<PAGE>
As Filed With the Securities and Exchange Commission on September 29, 1999;
Registration No. 333-_______
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________________
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
___________________________
PREMIER BANCSHARES, INC.
-----------------------------
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
Georgia 6025 58-1793778
- ------------------------------------ ------------------------------------ ------------------------------------------
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification No.)
incorporation) Classification Code No.)
</TABLE>
2180 Atlanta Plaza
950 East Paces Ferry Road
Atlanta, Georgia 30326
(404) 814-3090
(Address, including ZIP Code, and telephone number, including area
code, of registrant's principal executive offices)
Darrell D. Pittard
Premier Bancshares, Inc.
2180 Atlanta Plaza
950 East Paces Ferry Road
Atlanta, Georgia 30326
(404) 814-3090
(Name, address, including ZIP Code, and telephone number, including area code,
of agent for service)
-------------------------------------------------
Copies to:
Steven S. Dunlevie, Esq.
Elizabeth O. Derrick, Esq.
Womble Carlyle Sandridge & Rice, PLLC
One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309
(404) 872-7000
-------------------------------------------------
Approximate date of commencement of the proposed sale of the securities to the
public: As soon as practicable after this Registration Statement becomes
effective.
If the securities being registered on this Form are being offered in connection
with the formation of a holding company and there is compliance with General
Instruction G, check the following box. [_]
If this Form is being filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, as amended, check the
following box and list the Securities Act Registration Statement number of the
earlier effective Registration Statement for the same offering. [_]
If this Form is a post effective amendment filed pursuant to Rule 462(d) under
the Securities Act of 1933, check the following box and list the Securities Act
Registration Statement number of the earlier effective Registration Statement
for the same offering. [_]
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
================================================================================================================================
Proposed Maximum Proposed
Title of Each Class Offering Maximum Amount of
of Securities Amount To Be Price Per Aggregate Registration
To Be Registered Registered(1) Share Offering Price Fee(2)
- --------------------------------- ------------------- -------------------- ----------------- ------------------
<S> <C> <C> <C> <C>
Common Stock, $1.00 par value......... 2,900,160 $29.87 $21,506,400 $5,979
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The number of shares of common stock, par value $1.00 per share, of Premier
Bancshares, Inc. to be registered pursuant to this Registration Statement
includes the number of shares of common stock, $5.00 par value per share, of
Farmers & Merchants presently outstanding, multiplied by the exchange ratio
of 4.028 shares of Premier common stock for each share of Farmers &
Merchants common stock.
(2) In accordance with Rule 457(f)(2), the total registration fee has been
calculated based on the book value of the securities to be received by the
Registrant computed as of the latest practicable date prior to the date of
filing of the Registration Statement.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
Farmers & Merchants Bank
9861 Rome Boulevard
Summerville, Georgia 30747
(706) 857-3431
________________________________
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD NOVEMBER __, 1999
TO THE SHAREHOLDERS OF FARMERS & MERCHANTS
A Special Meeting of Shareholders (the "Meeting") of Farmers & Merchants
Bank, a Georgia chartered commercial bank ("Farmers & Merchants"), will be held
at the main office of Farmers & Merchants, located at 9861 Rome Boulevard,
Summerville, Georgia, on November __, 1999, at 9:00 a.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 April 20, 1999, by
and between Farmers & Merchants, Premier Bancshares, Inc., a
Georgia corporation ("Premier"), and PMB Acquisition Corp.
("PMB") pursuant to which (i) Farmers & Merchants will merge with
PMB, with Farmers & Merchants as the surviving bank and (ii) each
share of Farmers & Merchants common stock then outstanding will
be converted into the right to receive 4.028 shares of Premier
common stock, 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 September __, 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 Farmers & Merchants common stock.
Farmers & Merchants 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 Farmers &
Merchants 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 card as promptly as possible. You may revoke your proxy by delivering to
the Secretary of Farmers & Merchants a written revocation or a duly executed
proxy card bearing a later date or by electing to vote in person at the Meeting.
By Order of the Board of Directors
/s/ Bill M. Gilbert
____________________________________________
Bill M. Gilbert
President and Chief Executive Officer
Summerville, Georgia
October __, 1999
<PAGE>
Proxy Statement of Prospectus of
Farmers & Merchants Premier Bancshares, Inc.
For the Special Meeting of For
Shareholders 2,900,160 Shares of Common Stock
Trading Symbol: NYSE-PMB
Merger Proposed - Your Vote Is Very Important
______________________________________
<TABLE>
<S> <C>
The Boards of Directors of Farmers & This proxy statement/prospectus provides you with
Merchants and Premier have agreed on a detailed information about the proposed merger. We
merger of Farmers & Merchants and a encourage you to read this entire document carefully.
subsidiary of Premier. Farmers & You can also obtain other information about Premier
Merchants will be the surviving bank in from documents filed by Premier with the Securities
the merger and will become a and Exchange Commission.
wholly-owned subsidiary of Premier.
The merger cannot be completed unless the
If the merger is completed, you will shareholders of Farmers & Merchants approve it.
receive 4.028 shares of Premier common Farmers & Merchants has scheduled a special meeting
stock for each share of Farmers & of its shareholders to vote on the merger.
Merchants common stock you own. On
October __, 1999, the closing price of The date, time and place of the special meeting
Premier common stock was $______, making of shareholders are as follows:
the value of the shares of Premier
common stock to be received by Farmers & November __, 1999, 9:00 a.m.
Merchants shareholders equal to $_____ Main Office, Farmers & Merchants
for each share of Farmers & Merchants 9861 Rome Boulevard
common stock. Summerville, Georgia 30747
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 Farmers & Merchants shareholders will
be converted into the right to receive
0.5155 shares of BB&T common stock.
</TABLE>
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 October __, 1999 and was first mailed
to shareholders of Farmers & Merchants on October __, 1999.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
INCORPORATION BY REFERENCE 1
SUMMARY 1
RISK FACTORS 7
COMPARATIVE MARKET PRICES AND DIVIDENDS 9
Premier Market Prices............................................................................. 9
Farmers & Merchants Market Prices................................................................. 9
Dividends......................................................................................... 10
Shareholders of Record............................................................................ 10
THE FARMERS & MERCHANTS SHAREHOLDERS' MEETING 11
General........................................................................................... 11
Record Date, Voting Rights and Vote Required...................................................... 11
Voting and Revocation of Proxies.................................................................. 12
Solicitation of Proxies........................................................................... 13
Recommendation of the Farmers & Merchants Board................................................... 13
THE MERGER 14
General........................................................................................... 14
Background of, and Reasons for, the Merger........................................................ 14
Premier's Reasons for the Merger.................................................................. 16
Opinion of Farmers & Merchants' Financial Advisor................................................. 16
Exchange Ratio.................................................................................... 19
Exchange of Farmers & Merchants Common Stock Certificates......................................... 20
Effective Date and Time of the Merger............................................................. 21
Conditions to the Merger.......................................................................... 21
Conduct of Farmers & Merchants' and Premier's Business Prior to the Effective Time of the Merger.. 22
Waiver, Amendment and Termination of the Merger Agreement......................................... 23
Directors and Executive Officers Following the Merger............................................. 24
Interests of Certain Persons in the Merger........................................................ 24
Rights of Dissenting Shareholders................................................................. 26
Regulatory Approvals.............................................................................. 27
Material Federal Income Tax Consequences of the Merger............................................ 29
Accounting Treatment.............................................................................. 30
Restrictions on Resales by Affiliates............................................................. 30
Description of Premier Common Stock............................................................... 31
Certain Differences in Rights of Shareholders..................................................... 31
BUSINESS OF PREMIER 36
General........................................................................................... 36
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
Subsidiaries...................................................................................... 36
Acquisitions...................................................................................... 37
BUSINESS OF FARMERS & MERCHANTS 39
Description of Business........................................................................... 39
Competition....................................................................................... 39
Legal Proceedings................................................................................. 39
FARMERS & MERCHANTS MANAGEMENT'S 40
FARMERS & MERCHANTS SECURITY OWNERSHIP 48
REGULATORY CONSIDERATIONS 49
General........................................................................................... 49
Payment of Dividends.............................................................................. 51
Capital Adequacy.................................................................................. 51
Support of Subsidiary Institutions................................................................ 52
Prompt Corrective Action.......................................................................... 53
FDIC Insurance Assessments........................................................................ 55
Safety and Soundness Standards.................................................................... 56
Community Reinvestment Act........................................................................ 57
EXPERTS 57
OPINIONS 58
WHERE YOU CAN FIND MORE INFORMATION 58
APPENDIX A: AGREEMENT AND PLAN OF REORGANIZATION BY
AND BETWEEN PREMIER BANCSHARES, INC., PMB ACQUISITION
CORP. AND FARMERS & MERCHANTS.......................................................................... 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 STEVENS & 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)
Annual Report on Form 10-K For the fiscal year ended December 31,
1998
Quarterly Reports on Form 10-Q For the fiscal quarters ended March 31,
1999 and June 30, 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-A/A Dated May 27, 1999 (for Common Stock);
Dated May 27, 1999 (for Preferred
Securities of Premier Capital Trust I)
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 Farmers & Merchants
has supplied all such information relating to Farmers & Merchants.
1
<PAGE>
If you are a shareholder of Farmers & Merchants, 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 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 address:
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 Farmers & Merchants' special shareholder meeting,
please request them from us by October ___, 1999.
You should rely only on the information contained or incorporated by
reference in this proxy statement/prospectus. Premier and Farmers & Merchants
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 October __, 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.
2
<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 __ and __)
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 June 30, 1999, Premier's total assets were approximately $1.5
billion, deposits were approximately $1.2 billion, and shareholders' equity was
approximately $137.8 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.
Farmers & Merchants
9861 Rome Boulevard
Summerville, Georgia 30747
(706) 857-3431
Farmers & Merchants is a Georgia commercial bank headquartered in
Summerville, Chattooga County, Georgia. Farmers & Merchants also operates
banking offices in the cities of Lyerly, Menlo and Trion, Georgia. As of June
30, 1999, Farmers & Merchants' total assets were approximately $177 million,
deposits were approximately $153 million, and shareholders' equity was
approximately $21.5 million.
The Merger (Page __)
Farmers & Merchants will merge with a subsidiary of Premier. Farmers &
Merchants will be the surviving bank in the merger. Farmers & Merchants 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 Farmers & Merchants common stock. If Farmers & Merchants obtains
this approval, Premier currently expects to complete the merger in November,
1999.
The merger agreement is attached as Appendix A to this proxy statement/
prospectus. Please read the merger agreement in its entirety, because it is the
legal document that governs the merger.
Exchange Ratio (Page __)
If the merger is completed, you will receive 4.028 shares of Premier common
stock for each share of Farmers & Merchants common stock you own, plus cash
instead of any fractional share. On October __, 1999, the closing price of
Premier common stock was $____, making the value of shares of Premier common
stock received by Farmers & Merchants shareholders in the merger equal to $____
per share of Farmers & Merchants 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.
1
<PAGE>
Exchange Ratio Fair to Farmers & Merchants Shareholders According to Financial
Adviser (Page __)
Stevens & Company has given an opinion to the Farmers & Merchants 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 Farmers &
Merchants shareholders. The full text of this opinion is attached as Appendix C
to this proxy statement/prospectus. We encourage you to read this opinion
carefully. If the merger is completed, Stevens & Company will be paid
approximately $15,000 in exchange for its advice and for providing its fairness
opinion.
No Federal Income Tax on Shares Received in the Merger (Page __)
Farmers & Merchants 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. Farmers & Merchants 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 Farmers & Merchants urge you to contact your own
tax advisor to understand fully how the merger will affect you.
Two-Thirds Shareholder Vote Required (Page __)
Approval of the merger agreement requires the affirmative vote of the
holders of two-thirds of the outstanding shares of Farmers & Merchants 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 Farmers &
Merchants and their affiliates together own approximately 78.74% of the shares
entitled to be cast at the meeting, and Farmers & Merchants expects them to vote
their shares in favor of the merger.
