissenter believes that the amount offered under Code Section
14-2-1325 is less than the fair value of his shares or that the interest
due is incorrectly calculated; or
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<PAGE>
(2) The corporation, having failed to take the proposed action, does
not return the deposited certificates or release the transfer restrictions
imposed on uncertificated shares within 60 days after the date set for
demanding payment.
(b) A dissenter waives his or her right to demand payment under this Code
section and is deemed to have accepted the corporation's offer unless he or she
notifies the corporation of his or her demand in writing under subsection (a) of
this Code section within 30 days after the corporation offered payment for his
or her shares, as provided in Code Section 14-2-1325.
(c) If the corporation does not offer payment within the time set forth in
subsection (a) of Code Section 14-2-1325:
(1) The shareholder may demand the information required under
subsection (b) of Code Section 14-2-1325, and the corporation shall provide
the information to the shareholder within ten days after receipt of a
written demand for the information; and
(2) The shareholder may at any time, subject to the limitations period
of Code Section 14-2-1332, notify the corporation of his own estimate of
the fair value of his shares and the amount of interest due and demand
payment of his estimate of the fair value of his shares and interest due.
Part 3. Judicial Appraisal of Shares.
(S) 14-2-1330. Court Action.
(a) If a demand for payment under Code Section 14-2-1327 remains unsettled,
the corporation shall commence a proceeding within 60 days after receiving the
payment demand and petition the court to determine the fair value of the shares
and accrued interest. If the corporation does not commence the proceeding
within the 60-day period, it shall pay each dissenter whose demand remains
unsettled the amount demanded.
(b) The corporation shall commence the proceeding, which shall be a nonjury
equitable valuation proceeding, in the superior court of the county where a
corporation's registered office is located. If the surviving corporation is a
foreign corporation without a registered office in this state, it shall commence
the proceeding in the county in this state where the registered office of the
domestic corporation merged with or whose shares were acquired by the foreign
corporation was located.
(c) The corporation shall make all dissenters, whether or not residents of
this state, whose demands remain unsettled parties to the proceeding, which
shall have the effect of an action quasi in rem against their shares. The
corporation shall serve a copy of the petition in the proceeding upon each
dissenting shareholder who is a resident of this state in the manner provided by
law for the
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<PAGE>
service of a summons and complaint, and upon each nonresident dissenting
shareholder either by registered or certified mail or by publication, or in any
other manner permitted by law.
(d) The jurisdiction of the court in which the proceeding is commenced
under subsection (b) of this Code section is plenary and exclusive. The court
may appoint one or more persons as appraisers to receive evidence and recommend
decision on the question of fair value. The appraisers have the powers
described in the order appointing them or in any amendment to it. Except as
otherwise provide din this chapter, Chapter 11 of Title 9, known as the "Georgia
Civil Practice Act," applies to any proceeding with respect to dissenters'
rights under this chapter.
(e) Each dissenter made a party to the proceeding is entitled to judgment
for the amount which the court finds to be the fair value of his shares, plus
interest to the date of judgment.
(S) 14-2-1331. Court Costs and Counsel Fees.
(a) The court in an appraisal proceeding commenced under Code Section 14-2-
1330 shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court, but not
including fees and expenses of attorneys and experts for the respective parties.
The court shall assess the costs against the corporation, except that the court
may assess the costs against all or some of the dissenters, in amounts the court
finds equitable, to the extent the court finds the dissenters acted arbitrarily,
vexatiously, or not in good faith in demanding payment under Code Section 14-2-
1327.
(b) The court may also asses the fees and expenses of attorneys and experts
for the respective parties, in amounts the court finds equitable:
(1) Against the corporation and in favor of any or all dissenters if
the court finds the corporation did not substantially comply with the
requirements of Code Sections 14-2-1320 through 14-2-1327; or
(2) Against either the corporation or a dissenter, in favor of any
other party, if the court finds that the party against whom the fees and
expenses are assessed acted arbitrarily, vexatiously, or not in good faith
with respect to the rights provided by this article.