The merger does not require the approval of Premier's shareholders.
Meeting to be held November __, 1999 (Page __)
Farmers & Merchants will hold a special shareholders' meeting at 9:00 a.m.
on _________, November __, 1999, at the main office of Farmers & Merchants, 9861
Rome Boulevard, Summerville, 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 __)
If you owned shares of Farmers & Merchants common stock at the close of
business on September __, 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 720,000 shares of Farmers & Merchants common
stock outstanding. You will have one vote at the meeting for each share of
Farmers & Merchants common stock you owned on the record date.
Farmers & Merchants Board Recommends Shareholder Approval (Page __)
The Farmers & Merchants Board of Directors believes that the merger is in
the best interests of Farmers & Merchants and its shareholders and unanimously
recommends that the shareholders vote "FOR" approval of the merger agreement.
2
<PAGE>
Interests of the Robinson Family and the President of Farmers & Merchants in the
Merger (page __)
Robin Robinson Howell, the Chairman of the Board of Farmers & Merchants, is
also a director of Premier. Mrs. Howell's family, including her father and
mother, J. Mack Robinson and Harriet J. Robinson, trusts for the benefit of
Robin Howell and her sister and companies controlled by the Robinson family,
collectively control 564,295 shares, or 78.35%, of Farmers & Merchants common
stock. That same family group also controls approximately 1.8% of Premier's
outstanding common stock.
In addition, Bill Gilbert, President of Farmers & Merchants, has entered
into an agreement with Farmers & Merchants which provides that he will receive
two (2) times his most recent annual compensation, including bonuses, in the
event he is terminated by Premier following its acquisition of Farmers &
Merchants.
Regulatory Approvals Required (Page __)
Premier and Farmers & Merchants cannot complete the merger unless they
obtain the approval of the Board of Governors of the Federal Reserve System, the
Federal Deposit Insurance Corporation and the Georgia Department of Banking and
Finance. Premier and Farmers & Merchants have filed all of the required
applications or notices with these regulatory authorities. Although Premier and
Farmers & Merchants 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 Purchase Accounting Treatment (Page __)
Premier expects to account for the merger utilizing purchase accounting
treatment. This means that the assets and liabilities of Farmers & Merchants
will be recorded at their estimated fair values as of the date the merger is
completed and added to those of Premier.
Dissenters' Appraisal Rights (Page __)
Georgia law permits you to dissent from the merger and to have the fair
value of your Farmers & Merchants stock appraised by a court and paid to you in
cash. To do this, you must follow certain procedures, including filing certain
notices and refraining from voting your shares in favor of the merger.
If you dissent from the merger, your shares of Farmers & Merchants 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 __)
Before deciding to approve and recommend the merger, Farmers & Merchants'
Board of Directors considered the financial condition and prospects of Farmers &
Merchants, 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 Farmers & Merchants' Board of
Directors' legal and financial advisers and other factors. Farmers & Merchants'
Board of Directors has decided that the merger is advisable and is in Farmers &
Merchants' and its shareholders' best interests.
3
<PAGE>
Comparative Per Share Market Price Information (Page __)
Shares of Premier common stock are quoted on the New York Stock Exchange.
Shares of Farmers & Merchants are not quoted on any established market.
Premier Farmers & Merchants
Common Stock Common Stock
------------------------- ---------------------------
$19.25 at April 20, 1999 $30.00 at January 28, 1999
(prior to announcement). (prior to announcement).
$____ at October __, 1999. $30.00 at January 28, 1999.
Merger of Premier with BB&T Corporation (Page __)
On July 28, 1999, Premier entered into an Agreement and Plan of
Reorganization with BB&T Corporation, pursuant to which Premier will merge with
and into BB&T. If the merger is completed, each share of Premier common stock
you will receive as Farmers & Merchants shareholders will be converted into the
right to receive 0.5155 shares of BB&T common stock.
4
<PAGE>
Comparative Historical and Pro Forma Financial Share Data
Summarized below is per share information for Premier and Farmers &
Merchants on an historical, pro forma combined and equivalent basis. You should
read this information in conjunction with Premier and Farmers & Merchants
historical financial statements and the related notes. See "Where You Can Find
More Information."
In presenting the comparative pro forma information, we have assumed that
Premier will record Farmers & Merchants' assets and liabilities at their
estimated fair values and add them to the assets and liabilities of Premier for
accounting and financial reporting purposes (a method which is referred to as
the "purchase" method of accounting). We have also assumed that Premier will
issue 4.028 shares of Premier common stock for each outstanding share of Farmers
& Merchants common stock. Farmers & Merchants 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 4.028 shares of Premier common stock, so that the per share amounts equate to
the respective values for one share of Farmers & Merchants 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 Farmers & Merchants
had been combined or the future results Premier will experience after the
merger, nor should you rely on the six-month information as being indicative of
results Premier or Farmers & Merchants expect for the entire year.
<TABLE>
<CAPTION>
At and For the
Six Months At and For the
Ended Year Ended
June 30, December 31,
------------------- ---------------
1999 1998
------------------- ---------------
<S> <C> <C>
Income per common share
Basic
Premier historical..................... $ 0.37 $ 0.80
Farmers & Merchants historical......... 1.84 3.61
Pro forma combined..................... 0.35 0.76
Farmers & Merchants pro forma
Equivalent........................... 1.41 3.06
Diluted
Premier historical..................... $ 0.36 $ 0.78
Farmers & Merchants historical......... 1.84 3.61
Pro forma combined..................... 0.35 0.75
Farmers & Merchants pro forma
Equivalent........................... 1.41 3.02
Cash dividends declared per common share
Premier historical..................... $ 0.18 $ 0.31
Farmers & Merchants historical......... 0.39 1.56
Pro forma combined..................... 0.19 0.32
Farmers & Merchants pro forma
Equivalent........................... 0.77 1.30
Book value per common share
Premier historical..................... $ 5.27 $ 5.23
Farmers & Merchants historical......... 29.87 30.47
Pro forma combined..................... 5.48 5.47
Farmers & Merchants pro forma
Equivalent........................... 22.07 22.03
</TABLE>
5
<PAGE>
Selected Consolidated Historical and Pro Forma Financial Data
Premier and Farmers & Merchants are providing the following information to
help you analyze the financial aspects of the merger. Premier and Farmers &
Merchants derived this information from audited historical financial statements
for 1994 through 1998 and unaudited historical financial statements for the six
months ended June 30, 1998 and 1999. The pro forma financial information assumes
purchase accounting treatment, estimated goodwill of $22 million which is
amortized over a 15 year period, and is presented as if the merger had been
completed as of the beginning of the earliest period presented. 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 Farmers & Merchants Financial Statements." You should
not rely on the six-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 Six Months
Ended June 30, 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...... $ 31,358 $ 29,331 $ 60,151 $ 55,039 $ 45,396 $ 39,389 $ 32,018
Net income............... 9,667 12,131 20,914 18,737 13,657 11,348 6,694
Diluted earnings per
share................... 0.36 0.47 0.78 0.71 0.52 0.44 0.28
Cash dividends paid per
share................... 0.18 0.18 0.31 0.15 0.17 0.06 0.03
Book value per share..... 5.27 5.23 4.72 5.19 3.73 3.18
Total assets............. 1,493,164 1,371,968 1,520,618 1,280,499 1,115,290 937,078 763,524
</TABLE>
Farmers & Merchants - Historical Financial Information
(Dollars in thousands, except for per share amounts)
<TABLE>
<CAPTION>
At and For the Six Months
Ended June 30, 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...... $ 3,397 $ 3,187 $ 6,430 $ 6,366 $ 5,796 $ 5,637 $ 5,937
Net income............... 1,323 1,243 2,600 2,501 2,338 2,226 2,323
Diluted earnings per
share................... 1.84 1.73 3.61 3.47 4.87 4.64 4.84
Cash dividends paid per
share................... 0.39 0.39 1.56 1.48 2.12 2.12 2.12
Book value per share..... 29.87 28.04 30.47 28.13 38.60 36.47 32.12
Total assets............. 177,377 167,561 165,981 159,461 153,097 145,398 140,055
</TABLE>
<TABLE>
<CAPTION>
Premier - Pro Forma Financial Information
(Dollars in thousands, except for per share amounts)
At and For the Six Months At and For the Years
Ended June 30, 1999 Ended December 31, 1998
------------------------- -----------------------
<S> <C> <C>
Net interest income...... $ 34,755 $ 66,581
Net income............... 10,271 22,076
Diluted earnings per
share................... 0.35 0.75
Cash dividends paid per
share................... 0.19 0.32
Book value per share..... 5.48 5.47
Total assets............. 1,670,000 1,686,599
</TABLE>
6
<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 Farmers & Merchants 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 change such
that the interest Premier pays on deposits and borrowings increases faster than
the interest Premier earns 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.
7
<PAGE>
Banking legislation that limits our growth and activities will 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.
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 the interest rates we pay on deposits or decrease our interest rate
spread on loans we originate.
Year 2000 data processing problems could interrupt and hurt our operations.
Premier's operations depend 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.
The Merger of Premier With And Into BB&T May Not Be Consummated.
Premier's failure to merge with BB&T as expected could materially and
adversely affect the price of Premier common stock. Both Premier's shareholders
and banking regulators must approve the merger before the merger may be
consummated. If either fails to approve the merger, or if the merger is not
consummated for any other reason, shares of Premier common stock will not be
converted into shares of BB&T common stock.
8
<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, the 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 NASDAQ Small Cap Market for 1997 and 1998 and for each of the quarters in
1999.
<TABLE>
<CAPTION>
Calendar Period
- ---------------
Sales Price
----------------------------
High Low
------------- -------------
<S> <C> <C>
1997
First Quarter.................................................... $ 9.47 $ 7.84
Second Quarter................................................... 11.67 9.25
Third Quarter.................................................... 14.00 10.08
Fourth Quarter................................................... 17.92 13.08
1998
First Quarter.................................................... $29.38 $17.08
Second Quarter................................................... 29.50 22.62
Third Quarter.................................................... 28.75 20.00
Fourth Quarter................................................... 27.69 16.38
1999
First Quarter.................................................... $25.31 $19.00
Second Quarter................................................... 21.50 15.81
Third Quarter.................................................... ______ ______
Fourth Quarter (through October __, 1999)........................ ______ ______
</TABLE>
On October __, 1999, the last day on which Premier common stock was traded
prior to the mailing of this proxy statement/prospectus, the last reported sales
price of Premier common stock as reported on the New York Stock Exchange was
$_____ per share. At the close of trading on April 20, 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 $19.25 per share.
Farmers & Merchants Market Prices
Farmers & Merchants common stock is not listed for quotation on the New
York Stock Exchange or on any other stock exchange. The price of Farmers &
Merchants common stock in the last known transaction, which occurred on January
28, 1999, was $30.00 per share. Based on transactions of which Farmers &
Merchants' management is aware, all sales of Farmers & Merchants common stock
during 1997, 1998 and 1999 were for $30 per share. We can give you no assurances
that these price ranges represent the actual market value of Farmers & Merchants
common stock.
9
<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 paid the
following dividends to its shareholders in each of the last two years and in the
first and second quarters 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.
Premier is a legal entity separate and distinct from its subsidiaries, and
its revenues depend in significant part on dividends its subsidiaries pay to it,
which subsidiaries are subject to legal restrictions on the amount of dividends.
See "Regulatory Considerations--Payment of Dividends."
Farmers & Merchants paid the following dividends to its shareholders in
each of the last two years and in the first and second quarters of 1999:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
First Quarter........... $0.39 $0.39 $0.37
Second Quarter.......... 0.39 0.39 0.37
Third Quarter........... 0.39 0.39 0.37
Fourth Quarter.......... N/A 0.39 0.37
</TABLE>
It is anticipated that Farmers & Merchants will declare a fourth quarter
dividend in the amount of $0.39 per share prior to the effective time of the
merger.
Shareholders of Record
As of the record date for Farmers & Merchants' special shareholders'
meeting, there were 164 holders of record of Farmers & Merchants common stock.
10
<PAGE>
FARMERS & MERCHANTS SHAREHOLDERS' MEETING
General
Farmers & Merchants is providing this proxy statement/prospectus to its
shareholders as of the record date of September __, 1999, along with a proxy
card. The board of directors of Farmers & Merchants is soliciting proxies for
use at a special meeting of shareholders of Farmers & Merchants to be held on
_________, November __, 1999 at 9:00 a.m., Eastern Time, at the main office of
Farmers & Merchants, located at 9861 Rome Boulevard, Summerville, Georgia. At
the meeting, Farmers & Merchants shareholders will vote upon a proposal to
approve the merger agreement, which is dated as of April 20, 1999, and under
which Farmers & Merchants would merge with a subsidiary of Premier. Proxies may
be voted on other matters as may properly come before the meeting at the
discretion of the proxy holders. Farmers & Merchants' 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 proxy statement/prospectus.
Farmers & Merchants requests that holders of Farmers & Merchants common
stock complete, date and sign the accompanying proxy card and return it promptly
to Farmers & Merchants in the enclosed postage prepaid envelope.
Record Date, Voting Rights and Vote Required
Only Farmers & Merchants shareholders on the record date are entitled to
receive notice of and to vote at the meeting. On the record date, there were
720,000 shares of Farmers & Merchants common stock outstanding, held by
164 holders of record. Each share of Farmers & Merchants 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 Farmers & Merchants common
stock. Failure of Farmers & Merchants shareholders 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
Farmers & Merchants common stock entitled to vote at the meeting will constitute
a quorum.
As of the record date, the directors and executive officers of Farmers &
Merchants and their affiliates beneficially owned a total of 566,917 shares, or
78.74%, of the issued and outstanding shares of Farmers & Merchants common
stock. 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 8.38% of the outstanding shares of Farmers & Merchants common stock.
Robin Robinson Howell, the Chairman of the Board of Farmers & Merchants, is
a director of Premier. Mrs. Howell's family, including her father and mother,
J. Mack Robinson and Harriet J. Robinson, trusts for the benefit of Robin Howell
and her sister and companies controlled by the Robinson family, collectively
control 564,295 shares, or 78.35%, of Farmers &
11
<PAGE>
Merchants common stock. That same family group also controls approximately 1.8%
of Premier common stock.
Voting and Revocation of Proxies
The shares of Farmers & Merchants 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. 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 as to any proposed adjournment of the
meeting. 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 with respect to which proxies have been marked as
abstentions also will not be counted as votes cast on the proposal. Shares with
respect to which 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 two-thirds of the outstanding shares of Farmers & Merchants common
stock must approve the proposal adopting the merger agreement, abstentions and
broker shares 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 proxy statement/prospectus will be voted on such
matters at the discretion of the proxy holders. Farmers & Merchants' 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 its
exercise by filing a written notice of revocation with, or by delivering a duly
executed proxy bearing a later date to, the Secretary of Farmers & Merchants at
Farmers & Merchants' 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 Farmers & Merchants, 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 Farmers &
Merchants common stock must approve the merger agreement, abstentions and broker
shares which are not voted will have the same effect as negative votes.
Accordingly, Farmers & Merchants' board of directors urges Farmers & Merchants'
shareholders to complete, date and sign the accompanying proxy card and return
it promptly in the enclosed postage prepaid envelope.
12
<PAGE>
Solicitation of Proxies
Directors, officers and employees of Farmers & Merchants may solicit
proxies personally or by telephone or facsimile. None of these people will
receive any special compensation for solicitation activities. Farmers &
Merchants will arrange with brokerage firms and other custodians, nominees and
fiduciaries to forward proxy solicitation materials to the beneficial owners of
stock such persons hold, and Farmers & Merchants will reimburse these record
holders for their reasonable out-of-pocket expenses.
Recommendation of the Farmers & Merchants Board of Directors
The Farmers & Merchants board of directors has unanimously adopted the
merger agreement and believes that the proposed transaction is fair to and in
the best interests of Farmers & Merchants and its shareholders. The Farmers &
Merchants Board of Directors unanimously recommends that Farmers & Merchants'
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 Farmers & Merchants Common Stock Certificates."
13
<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, the
terms of which are incorporated by reference. All shareholders are urged to
read the appendices in their entirety.
General
In the merger, Farmers & Merchants will be merged with and into PMB
Acquisition Corp., a subsidiary of Premier, and Farmers & Merchants will be the
surviving bank of the merger. Shareholders of Farmers & Merchants will receive
shares of the common stock of Premier in exchange for their shares of Farmers &
Merchants common stock. Upon completion of the merger, Farmers & Merchants will
become a wholly owned subsidiary of Premier.
Background of, and Reasons for, the Merger
Darrell D. Pittard, the Chairman and Chief Executive Officer of Premier,
contacted J. Mack Robinson, the principal shareholder of Farmers & Merchants, on
April 5, 1999, to explore the possibility of combining Farmers & Merchants and
Premier.
At a Board of Directors meeting held on April 19, 1999, the Board of
Directors of Farmers & Merchants met to consider a number of factors in
evaluating the merger and voted to approve the merger. J. Mack Robinson, the
controlling shareholder of Farmers & Merchants, presented the proposal to the
Board of Directors. Mr. Robinson's daughter, Robin Robinson Howell, Chairman of
the Board of Farmers & Merchants, who is also a director and significant
shareholder of Premier, abstained from voting.
Without assigning any relative or specific weights to the factors, in
approving the merger on April 19, the Board of Directors of Farmers & Merchants
considered the following material factors:
. The alternatives to the merger, including remaining an independent
institution in light of the current economic condition of the
market and the competitive disadvantages as compared to the larger
financial institutions operating in the market;
. The value of the consideration to be received by Farmers &
Merchants shareholders relative to the book value and earnings per
share of Farmers & Merchants' common stock;
. Certain information concerning the financial condition, results of
operations and business prospects of Premier;
14
<PAGE>
. 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 marketability of Farmers & Merchants' common stock and the
greater liquidity of Premier common stock, which is listed on
a national stock exchange;
. The competitive and regulatory environment for financial
institutions generally;
. The fact that the merger would enable Farmers & Merchants
shareholders to exchange their shares of Farmers & Merchants'
common stock in a tax-free transaction for shares of common stock
of a regional bank holding company;
. Premier's ability to provide comprehensive financial services
through Farmers & Merchants to the Chattooga County market;
. The local autonomy that Premier provides its subsidiary banking
operations;
. The likelihood of the merger being approved by applicable
regulatory authorities without undue conditions or delay; and
. The potential effect that the future elimination of the pooling of
interests method of accounting might have upon the market price of
Farmers & Merchants' common stock.
The Board of Directors of Farmers & Merchants believes the merger is in the
best interest of its shareholders because the merger will permit them to
exchange their ownership interest in Farmers & Merchants for an equity interest
in Premier, which has greater financial resources than Farmers & Merchants. The
Board of Directors of Farmers & Merchants also believes that the terms of the
merger, including the basis of exchange, 4.028 shares of Premier common stock
for each share of Farmers & Merchants' common stock, which was determined
through arms-length negotiations between Premier and the Board of Directors of
Farmers & Merchants, are fair and equitable and take into account the relative
earning power of Premier and Farmers & Merchants, historic and anticipated
operations, the economies of scale to be achieved through the merger, the
trading prices of the stocks of the respective companies and other pertinent
factors.
On April 20, 1999, the Agreement and Plan of Reorganization was executed by
both parties, and a joint press release describing the transaction was issued.
On August 30, 1999, management of Premier concluded that the proposed
acquisition of Farmers & Merchants would not qualify for "pooling of interests"
accounting treatment. As a result, Premier would be required to either account
for the transaction utilizing the "purchase" method of accounting, or terminate
the transaction pursuant to a failure of a
15
<PAGE>
condition contained in the merger agreement related to "pooling of interests"
accounting treatment. On September 23, 1999, counsel to Premier informed counsel
to Farmers & Merchants that Premier was willing to consummate the transaction
utilizing purchase accounting, and therefore waived the condition in the merger
agreement relating to "pooling of interests".
The Farmers & Merchants board of directors recommends that Farmers &
Merchants shareholders vote FOR approval of the merger agreement.
Premier's Reasons for the Merger
At a Board of Directors meeting held on May 20, 1999, the Board of
Directors of Premier considered the business and operations and asset quality of
Farmers & Merchants as well as the attractiveness of the Farmers & Merchants
franchise and its management team and the compatibility of that franchise with
the operations of Premier. Robin Robinson Howell, a director and significant
shareholder of Premier, who is also the Chairman of the Board of Farmers &
Merchants, abstained from the voting.
In approving the merger on May 20, 1999, the Board of Directors of Premier
determined that one of Premier's prime objectives is to build a statewide
franchise in Georgia with an emphasis on customer service, value and personal
attention. Premier management believes that Farmers & Merchants is a well-run
organization that stresses customer service and loyalty, and that by acquiring
it, Premier will have a substantial presence in Chattooga County, another step
toward achieving Premier's goal.
Opinion of Farmers & Merchants' Financial Advisor
Farmers & Merchants has retained Stevens & Company to act as financial
advisor in connection with the merger. As part of this engagement, Stevens
agreed to render to Farmers & Merchants' Board of Directors an opinion with
respect to the fairness to the shareholders of the consideration to be received
in the merger from a financial point of view. On May 27, 1999, Stevens
delivered to Farmers & Merchants a letter confirming the consideration to be
received as fair from a financial point of view. On October __, 1999, Stevens
delivered a fairness opinion to Farmers & Merchants. The full text of this
opinion appears as Appendix C to the proxy statement/prospectus and should be
read carefully and in its entirety. Stevens' opinion does not constitute a
recommendation to any shareholder as to how such shareholder should vote on the
proposed transaction. The fairness opinion was based upon information available
to Stevens as of the date the opinion was rendered.
In rendering its opinion, Stevens has, among other things:
. reviewed certain publicly available financial and other data with
respect to Premier, including financial statements for the past five
years, Farmers & Merchants' audited financial statements for the past
five years, and certain other relevant financial and operating records
of Farmers & Merchants and Premier;
. reviewed the merger agreement;
16
<PAGE>
. reviewed certain historical market prices and trading volumes of
Premier common stock as reported by NASDAQ, The American Stock
Exchange, and the New York Stock Exchange and historical and current
market prices for Farmers & Merchants common stock;
. considered the financial terms, to the extent publicly available, of
selected recent acquisitions of financial institutions which Stevens
deemed to be comparable, in whole or in part, to the merger;
. analyzed the business prospects of Farmers & Merchants and Premier,
and the economies of their respective markets;
. reviewed with management of Farmers & Merchants alternative merger
prospects;
. inquired about and discussed the agreement and other matters related
thereto with Farmers & Merchants' counsel; and
. performed such other analyses and examinations as Stevens deemed
appropriate.
In connection with this review, Stevens assumed and relied on the accuracy
and completeness of the financial and other information provided to it by
Farmers & Merchants and Premier.
Stevens is a financial consulting and investment banking firm that
specializes in community bank transactions. Farmers & Merchants' Board of
Directors selected Stevens to act as its financial advisor in connection with
the specific purpose of completing a fairness opinion on the basis of the firm's
expertise in mergers and acquisitions of community banks, prior experience with
Premier, and knowledge of the history of Farmers & Merchants.
This summary reflects the material analysis performed by Stevens but does
not purport to be a complete description of the analysis performed by Stevens.
The evaluation of the fairness, from a financial point of view, of the
consideration to be received in the merger is to some extent a subjective one
based on the experience and judgment of Stevens and not merely the result of
mathematical analysis of financial data. The preparation of a fairness opinion
involves determination as to the most appropriate factors to be considered as
well as relevant methods of financial analysis and the application of those
factors and methods to the particular circumstances, and, therefore, such an
opinion is not readily susceptible to summary description. Stevens believes
that its analysis must be considered as a whole and that selecting only portions
of the analysis and factors considered by Stevens could create an incomplete
view of the process underlying Stevens' opinion. In addition, Stevens may have
given various factors more or less weight than others and may have deemed
various assumptions more or less probable than other assumptions. In its
analysis, Stevens incorporated numerous assumptions with respect to business,
market, monetary and economic conditions, industry performance and other
matters, many of which are beyond Farmers & Merchants and Premier's control.