(c) If the court finds that the services of attorneys for any dissenter
were of substantial benefit to other dissenters similarly situated, and that the
fees for those services should not be assessed against the corporation, the
court may award to these attorneys reasonable fees to be paid out of the amounts
awarded the dissenters who were benefited.
(S) 14-2-1332. Limitation of Actions.
No action by any dissenter to enforce dissenters' rights shall be brought
more than three years after the corporate action was taken, regardless of
whether notice of the corporate action and of the
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<PAGE>
right to dissent was given by the corporation in compliance with the provisions
of Code Section 14-2-1320 and Code Section 14-2-1322.
B-9
<PAGE>
APPENDIX C
________, 1999
Board of Directors
Bank Atlanta
1221 Clairmont Road
Decatur, Georgia 30030
Members of the Board:
You have requested our opinion as to the fairness, from a financial point of
view, of the consideration to be received by the shareholders of Bank Atlanta
("Bank Atlanta") under the terms of a certain Agreement and Plan of
Reorganization dated May 20, 1999 (the "Agreement") which provides for the
acquisition of Bank Atlanta by Premier Bancshares, Inc. ("Premier") (the
"Merger"). Under the terms of the Agreement, each of the outstanding shares of
Bank Atlanta Common Stock shall be converted into 1.25 shares of Premier Common
Stock. The foregoing summary of the Merger is qualified in its entirety by
reference to the Agreement.
The Carson Medlin Company is a National Association of Securities Dealers, Inc.
(NASD) member investment banking firm, which specializes in the securities of
southeastern United States financial institutions. As part of our investment
banking activities, we are regularly engaged in the valuation of southeastern
United States financial institutions and transactions relating to their
securities. We regularly publish our research on independent community banks
regarding their financial and stock price performance. We are familiar with the
commercial banking industry in Georgia and the major commercial banks operating
in that market. We have been retained by Bank Atlanta in a financial advisory
capacity to render our opinion hereunder, for which we will receive
compensation.
In reaching our opinion, we have analyzed the respective financial positions,
both current and historical, of Premier and Bank Atlanta. We have reviewed:
(i) the Agreement; (ii) the annual reports to shareholders of Premier, including
audited financial statements for the five years ended December 31, 1998; (iii)
audited financial statements of Bank Atlanta for the five years ended December
31, 1998; (iv) unaudited interim financial statements of Bank Atlanta for the
three months ended March 31, 1999; (v) unaudited interim financial statements of
Bank Atlanta for the three months ended March 31, 1999; and, (vi) certain
financial and operating information with respect to the business, operations and
prospects of Premier and Bank Atlanta. We also: (a) reviewed and discussed
with members of management of Premier and Bank Atlanta the historical and
current business operations, financial condition and future prospects of their
respective companies; (b) reviewed the historical market prices and trading
activity for the common stocks of Premier and Bank Atlanta and compared them
with those of certain publicly traded companies which we deemed to be relevant;
(c) compared the results of operations of Premier and Bank Atlanta with those of
certain banking companies which we deemed to be relevant; (d) compared the
proposed financial terms of the Merger with the financial terms, to the extent
publicly available, of certain other recent business combinations of commercial
banking organizations; (e)
<PAGE>
Board of Directors
Bank Atlanta
_______, 1999
Page 2
analyzed the pro forma financial impact of the Merger on Premier; and (f)
conducted such other studies, analyses, inquiries and examinations as we deemed
appropriate.
We have relied upon and assumed, without independent verification, the accuracy
and completeness of all information provided to us. We have not performed or
considered any independent appraisal or evaluation of the assets of Premier or
Bank Atlanta. The opinion we express herein is necessarily based upon market,
economic and other relevant considerations as they exist and can be evaluated as
of the date of this letter.
Based upon the foregoing, it is our opinion that the consideration provided for
in the Agreement is fair, from a financial point of view, to the shareholders of
Bank Atlanta.
Very truly yours,
THE CARSON MEDLIN COMPANY