Any estimates
17
<PAGE>
contained in Stevens' analysis are not necessarily indicative of future results
or values, which may be significantly more or less favorable than such
estimates. Such estimates were prepared solely as part of Stevens' analysis of
the fairness to Farmers & Merchants' shareholders of the consideration to be
paid in the merger.
The following is a brief summary of analysis performed by Stevens in
connection with its opinion.
Summary of Proposal. Stevens reviewed the terms of the proposed
transaction as reflected in the merger agreement, including the terms of the
exchange ratio. Based on the __-day average trading price of Premier at $____,
the exchange ratio of 4,028 shares of Premier common stock would result in a
price per share of Farmers & Merchants common stock of $____.
Possible Value of Farmers & Merchants In a Sale of Control. In determining
the potential value per share of Farmers & Merchants common stock if Farmers &
Merchants were sold to an alternative purchaser, Stevens reviewed the historical
results of Farmers & Merchants and examined certain projections. Stevens
computed the value of Farmers & Merchants based on a multiple of 19.64 times
1998 earnings and a multiple of 2.90 times Farmers & Merchants' shareholders'
equity. Based on this analysis, Stevens calculated an expected value to Farmers
& Merchants' shareholders in a sale of control transaction of $88.36 on book,
and $70.90 on earnings, for an average of $79.63.
Net Present Value. The investment or earnings value of any bank's stock is
an estimate of the present value of the future benefits usually earnings, cash
flow or dividends, which will accrue to the stock. An earnings value was
calculated using an annual future earnings stream over a period of time of not
less than ten years and an appropriate capitalization rate (the net present
value discount rate). The computations were based on an analysis of the banking
industry, the economic and competitive situations in Farmers & Merchants' market
area, and the current financial condition and historical levels of growth and
earnings. Using a net present value discount rate of 10%, the net present value
would be $27.16 per share.
Dividend Capacity. Stevens' analysis also considered the dividend stream
that would be afforded the merger. Given the stable growth but stagnant loan
demand of Farmers & Merchants, Stevens concluded that there would continue to be
substantial dividend payment capacity for Farmers & Merchants as an independent
bank. It should be noted that the dividend payout ratio of Farmers & Merchants
is significantly higher than peer group community banks and Farmers & Merchants'
ability to pay this level of dividends is attributable more to excess capital
than above average return on equity. Stevens noted that based on the stated
exchange ratio and current dividend of Premier ($0.36 per share), the
shareholders of Farmers & Merchants would receive a total of $1,044,058 per year
which is slightly below pre-merger amounts for the reasons previously cited.
Farmers & Merchants' shareholders received $1,123,200 in dividends in 1998.
Analysis of Selected Other Bank Mergers. Stevens reviewed in excess of 50
mergers involving transactions in the southeastern portion of the United States,
Seventeen transactions
18
<PAGE>
were highlighted as being similar to that between Farmers & Merchants and
Premier. Stevens noted the prices paid in these mergers as a multiple of
earnings and book value. Stevens also reviewed other data in connection with
each of these mergers, including the amount of total assets, return on equity,
and return on assets of the selling institutions. Stevens then compared this
data to that of the transaction between Farmers & Merchants and Premier, and to
the value to be received by the shareholders of Farmers & Merchants following
the merger.
This comparison yielded a range of transaction values as multiples of the
last twelve months earnings per share from a low of 10.30 to a high of 25.50,
with the average being 19.64. Price to book value, in this analysis ranged from
1.44 to 3.93 with the average being 2.90. Based on a __-day average trading
price of Premier at $____, and the exchange ratio, Farmers & Merchants would be
valued at ____times book, and ____ times earnings.
There was no one company or transaction used in the above analysis as a
comparison that is identical to Farmers & Merchants, Premier, or the merger.
Accordingly, an analysis of the results of the foregoing necessarily involves
complex considerations and judgments concerning differences in financial and
operating characteristics of the companies and other factors that could affect
the public trading of the companies to which they are being compared.
Mathematical analysis (such as determining an average or median) is not, in
itself, a meaningful method of using comparable comparative data. Analysis must
also be given to the consolidation issues within the financial services
industry.
Stevens also analyzed the value that Premier would add in terms of:
. liquidity;
. capital required to continue the growth patterns of Farmers &
Merchants; and
. the ability of senior management of Farmers & Merchants to
compliment that of Premier as they further expand in the state of
Georgia.
With respect to liquidity, Premier is traded on the New York Stock Exchange,
with an average daily volume of 22,300 shares. Stevens also concluded that
Farmers & Merchants and present management are key factors in Premier's ability
to grow their banking franchise, especially in North Georgia.
The foregoing description of Stevens' opinion is qualified in its entirety
by reference to the full text of such opinion, which is attached hereto as
Appendix C.
Exchange Ratio
At the effective time of the merger, Farmers & Merchants will merge with a
subsidiary of Premier. Farmers & Merchants will be the surviving bank in the
merger. Farmers & Merchants will become a wholly owned subsidiary of Premier as
a result of the merger. In the merger, each share of Farmers & Merchants common
stock outstanding at the effective time will be converted into the right to
receive 4.028 shares of Premier common stock.
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Farmers & Merchants 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 Farmers & Merchants common stock, may
be more or less than the value of such shares as of the date of this proxy
statement/prospectus or the date of the Farmers & Merchants shareholders'
meeting. Farmers & Merchants shareholders are urged to obtain information on the
market value of Premier common stock that is more recent than that which this
proxy statement/prospectus 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 Farmers & Merchants common stock otherwise entitled
to a fractional share an amount in cash determined by multiplying the fractional
part of such share of Premier common stock by the closing price of Premier
common stock on the last trading day before the effective date of the merger.
Exchange of Farmers & Merchants Common Stock Certificates
At the effective date, by virtue of the merger and without any action on
the part of Farmers & Merchants or the holders of Farmers & Merchants common
stock, each share of Farmers & Merchants 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 such share of
Farmers & Merchants common stock as described below, whole shares of Premier
common stock and cash in lieu of any fractional share interest. Promptly after
the effective date, Premier will cause its exchange agent to deliver or mail to
each Farmers & Merchants shareholder a form letter of transmittal and
instructions for use in effecting the surrender of the certificates that,
immediately before the effective time, represented any shares of Farmers &
Merchants common stock. Upon surrender of these certificates or other
satisfactory evidence of ownership, together with such letter of transmittal
duly executed and completed in accordance with its instructions and such other
documents as may be reasonably requested, Premier will cause its exchange agent
to transfer promptly the merger consideration to the persons entitled to receive
it.
Holders of Farmers & Merchants common stock should not send in their stock
certificates until they receive transmittal forms and instructions.
Until surrendered as described above, each outstanding certificate
representing shares of Farmers & Merchants 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
Farmers & Merchants common stock. With respect to any certificate for Farmers &
Merchants common stock that has been lost or destroyed, Premier will pay the
merger consideration attributable to such 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 date, no transfer of the shares of
Farmers & Merchants common stock outstanding immediately before the effective
time will be made on Premier's stock transfer books.
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Premier will pay any dividends or other distributions with respect to
Farmers & Merchants common stock that Farmers & Merchants 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 Farmers & Merchants will 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
Farmers & Merchants common stock are converted, regardless of whether such
holders have exchanged their certificates representing Farmers & Merchants
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 dividends or other distributions on all shares of Premier common
stock issuable pursuant to the merger agreement, but the holder of any such
shares will only receive such dividend or distribution at such time as such
holder surrenders the certificate for exchange as described above. Upon
surrendering such certificate, both the Premier common stock certificate and any
undelivered dividends and cash payments payable hereunder, without interest,
will be delivered and paid with respect to each share of Farmers & Merchants
common stock such certificate represents.
Effective Date and Time of the Merger
The effective date will occur at the time and date specified in the
articles of merger to be filed by Premier with the Secretary of State of
Georgia. Premier and Farmers & Merchants currently anticipate that the filing of
the articles of merger will take place as soon as practicable following the date
on which the merger agreement is approved by the Farmers & Merchants
shareholders and all other conditions to the respective obligations of Premier
and Farmers & Merchants to complete the merger have been satisfied. If the
Farmers & Merchants shareholders approve the merger at the meeting, we currently
anticipate that the filing of the articles of merger and the effective date will
occur in November, 1999.
Conditions to the Merger
Premier and Farmers & Merchants' 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 Farmers & Merchants 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;
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. 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; and
. 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 Farmers & Merchants common stock for
Premier common stock will not give rise to recognition of gain or loss
to Farmers & Merchants shareholders, except to the extent of any cash
received.
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. The condition set forth in the merger agreement
that the transaction be accounted for as a "pooling of interests" has been
waived by Premier. These conditions include, among others, the delivery by
Premier and Farmers & Merchants 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 Farmers & Merchants' and Premier's Business Prior to the Effective
Date of the Merger
Farmers & Merchants 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 to 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 certain other restrictions
applicable to the conduct of the business of Farmers & Merchants prior to
consummation of the merger, as described below. Farmers & Merchants 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 Farmers &
Merchants has agreed not to take are in the general categories of:
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. amending the Charter, Bylaws, or other governing instruments of
Farmers & Merchants;
. incurring additional indebtedness;
. acquiring any of its outstanding shares or paying dividends, except in
accordance with past practices;
. issuing additional securities of Farmers & Merchants or rights or
options to acquire such securities;
. reclassifying any capital stock of Farmers & Merchants 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, Farmers & Merchants has agreed not to solicit, directly or
indirectly, any acquisition proposal from any other person or entity. Farmers &
Merchants also has agreed not to negotiate with respect to any acquisition
proposal, provide nonpublic information to any party making such 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, Farmers & Merchants 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 between Premier and
Farmers & Merchants and approved by their respective boards of directors;
provided, however, that after approval by the Farmers & Merchants shareholders,
no amendment that pursuant to the Financial Institutions Code of Georgia
requires further approval of the Farmers & Merchants shareholders, including
decreasing the consideration to be received by Farmers & Merchants shareholders,
may be made without the shareholders' further approval.
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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 Farmers & Merchants 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
Farmers & Merchants 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 and 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; or
. 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.
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 Farmers &
Merchants after the effective time of the merger will consist of the officers
and directors of Farmers & Merchants before the merger, provided, however, that
Premier may elect additional directors to serve on the Board of Directors of
Farmers & Merchants from and after the effective time of the merger.
Interests of Certain Persons in the Merger
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The merger agreement provides that, after the effective time of the merger,
Premier will provide certain employee benefits to officers and employees of
Farmers & Merchants who, at or after the effective time, remain officers or
employees of Farmers & Merchants. These employee benefits will be under
employee benefit plans on the 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 employee benefit plans, service
with Farmers & Merchants 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 Farmers &
Merchants previously disclosed to Premier between Farmers & Merchants and any
current or former director, officer or employee, and all provisions for vested
amounts earned or accrued through the effective time under Farmers & Merchants'
benefit plans.
Robin Robinson Howell, the Chairman of the Board of Farmers & Merchants, is
a director of Premier. Mrs. Howell's family, including her father and mother,
J. Mack Robinson and Harriet J. Robinson, trusts for the benefit of Robin Howell
and her sister and companies controlled by the Robinson family, collectively
control 564,295 shares, or 78.35%, of Farmers & Merchants common stock. That
same family group also controls approximately 1.8% of Premier common stock.
In addition, Bill Gilbert, President of Farmers & Merchants, has entered
into an agreement with Farmers & Merchants which provides that he will receive
two (2) times his most recent annual compensation, including bonuses, in the
event he is terminated by Premier following its acquisition of Farmers &
Merchants.
As of the record date, the directors and executive officers of Farmers
& Merchants and their affiliates owned less than 1% of the shares of Premier
common stock.
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Rights of Dissenting Shareholders
Pursuant to 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 Farmers & Merchants 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 Farmers & Merchants 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 Farmers & Merchants 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
Farmers & Merchants common stock equals the value of the shares immediately
before the effective time of the merger, excluding any appreciation or
depreciation in anticipation of the merger.
Any shareholder of Farmers & Merchants desiring to receive payment of the
fair value of his or her Farmers & Merchants common stock in accordance with the
requirements of the dissenters' rights provisions of Georgia law must:
. deliver to Farmers & Merchants 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 Farmers
& Merchants 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: Farmers & Merchants, 9861 Rome Boulevard, Summerville, Georgia 30747-
1585, Attention: Bill Gilbert, 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 Farmers & Merchants common stock or the deposit of the
stock certificates. Rather, a dissenting shareholder must separately comply
with all of those conditions.
Within 10 days of the later of the effective date or receipt of a payment
demand by a shareholder who deposits his or her stock certificates in accordance
with the Farmers & Merchants dissenters' notice sent to those shareholders who
notified Farmers & Merchants of their intent to dissent, Premier must offer to
pay to each dissenting shareholder the amount
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Premier estimates to be the fair value of the dissenting shareholder's shares,
plus accrued interest. Premier's offer must be accompanied by:
. Farmers & Merchants' balance sheet as of the end of a fiscal year
ended not more than 16 months before the date of making an 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 date, whichever is later. Upon payment of the agreed
value, the dissenting shareholder will cease to have any interest in his or her
shares of Farmers & Merchants common stock.
If within 30 days after Premier offers payment for the shares of a
dissenting shareholder, the dissenting shareholder does not accept the estimate
of fair value of his or her shares and interest due on that fair value 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 payment demand of
a different amount from a dissenting shareholder, must file an action in a court
of competent jurisdiction in Chattooga 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 begin the proceeding within the 60-day
period, it shall be 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 proxy statement/prospectus.
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 such approval to fail to satisfy the
conditions included in the merger agreement. Premier has submitted applications
for the approvals described below to the appropriate regulatory agencies.
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Premier and Farmers & Merchants 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 approval or take such 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 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 those of Farmers & Merchants.
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 anti-trust
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 (30/th/) day, which
may be shortened to the fifteenth (15/th/) day, following the date of the 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.
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Premier and Farmers & Merchants 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 of Banking and Finance 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 such 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 Farmers & Merchants shareholders in light of their
particular circumstances or status. For example, this summary does not address
the federal income taxation of the merger to Farmers & Merchants 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.
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.
In connection with the filing of the registration statement of which this
proxy statement/prospectus is a part, Womble Carlyle Sandridge & Rice, PLLC
delivered a tax opinion to Premier and Farmers & Merchants. The following
discussion summarizes the material income tax consequences of the merger to the
shareholders of Premier and Farmers & Merchants. 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 such factual assumptions as are
customary in similar tax opinions and representations made by Premier and
Farmers & Merchants in the merger agreement.
Based upon the merger agreement, the factual assumptions and
representations made by Premier and Farmers & Merchants, 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 Farmers & Merchants will recognize no gain or loss
upon the exchange of their Farmers & Merchants common stock solely for
shares of
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Premier common stock, except for the recognition of gain with respect
to the receipt by the Farmers & Merchants shareholders of cash in lieu
of fractional shares.
. Cash that a dissenting Farmers & Merchants shareholder receives will
be treated as having been received as a distribution in redemption of
his or her Farmers & Merchants 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 Farmers & Merchants common stock surrendered. Farmers &
Merchants shareholders electing to exercise dissenters' rights should
consult their own tax advisors for tax treatment for their particular
circumstances.
. Neither Premier nor Farmers & Merchants will recognize income, gain or
loss as a consequence of the merger.
. The aggregate tax basis of the Premier common stock that Farmers &
Merchants shareholders receive pursuant to the merger will be the same
tax basis as their shares of Farmers & Merchants 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 Farmers
& Merchants shareholders receive will include the holding period of
the shares of Farmers & Merchants common stock being exchanged,
provided that the Farmers & Merchants 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 "purchase"
transaction under generally accepted accounting principles. Under such
accounting method, the assets and liabilities of Farmers & Merchants as of the
effective time of the proposed merger will be recorded at their estimated
respective fair values and added to those of Premier. Financial statements of
Premier issued after the effective time will reflect such values and will not be
restated retroactively to reflect the historical financial position or results
of operations of Farmers & Merchants.
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
Farmers & Merchants. At the effective time, affiliates may resell their Premier
common stock only in transactions 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.
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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 Farmers & Merchants, and include directors and certain
executive officers of Farmers & Merchants. 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 Farmers & Merchants 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
the Securities Act and the rules and regulations issued under the Securities
Act.
Description of Premier Common Stock
Premier is currently authorized to issue 60,000,000 shares of Premier
common stock, of which __________ shares were issued and outstanding as of
September __, 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 June 30, 1999, under these requirements and
guidelines, Premier's combined subsidiaries had $_________, 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, Farmers & Merchants' shareholders
will exchange their shares of a Georgia bank governed by the Financial
Institutions Code of Georgia and Farmers & Merchants' 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
certain differences between Farmers & Merchants' Charter and Bylaws and
Premier's Articles of Incorporation and Bylaws, the current rights of Farmers &
Merchants shareholders will change after the merger. The following is a summary
of the material differences in the rights of shareholders of Premier and Farmers
& Merchants. This summary is not intended to be a complete discussion of the
Georgia Business Corporations Code, the Financial Institutions Code of Georgia,
the Articles of Incorporation and Bylaws of Premier, or the Charter and Bylaws
of Farmers & Merchants.
Authorized Capital Stock. Premier is currently authorized to issue
60,000,000 shares of common stock, $1.00 par value, of which __________ shares
were outstanding as of September __, 1999. No other class of common stock is
currently authorized. The Board of Directors of Premier may issue additional
shares of Premier common stock up to the maximum amount permitted by the
Articles of Incorporation, without further action by the Premier shareholders,
unless applicable law requires such action. Premier's Articles of Incorporation
provide that no
31
<PAGE>
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 such
preferred stock in one or more series, with such 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 such series, as
it may determine. 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 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
such 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.
Farmers & Merchants is authorized to issue 2,000,000 shares of Farmers &
Merchants' common stock, $5.00 par value, of which 720,000 shares were issued
and outstanding as of September __, 1999. The Board has currently authorized no
other class of capital stock. The Board of Directors of Farmers & Merchants may
issue additional shares of common stock up to the maximum amount permitted by
Farmers & Merchants' Charter, without further action by Farmers & Merchants'
shareholders, unless applicable law requires such action. The Financial
Institutions Code of Georgia provides Farmers & Merchants' shareholders with
preemptive rights to purchase or subscribe to the unissued authorized shares of
Farmers & Merchants' common stock.
Removal of Directors. Premier's Bylaws provide that 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
common stock; and
. with cause, only upon the affirmative vote of the holders of a
majority of the issued and outstanding shares of Premier common stock.
The term ''cause'' will mean the adjudication of such director as
incompetent by a court having jurisdiction in the matter; the conviction of such
director of a felony; the failure of such 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 such
director to
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<PAGE>
attend regular meetings of the Board of Directors for six consecutive meetings
without having been excused by the Board of Directors.
Neither Farmers & Merchants' Charter nor Bylaws provide specific procedures
for removing directors. As a result, the provisions of the Financial
Institutions Code of Georgia govern the removal of directors. The Financial
Institutions Code of Georgia generally provides that directors may be removed
without cause by the affirmative vote of a majority of the issued and
outstanding shares of Farmers & Merchants' 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 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.
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 such amount, the corporation
must establish that such director did not perform his duties in a manner he
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.
Neither Farmers & Merchants' Charter nor Bylaws provide for limitations on
director liability.
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 such individual for reasonable expenses, judgments, fines,
penalties and amounts paid in settlement 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,
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<PAGE>
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 therein, 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.
Farmers & Merchants' Bylaws provide that Farmers & Merchants 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, she, or they shall be made a party
by reason of his or her being or having been a director, officer, or employee of
Farmers & Merchants or of any firm, corporation, or organization which he served
in any such capacity at the request of Farmers & Merchants; provided, however
that no person shall be so indemnified or reimbursed in relation to any matter
in such action, suit, or proceeding as to which he or she shall finally be
adjudged to have been guilty of or liable for negligence or willful misconduct
in the performance of his or her duties to Farmers & Merchants, and provided
further, that no person shall be so 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 Farmers & Merchants, 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. The foregoing right
of an indemnification or reimbursement shall not be exclusive of other rights to
which such 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 such transactions. The
Georgia Business Corporations Code generally provides that approval of such
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 Farmers & Merchants' 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 of Georgia govern the
approval of such transactions. The Financial Institutions Code of Georgia
generally provides that approval of such 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.
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.
Farmers & Merchants' 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
34
<PAGE>
number of directors by no more than two in any one year. Farmers & Merchants'
Board of Directors presently consists of seven 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 Farmers & Merchants' Bylaws nor Charter address how and when
dividends are to be paid to their shareholders.
35
<PAGE>
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
subsidiaries, Premier Bank and Milton National Bank. The principal asset of
Premier is all of the issued and outstanding shares of common stock of Premier
Bank and Milton National Bank.
Subsidiaries
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.
Milton National Bank currently operates through its commercial banking
office located in Roswell, Georgia, and through a commercial banking office of
The Buckhead Bank, a division of Milton National Bank, located in the Buckhead
community of Atlanta. Milton National Bank is a nationally chartered, full-
service commercial bank.
Merger with BB&T
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
share of Premier common stock you will receive as a Farmers & Merchants
shareholder, 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 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 June 30, 1999, BB&T
had total assets of approximately $39.2 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. As a shareholder of Farmer & Merchants, you 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 merger with Farmers &
Merchants.
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<PAGE>
If the BB&T merger is not consummated, Premier expects to continue its
current business strategy. If the merger is consummated, BB&T plans to
supplement Premier's real estate lending focus with emphasis on retail customers
and small to middle market commercial customers. BB&T will offer products such
as insurance, mutual funds, annuities, trust services, retail brokerage
services, investment banking, treasury services and international banking
services. 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."
Acquisitions
Premier's profitability and market share have increased through both
internal growth and acquisitions of other financial institutions located in
Georgia.
On July 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 July 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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<PAGE>
On August 31, 1999, Premier completed the acquisition of North Fulton
Bancshares, Inc., the Georgia bank holding company for Milton National Bank, in
a transaction accounted for as a pooling of interests.
On May 20, 1999, Premier announced an agreement to acquire Bank Atlanta, a
Georgia chartered commercial bank located in Decatur, Georgia, in a stock
transaction valued at $18.1 million, based on Premier's closing prices on May
19, 1999. The exchange ratio will be 1.25 shares of Premier common stock for
each share of Bank Atlanta common stock. Bank Atlanta was chartered in 1998, and
has assets of approximately $80.0 million. The acquisition of Bank Atlanta,
which will be accounted for as a pooling of interests, is subject to the
approval of regulators and Bank Atlanta shareholders and is expected to be
completed during the third quarter of 1999.
If the merger with BB&T is not consummated, Premier expects to continue to
develop its franchise through the acquisition of financial institutions. These
acquisitions may entail Premier's payment of consideration in excess of the book
value of the underlying net assets acquired, may result in Premier's issuing
additional shares of Premier capital stock or incurring additional indebtedness,
and could have a dilutive effect on the per share earnings or book value of
Premier common stock. Moreover, such acquisitions sometimes result in
significant front-end charges against earnings, although cost savings,
especially incident to in-market acquisitions, also frequently occur.
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<PAGE>
BUSINESS OF FARMERS & MERCHANTS
Description of Business
Farmers & Merchants is a Georgia state chartered bank which provides
banking services through its four full-service banking offices in Summerville,
Lyerly, Menlo and Trion, Georgia. Farmers & Merchants' executive office is
located at 9861 Rome Blvd., Summerville, Georgia 30747-1502, and its telephone
number is (706) 857-3431.
Farmers & Merchants offers a broad range of customary banking services
including commercial, mortgage and consumer loans; checking, savings and time
deposit accounts; wire transfers; and rental of safety deposit boxes.
As of June 30, 1999, Farmers & Merchants had total consolidated assets of
approximately $177 million, total consolidated deposits of approximately $153
million and total consolidated shareholders' equity of approximately $21.5
million. At June 30, 1999, Farmers & Merchants had an aggregate of 66 full-time
equivalent employees.
Competition
Farmers & Merchants competes in the Chattooga County, Georgia market with
two commercial banks and one credit union. In addition, Farmers & Merchants
competes with insurance companies and brokerage firms. As of June 30, 1999, in
terms of deposits, Farmers & Merchants ranked first out of the depository
institutions in Chattooga County, with approximately 69% of total county
deposits.
Legal Proceedings
Neither Farmers & Merchants nor any of its properties is subject to any
material pending legal proceedings, and Farmers & Merchants does not know of any
material proceeding being contemplated by any governmental authority.
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<PAGE>
FARMERS & MERCHANTS MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS'
The following discussion and analysis discusses the major factors that
affected Farmers & Merchants' results of operations and financial condition for
the periods shown. These comments are intended to supplement and highlight
financial and other information and should be read in conjunction with Farmers &
Merchants' financial statements, related notes and selected financial data
presented elsewhere in this proxy statement/prospectus.
Financial Condition - June 30, 1999 vs. December 31, 1998
Total assets at June 30, 1999, were $177 million, representing a $11
million (6%) increase from December 31, 1998. Cash and cash equivalents
decreased $1.7 million when compared to December 31, 1998. Deposits increased
$12 million (8%) while loans increased $5 million (7%) when compared to December
31, 1998, which reflected that increased deposits were not being utilized to
fund investments or loans. The allowance for loan losses at June 30, 1999,
totaled $1.1 million, representing 1.57% of total loans compared to December 31,
1998, total of $1.1 million representing 1.59% of total loans.
Financial Condition - 1998 vs. 1997
During 1998, average total assets increased approximately $11 million (7%)
over 1997. Average deposits increased $7 million (6%) in 1998 over 1997.
Average loans increased $2 million (4%) in 1998 over 1997.
Total assets at December 31, 1998, were $166 million, representing a $7
million (4%) increase from December 31, 1997. Total deposits increased $5
million (4%) from 1997 to 1998 while total loans decreased $3 million (4%)
during 1998. Time deposits increased $3 million from 1997 to 1998 while all
other deposit accounts increased $2 million in 1998.
Results of Operations - 1998 vs. 1997
Farmers & Merchants' earnings depend to a large degree on net interest
income, which is the difference between the interest income received from its
investments, such as loans, investment securities, federal funds sold, and the
interest expense which is paid on its deposit liabilities.
Net interest income was flat in 1998. Net interest income at December 31,
1998, was $6.4 million compared to $6.4 million in 1997.
The provision for loan losses in 1998 was $0 compared to $75,000 in 1997.
The provision for loan losses continues to reflect management's estimate of
potential loan losses inherent in the portfolio and the creation of an allowance
for loan losses adequate to absorb these losses. The allowance for loan losses
represented approximately 1.57% and 1.50% of total loans outstanding at December
31, 1998, and 1997, respectively. Net recoveries were $10,000 during 1998 and
net chargeoffs were $57,000 during 1997. Farmers & Merchants has established a
loan
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<PAGE>
grading system whose classifications are consistent with those of its
regulators. Management utilizes this system to evaluate the adequacy of its
allowance for loan losses. Management allocates losses based on expected loss
ratios for each loan classification. Management has determined these ratios
considering Farmers & Merchants' loss rates and the losses experienced by its
peer group. Farmers & Merchants also utilizes an independent loan review process
to validate the internal loan grading in addition to assessing the overall
adequacy of the allowance for loan losses.
Other operating income was $784,000 in 1998 which increased by $35,000 or 5%
when compared to 1997. Other operating expenses increased $38,000 (1%) in 1998
over 1997 principally due to an increase in personal expenses
Table 1 presents for the two years ended December 31, 1998, average balances
of interest-earning assets and interest-bearing liabilities and the weighted
average interest rates earned and paid on those balances. In addition, interest
rate spreads, net interest margins and the ratio of interest-earning assets
versus interest-bearing liabilities for those years are presented.
<TABLE>
<CAPTION>
Years Ended December 31,
- ------------------------
1998 1997
--------------------------------------------------------------------------------
Table 1 - Average Balances, Interest Weighted Interest Weighted
Interest, and Rates - Average Income/ Average Rate Average Income/ Average
Taxable Equivalent Basis Balance Expense Balance Expense Rate
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Interest-earning assets:
Loans $ 69,748,848 $ 6,443,756 9.24% $ 67,406,018 $ 6,872,967 10.20%
Investment securities 85,920,812 5,127,022 5.97% 73,906,642 4,576,277 6.19%
Federal funds sold 3,927,931 238,071 6.06% 5,855,077 322,800 5.51%
------------ ----------- ------ ------------ ----------- ------
Total interest-earning assets 159,597,591 11,808,849 7.40% 147,167,737 11,772,044 8.00%
Other assets and cash 6,523,129 8,031,986
------------ ------------
Total assets $166,120,720 $155,199,723
============ ============
LIABILITIES AND SHARHOLDERS'
EQUITY
Interest-bearing liabilities:
Interest-bearing demand
deposits $ 34,203,270 $ 1,092,771 3.19% $ 30,591,979 $ 919,312 3.01%
Savings deposits 7,918,959 163,472 2.06% 8,264,044 158,693 1.92%
Other time deposits 80,061,352 4,462,352 5.57% 74,049,493 4,097,992 5.53%
FHLB advances and other
borrowings 2,214,286 115,527 5.22% 4,030,764 139,348 3.46%
------------ ----------- ------ ------------ ----------- ------
Total interest bearing
liabilities 124,397,867 5,834,122 4.69% 116,936,280 5,315,345 4.55%
Noninterest bearing demand
deposits 19,193,162 17,582,305
Other liabilities 1,437,234 1,291,691
Shareholders' equity 21,092,457 19,389,447
------------ ------------
Total liabilities and
shareholders' equity $166,120,720 $155,199,723
============ ============
Tax equivalent adjustment
Net interest income 5,974,727 6,456,699
Interest rate spread 2.71% 3.45%
Net interest margin 3.74% 4.39%
Interest-earning assets/
Interest-bearing liabilities 128.30% 125.85%
----------------------------------------------------------------------------------
</TABLE>
Net interest income is determined by the amount of interest-earning assets
compared to interest-bearing liabilities and their related yields and costs.
The difference between the weighted average interest rates earned on interest-
earning assets, i.e., loans and investment securities, and the weighted average
interest rates paid on interest-bearing liabilities, i.e., deposits and
borrowings, is called the net interest spread. Another measure of the
difference in interest income earned versus interest expense paid is net
interest margin. Net interest margin is calculated by dividing net interest
income by average earning assets.
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<PAGE>
Average interest-earning assets were $160 million in 1998 versus $147
million in 1997. Average interest-bearing liabilities were $124 million in 1998
versus $117 million in 1997. The interest rate spread was 2.71% in 1998 versus
3.45% in 1997, while the net interest margin was 3.74% in 1998, and 4.39% in
1997.
Investment Securities
The composition of the investment securities portfolio reflects
management's strategy to maintain an appropriate level of liquidity while
providing a relatively stable source of income. The portfolio also provides a
balance to interest rate risk and credit risk in other categories of Farmers &
Merchants' balance sheet while providing a vehicle for the investment of
available funds, furnishing liquidity, and providing securities to pledge as
required collateral for certain deposits.
Investment securities increased $10 million from $80 million at December
31, 1997 to $90 million at December 31, 1998. At December 31, 1998, $82 million
(92%) of investment securities outstanding were classified as available-for-
sale.
Table 2 reflects the carrying amount of the investment securities portfolio
for the past two years.
<TABLE>
<CAPTION>
December 31,
------------
Table 2 - Carrying Value of Investments 1998 1997
------------------------------------
<S> <C> <C>
Securities available-for-sale:
U.S. Treasuries and agencies $54,761,551 $47,530,757
Mortgage-backed securities 27,432,453 22,020,027
----------- -----------
Total $82,194,004 $69,550,784
=========== ===========
Securities held-to-maturity:
U.S. Treasuries and agencies $ 1,299,505 $ 3,499,711
Mortgage-backed securities 6,215,233 6,861,432
----------- -----------
Total $ 7,514,738 $10,361,143
=========== ===========
Total investment securities $89,708,742 $79,911,927
=========== ===========
</TABLE>
Carrying Value of Investments
The market value of investment securities will change as interest rates
change but the related unrealized gains and losses will not flow through the
earnings statement unless the related securities become permanently impaired or
they are sold or called at prices which differ from the carrying value. At
December 31, 1998, Farmers & Merchants did not have any securities that it
deemed to be permanently impaired.
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<PAGE>
Loans
Gross loans receivable decreased by approximately $2 million from $69
million at December 31, 1997 to $67 million at December 31, 1998. This decrease
primarily resulted from decreases in the commercial and real estate portfolios
which are noted below in Table 3.
<TABLE>
<CAPTION>
December 31,
-------------
1998 1997
---------------------------------------------------------------
Table 3 - Loan Portfolio Percent of Percent of
Amount Total Amount Total
---------------------------------------------------------------
<S> <C> <C> <C> <C>
Commercial/Financial/Agricultural $10,744,181 16.15% $11,588,464 16.74%
Equity Line 3,803,627 5.72% 4,324,119 6.24%
Real Estate Mortgage 29,602,095 44.49% 31,103,970 44.92%
Installment Loans to Individuals 22,366,183 33.61% 22,226,557 32.10%
Other 20,394 0.03% -- 0.00%
----------- ------ ----------- ------
66,536,480 100.00% 69,243,110 100.00%
----------- ------ ----------- ------
Total loans
Less:
Allowance for loan losses 1,069,086 1,059,347
----------- -----------
Total net loans $65,467,394 $68,183,763
=========== ===========
</TABLE>
Table 4 represents the expected maturities for commercial, financial, and
agricultural loans, and real estate construction loans at December 31, 1998.
<TABLE>
<CAPTION>
Maturity
--------
Table 4 - Loan Portfolio Maturity Over One
One Year Through Over Five
or Less Five Years Years Total
---------------- -------------- ---------------- ----------------
<S> <C> <C> <C> <C>
$7,857,000 $2,222,000 $124,000 $10,203,000
</TABLE>
Provision and Allowance for Loan Losses
Table 5 presents an analysis of activities in the allowance for loan losses
for the past two years. An allowance for possible losses is provided through
charges to Farmers & Merchants' earnings in the form of a provision for loan
losses. The provision for loan losses was $0 in 1998, and $75,000 in 1997.
Management determines the level of the provision for loan losses based on
outstanding loan balances, the levels of non-performing assets, reviews of
assets classified as substandard, doubtful, or loss, reviews of the larger
credits, analysis of historical loss experience, and analysis of current
economic conditions.
Management believes that the allowance for loan losses was both adequate
and appropriate at December 31, 1998 and 1997. The future level of the allowance
for loan losses, however, depends largely upon loan growth, loan loss
experience, and other factors which cannot be anticipated with a high degree of
certainty.
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<PAGE>
<TABLE>
<CAPTION>
Years Ended December 31,
----------------------------------
Table 5 - Analysis of the Allowance for Loan Losses 1998 1997
-------------------------------------
<S> <C> <C>
Average net loans
Allowance for loan losses, beginning of period $1,059,347 $1,041,332
Chargeoffs for the period: 152,580 196,252
---------- ----------
Total chargeoffs 152,580 196,252
Recoveries for the period: 162,319 139,264
Provision charged to operations -- 75,000
---------- ----------
Total recoveries 162,319 214,264
---------- ----------
Net chargeoffs/ (recoveries) for the period (9,739) (18,012)
Provision for loan losses (9,739) (18,012)
---------- ----------
Allowance for loan losses, end of period $1,069,086 $1,059,344
========== ==========
Ratio of allowance for loan losses to total
loans outstanding 1.61% 1.53%
Ration of net chargeoffs/(recoveries) during the
period to
average net loans outstanding during the period (0.0150)% (0.0260)%
</TABLE>
Asset Quality
At December 31, 1998, there were no commitments to lend additional funds on
nonaccrual loans. Table 6 summarizes the non-performing assets for each of the
last two years.
<TABLE>
<CAPTION>
December 31,
-------------
Table 6 - Risk Elements 1998 1997
------------------------------------
<S> <C> <C>
Loans on nonaccrual 1,874 8,717
Loans past due 90 days and still accruing -- --
Other real estate owned -- --
----- -----
Total non-performing assets 1,874 8,717
===== =====
Total non-performing loans as a percentage of 0.003% 0.013%
net loans
</TABLE>
There may be additional loans within Farmers & Merchants' loan portfolio
that are classified as conditions dictate. Management, however, was not aware of
any such loans that were material in amount at December 31, 1998. At December
31, 1998, management was unaware of any known trends, events, or uncertainties
that would have, or that were reasonably likely to have a material effect on
Farmers & Merchants' liquidity, capital resources, or operations.
Deposits
Total deposits increased approximately $6 million during 1998, totaling
$141 million at December 31, 1998, compared to $135 million at December 31,
1997. The maturities of time deposits of $100,000 or more issued by Farmers &
Merchants at December 31, 1998, are summarized in Table 7.
44
<PAGE>
<TABLE>
Table 7 - Maturities of Time Deposits Over $100,000
6/30/99 12/31/98 12/31/97
---------------------------------------------------
<S> <C> <C> <C>
Three months or less $ 4,512,000 $ 6,938,000 $ 7,609,000
Over three months through six months 2,343,000 3,609,000 2,502,000
Over six months through twelve months 7,254,000 2,584,000 5,856,000
Over twelve months 5,560,000 5,766,000 1,614,000
----------- ----------- -----------
Total $19,669,000 $18,897,000 $17,581,000
=========== =========== ===========
</TABLE>
Asset-Liability Management
A primary objective of Farmers & Merchants' asset and liability management
program is to control exposure to interest rate risk to enhance its earnings and
protect its net worth against potential loss resulting from interest rate
fluctuations. Interest rate risk is exposure to changes in net interest income
due to changes in market interest rates.
Table 8 provides information regarding the balances of interest-earning
assets and interest-bearing liabilities outstanding as of December 31, 1998,
that are expected to mature, prepay, or reprice in each of the future time
periods shown (i.e., the interest rate sensitivity). As presented in this
table, at December 31, 1998, the liabilities subject to rate changes within one
year exceeded its assets subject to rate changes within one year. This
mismatched condition subjects Farmers & Merchants to interest rate risk within
one-year period because Farmers & Merchants' liabilities, due to their generally
shorter term to maturity or to their repricing characteristics, are more
sensitive to short-term interest rate changes than its assets. Theoretically,
this position would result in a decrease in net interest income if market
interest rates rise and an increase in net interest income if market interest
rates decline. However, management's recent experience has shown that the
interest-bearing demand and savings deposits categories do not actually reprice
on an immediate basis as a result of a rise in market interest rates, and,
therefore net interest income could increase under these conditions.
Management carefully measures and monitors interest rate sensitivity and
believes that its operating strategies offer protection against interest rate
risk.
Management has maintained positive ratios of average interest-earning
assets to average interest-bearing liabilities. As represented in Table 1 this
ratio, based on average balances for the respective years, was 128.30% in 1998,
and 125.85% in 1997.
45
<PAGE>
<TABLE>
<CAPTION>
December 31, 1998
Maturing Or Repricing In
-------------------------------------------------
Table 8 - Interest Rate Sensitivity Analysis Over 1 Year
(Dollars in Thousands) 1 Year Through 5 Over 5
or Less Years Years Total
-------------------------------------------------
<S> <C> <C> <C> <C>
Interest-Earning Assets:
Adjustable rate mortgages $ 3,005 -- -- $ 3,005
Fixed rate mortgages 1,395 5,531 5,728 12,654
Other loans 3,518 -- -- 3,518
Investment securities 12,997 4,711 -- 17,708
Other investment -- -- -- --
Federal funds sold 4,893 -- -- 4,893
------- ------- ------ --------
Total interest-earning assets $25,808 $10,242 $5,728 $ 41,778
======= ======= ====== ========
Interest-Bearing Liabilities:
Fixed maturity deposits 53,849 8,684 -- 62,533
DDA accounts 36,490 -- -- 36,490
Passbook accounts 7,804 -- -- 7,804
Other borrowed funds -- -- -- --
FHLB advances 286 1,785 -- 2,071
------- ------- ------ --------
Total interest-bearing liabilities $98,429 $10,469 -- $108,898
======= ======= ====== ========
</TABLE>
Capital Resources and Dividends
Shareholders' equity increased 8.32% from December 31, 1997 to December 31,
1998. This growth resulted primarily from 1998 earnings. Dividends of
$1,065,600 or $1.48 per share were declared and paid in 1998, and dividends of
$1,123,200 or $1.56 per share were declared and paid in 1997.
Average shareholders' equity as a percent of total average assets is one
measure used to determine capital strength. The ratio of average shareholders'
equity to average total assets was 12.96% for 1998 and 12.41% for 1997. Table 9
summarizes these and other key ratios for Farmers & Merchants for each of the
last two years.
The Federal Deposit Insurance Corporation Improvement Act required federal
banking agencies to take "prompt corrective action" with regard to institutions
that do not meet minimum capital requirements. As a result, the federal banking
agencies introduced an additional capital measure called the "Tier 1 risk-based
capital ratio." The Tier 1 ratio is the ratio of core capital to risk adjusted
total assets. Farmers & Merchants exceeded all requirements to be a "well-
capitalized" institution at June 30, 1999.
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------
Table 9 - Equity Ratios
1998 1997
-------------------------------------
<S> <C> <C>
Return on average assets 1.60% 1.60%
Return on average equity 12.33% 12.90%
Dividend payout ratio 43.20% 42.61%
Average equity to average assets 12.96% 12.41%
</TABLE>
46
<PAGE>
Provision for Income Taxes
The provision for income taxes was $999,987 in 1998, versus $1,038,409 in
1997. The effective actual tax rates, tax provision as a percentage of income
before taxes for 1998 and 1997 were 27.78% and 29.34%, respectively.
Impact of Inflation and Changing Prices
The financial statements and related financial data presented in this
discussion have been prepared in accordance with generally accepted accounting
principles. These principles require the measurement of financial position and
operating results in terms of historical dollars without considering changes in
relative purchasing power over time due to inflation.
Unlike most industrial companies, virtually all of the assets and
liabilities of a financial institution are monetary in nature. As a result,
interest rates generally have a more significant impact on a financial
institution's performance than does the effect of inflation. The liquidity
maintenance of acceptable performance levels.
47
<PAGE>
FARMERS & MERCHANTS SECURITY OWNERSHIP
The following table sets forth certain information regarding the Farmers &
Merchants 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 Farmers
& Merchants common stock outstanding,
. each Farmers & Merchants director,
. the executive officers of Farmers & Merchants, and
. all Farmers & Merchants 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 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 on person may be deemed to be a
beneficial owner of the same securities.
<TABLE>
<CAPTION>
Percent of
Premier
Percent of Common Stock
Number of Common Following the
Name of Beneficial Owner Shares (1) Stock Merger
------------------------ ---------- ---------- -------------
<S> <C> <C> <C>
Norman E. Bryant 1,278 * *
Allen W. Eleam 30 * *
Robert L. Himes 150 * *
James R. Jackson III 327 * *
Bill M. Gilbert 607 * *
William E. Ellenburg, Jr. 130 * *
J. Scott Tucker 100 * *
J. Mack Robinson 391,102 54.3 5.1
Harriet J. Robinson as Trustee FBO
Jill E. Robinson 60,300 8.4 *
Harriet J. Robinson as Trustee FBO
Robin R. Howell 60,300 8.4 *
Delta Life Insurance Company 28,530 4.0 *
Harriet J. Robinson 12,315 1.7 *
Delta Fire Insurance Company 11,748 1.6 *
All Executive Officers and Directors
as a group 175,815 24.4 2.3
</TABLE>
________________
* Represents less than one percent of the shares outstanding.
(1) Includes shares as to which the named person shares voting power or
investment power, or both.
48
<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 Farmers & Merchants.
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.
Farmers & Merchants is a Georgia chartered commercial bank. As such, Farmers &
Merchants 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 such 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 July 1, 1997, national and state-chartered banks may branch
interstate through acquisitions of banks in other states.
49
<PAGE>
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.
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 such activity or control constitutes a
serious risk to the financial safety, soundness or stability of any bank
subsidiary of that bank holding company.
Farmers & Merchants, Premier Bank and Milton National Bank are members of
the FDIC. Consequently, the FDIC insures their deposits to the maximum extent
provided by law. Farmers & Merchants, Premier Bank and Milton National 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.
Farmers & Merchants and Premier Bank are subject to regulation,
supervision, and examination by the FDIC and the Georgia Department of Banking
and Finance. Milton National Bank is subject to regulation, supervision and
examination by the Office of the Comptroller of the Currency. The FDIC, the
Comptroller of the Currency, and the Georgia Department of Banking and Finance
regularly examine the operations of Farmers & Merchants, Premier Bank and Milton
National Bank and are given the authority to approve or disapprove mergers,
consolidations, the establishment of branches and similar corporate actions.
The FDIC, the Comptroller of the Currency and the Georgia Department of Banking
and Finance also have
50
<PAGE>
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. There are statutory and regulatory limitations on the payment of
dividends by Premier's subsidiary depository institutions, as well as by Premier
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 authority may require, after notice and hearing,
that such 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.
At June 30, 1999, under dividend restrictions imposed under federal and
state laws, without obtaining governmental approvals, Premier Bank could declare
aggregate dividends to Premier of approximately $_________ and Milton National
Bank could declare aggregate dividends to Premier of approximately $_________.
At June 30, 1999, Farmers & Merchants, without obtaining governmental approvals,
could declare dividends to its shareholders of approximately $_______.
The payment of dividends by Farmers & Merchants, Premier, Premier Bank and
Milton National 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, Farmers & Merchants and
Milton National Bank 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.
51
<PAGE>
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 June 30, 1999,
Premier's consolidated total risk-based capital ratio and its Tier 1 risk-based
capital ratio were 14.17% and 13.0% 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 certain
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 June 30, 1999 was 11.03%. 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.
Farmers & Merchants, Premier Bank and Milton National 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. Farmers & Merchants, Premier
Bank and Milton National Bank were in compliance with applicable minimum capital
requirements as of June 30, 1999. Neither Farmers & Merchants, Premier, Premier
Bank nor Milton National 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 additional restrictions 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 and
Milton National 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.
52
<PAGE>
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 and Milton National Bank are subject to
these cross-guarantee provisions. As a result, any loss the FDIC suffers with
respect to Premier Bank, Milton National Bank or Farmers & Merchants 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.
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
53
<PAGE>
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.
54
<PAGE>
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 June 30, 1999, Farmers & Merchants, Premier Bank and Milton National
Bank had the requisite capital levels to qualify as ''well capitalized.''
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
55
<PAGE>
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.
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 if it 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 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
the orders in judicial proceedings and to impose civil money penalties.
56
<PAGE>
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.
EXPERTS
Ernst & Young LLP, independent auditors, have audited Premier's
consolidated financial statements for the two years ended December 31, 1998,
included in Premier's 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
proxy statement/prospectus 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, 1998, as
set forth in their report, which is incorporated by reference in this proxy
statement/prospectus 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.
Read, Martin & Slickman, independent auditors, have audited the financial
statements of Farmers & Merchants at December 31, 1998 and 1997, and for each of
the two years in the period ended December 31, 1998, as set forth in their
report. Farmers & Merchants' financial statements are included in the proxy
statement/prospectus and elsewhere in the registration statement in reliance on
Read, Martin & Slickman's report, given on their authority as experts in
accounting and auditing.
57
<PAGE>
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.
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 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
Farmers & Merchants 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 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 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.
58
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
<S> <C>
Farmers & Merchants
Unaudited Financial Statements - June 30, 1999 and June 30, 1998.. F-1
Report of Certified Public Accountants....................... F-2
Balance Sheet................................................ F-3
Statements of Income......................................... F-4
Statement of Changes In Stockholders' Equity................. F-6
Financial Statements - December 31, 1998 and 1997................. F-7
Independent Auditor's Report................................. F-8
Balance Sheets............................................... F-9
Statements of Income......................................... F-10
Statements of Changes In Stockholders' Equity................ F-12
Statements of Cash Flows..................................... F-13
Notes to Financial Statements................................ F-15
</TABLE>
<PAGE>
FARMERS AND MERCHANTS BANK
FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30, 1999
F-1
<PAGE>
To the Board of Directors
Farmers and Merchants Bank
Summerville, Georgia
We have compiled the accompanying balance sheet of Farmers and
Merchants Bank (a corporation) as of June 30, 1999, and the related statement of
income and changes in stockholders' equity for the six months then ended, in
accordance with Statements on Standards for Accounting and Review Services
issued by the American Institute of Certified Public Accountants.
A compilation is limited to presenting in the form of financial
statements information that is the representation of management. We have not
audited or reviewed the accompanying financial statements and, accordingly, do
not express an opinion or any other form of assurance on them.
Management has elected to omit substantially all of the disclosures
and the statement of cash flows required by generally accepted accounting
principles. If the omitted disclosures and statement of cash flows were
included in the financial statements, they might influence the user's
conclusions about the Company's financial position, results of operations, and
cash flows. Accordingly, these financial statements are not designed for those
who are not informed about such matters.
Rome, Georgia
July 28, 1999
F-2
<PAGE>
FARMERS AND MERCHANTS BANK
SUMMERVILLE, GEORGIA
BALANCE SHEET
June 30, 1999
<TABLE>
<S> <C>
ASSETS
Cash and due from banks $ 3,458,708
Interest-bearing deposits with banks 40,512
Federal funds sold 5,062,032
Securities available-for-sale 86,739,083
Securities held-to-maturity 6,975,800
Loans, less allowance for loan losses of $1,121,919 70,212,417
Office buildings, equipment and automobiles, net 775,141
Other assets 4,113,392
------------
Total assets $177,377,085
============
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Noninterest-bearing demand $ 22,043,063
Interest-bearing demand 39,038,911
Savings 8,543,687
Time, $100,000 and over 64,512,189
Other time 18,753,000
Accrued interest and other liabilities 1,049,709
Borrowed funds 1,928,571
------------
Total liabilities
155,869,130
COMMITMENTS AND CONTINGENT LIABILITIES (Note 11) ------------
STOCKHOLDERS' EQUITY
Common stock, $5 par value; 2,000,000 shares authorized,
720,000 shares issued and outstanding 3,600,000
Capital surplus 7,600,000
Retained earnings 11,055,131
Unrealized loss on securities available-for-sale net
of deferred income tax (747,177)
------------
Total stockholders' equity $ 21,507,955
============
$177,377,085
============
</TABLE>
SEE ACCOUNTANT'S COMPILATION REPORT
F-3
<PAGE>
FARMERS AND MERCHANTS BANK
STATEMENT OF INCOME
Six Months Ended June 30, 1999
F-4
<TABLE>
<S> <C>
Interest income:
Interest and fees on loans $3,340,822
Securities held-to-maturity 185,123
Securities available-for-sale 2,459,485
Interest on federal funds sold 131,100
----------
6,116,530
----------
Interest expense:
Interest-bearing demand 73,247
Time deposits 2,056,539
Other time deposits 537,169
Borrowed funds 52,095
----------
Interest on deposits 2,719,050
----------
Net interest income 3,397,480
Provision for loan losses --
----------
Net interest income after provision for loan losses 3,397,480
----------
Other income:
Service charges on deposits 297,726
Other service charges, commissions and fees 101,194
Gain on disposal of equipment 815
----------
399,735
----------
Other expenses:
Salaries and employee benefits 972,119
Occupancy expense 93,249
Other operating expenses 895,424
----------
1,960,792
----------
</TABLE>
SEE ACCOUNTANT'S COMPILATION REPORT
F-4
<PAGE>
FARMERS AND MERCHANTS BANK
STATEMENT OF INCOME
Six Months Ended June 30, 1999
<TABLE>
<S> <C>
Income before provision for income taxes $ 1,836,423
Provision for income taxes 513,664
-----------
Net income $ 1,322,759
===========
Per share of common stock:
Net income $ 1.84
===========
</TABLE>
SEE ACCOUNTANT'S COMPILATION REPORT
F-5
<PAGE>
FARMERS AND MERCHANTS BANK
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
Six Months Ended June 30, 1999
COMMON STOCK
<TABLE>
<CAPTION>
Net
Unrealized
Gain (Loss) on
Available-
Capital Retained for-Sale
Shares Par Value Surplus Earnings Securities
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1999 720,000 $3,600,000 $7,600,000 $10,293,972 $ 440,788
Net income -- -- -- 1,322,759 --
Net unrealized loss on --
available-for-sale securities -- -- -- (1,187,964)
--
Cash dividends declared, $.39 per share -- -- (561,600) --
------- ---------- ---------- ----------- ----------
Balance, June 30, 1999 720,000 $3,600,000 $7,600,000 $11,055,131 $ (747,176)
======= ========== ========== =========== ==========
<CAPTION>
Total
<S> <C>
Balance, January 1, 1999 $21,934,760
Net income 1,322,759
Net unrealized loss on (1,187,964)
available-for-sale securities
(561,600)
Cash dividends declared, $.39 per share -----------
Balance, June 30, 1999 $21,507,955
===========
</TABLE>
SEE ACCOUNTANT'S COMPILATION REPORT
F-6
<PAGE>
FARMERS AND MERCHANTS BANK
FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998 AND 1997
F-7
<PAGE>
INDEPENDENT AUDITOR'S REPORT
The Board of Directors
Farmers and Merchants Bank
Summerville, Georgia
We have audited the accompanying balance sheets of the Farmers and
Merchants Bank as of December 31, 1998 and 1997, and the related statements of
income, changes in 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 the Farmers and
Merchants Bank 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.
Rome, Georgia
January 29, 1999
F-8
<PAGE>
FARMERS AND MERCHANTS BANK
SUMMERVILLE, GEORGIA
BALANCE SHEETS
December 31, 1998 and 1997
<TABLE>
<CAPTION>
ASSETS 1998 1997
<S> <C> <C>
Cash and due from banks $ 5,221,066 $ 6,236,273
Interest-bearing deposits with banks 45,859 39,978
Federal funds sold 2,333,974 1,976,177
Securities available-for-sale (Note 2) 82,194,004 69,550,784
Securities held-to-maturity (Note 2) 7,514,739 10,361,143
Loans, less allowance for loan losses
of $1,069,086 and $1,059,347, respectively (Note 3) 65,467,394 68,183,763
Office buildings, equipment and automobiles (Note 4) 739,134 865,801
Other assets 2,464,877 2,247,405
------------ ------------
Total assets
$165,981,047 $159,461,324
LIABILITIES AND STOCKHOLDERS' EQUITY ============ ============
Deposits:
Noninterest-bearing demand $ 20,145,924 $ 18,240,399
Interest-bearing demand 31,092,144 31,642,952
Savings 7,739,003 7,277,236
Time, $100,000 and over (Note 5) 18,007,971 16,952,269
Other time 63,563,100 61,293,420
Accrued interest and other liabilities (Note 9) 1,426,716 1,447,752
Borrowed funds 2,071,429 2,357,143
------------ ------------
Total liabilities $144,046,287 $139,211,171
============ ============
COMMITMENTS AND CONTINGENT LIABILITIES (Note 11)
STOCKHOLDERS' EQUITY
Common stock, $5 par value; 2,000,000 shares authorized,
720,000 shares issued and outstanding 3,600,000 3,600,000
Capital surplus 7,600,000 7,600,000
Retained earnings 10,293,972 8,816,904
Unrealized gain on securities available-for-sale net of deferred
income tax of $227,072 and $120,158 440,788 233,249
------------ ------------
Total stockholders' equity 21,934,760 20,250,153
------------ ------------
$165,981,047 $159,461,324
============ ============
</TABLE>
The Notes to Financial Statements are an integral part of these
statements.
F-9
<PAGE>
FARMERS AND MERCHANTS BANK
STATEMENTS OF INCOME
Years Ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Interest income:
Interest and fees on loans $ 6,899,527 $ 6,895,852
Securities held-to-maturity 471,344 572,322
Securities available-for-sale 4,605,955 4,003,956
Interest on federal funds sold 287,714 368,319
----------- -----------
12,264,620 11,840,449
----------- -----------
Interest expense:
Interest-bearing demand 151,964 160,967
Time deposits 4,462,352 4,097,993
Other time deposits 1,104,280 955,646
Borrowed funds 115,603 184,867
----------- -----------
Interest on deposits 5,834,199 5,399,473
----------- -----------
Net interest income 6,430,421 6,440,976
Provision for loan losses -- 75,000
----------- -----------
Net interest income after provision for loan losses 6,430,421 6,365,976
----------- -----------
Other income:
Service charges on deposits 600,376 568,552
Other service charges, commissions and fees 184,232 173,854
Gain on sale of investment securities -- 5,341
Gain (loss) on disposal of equipment (766) 1,267
----------- -----------
783,842 749,014
----------- -----------
Other expenses:
Salaries and employee benefits 1,885,312 1,785,523
Occupancy expense 190,205 240,484
Other operating expenses 1,538,491 1,549,511
----------- -----------
3,614,008 3,575,518
----------- -----------
</TABLE>
The Notes to Financial Statements are an integral part of these
statements.
F-10
<PAGE>
FARMERS AND MERCHANTS BANK
STATEMENTS OF INCOME
Years Ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Income before provision for income taxes $3,600,255 $3,539,472
Provision for income taxes (Note 10) 999,987 1,038,409
---------- ----------
Net income $2,600,268 $2,501,063
========== ==========
Per share of common stock:
Net income $ 3.61 $ 3.47
========== ==========
</TABLE>
The Notes to Financial Statements are an integral part of these statements.
F-11
<PAGE>
FARMERS AND MERCHANTS BANK
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Years Ended December 31, 1998 and 1997
COMMON STOCK
<TABLE>
Net
Unrealized
Gain on
Available-
Capital Retained for-Sale
Shares Par Value Surplus Earnings Securities Total
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1997 480,000 $2,400,000 $7,600,000 $ 8,581,442 $(52,701) $18,528,741
Net income -- -- -- 2,501,062 -- 2,501,062
Stock dividend 240,000 1,200,000 -- (1,200,000) -- --
Net unrealized loss on available-for-sale
securities, net of tax expense of $147,353 -- -- -- -- 285,950 285,950
Cash dividends declared, $1.48 per share -- -- -- (1,065,600) -- (1,065,600)
------- ---------- ---------- ----------- --------- -----------
Balance, December 31, 1997 720,000 3,600,000 7,600,000 8,816,904 233,249 20,250,153
Net income -- -- -- 2,600,268 -- 2,600,268
Net unrealized gain on available-for-sale
securities, net of tax expense of $106,914 -- -- -- -- 207,539 207,539
Cash dividends declared, $1.56 per share -- -- -- (1,123,200) -- (1,123,200)
------- ---------- ---------- ----------- --------- -----------
Balance, December 31, 1998 720,000 $3,600,000 $7,600,000 $10,293,972 $440,788 $21,934,760
======= ========== ========== =========== ======== ===========
</TABLE>
The Notes to Financial Statements are an integral part of these statements.
F-12
<PAGE>
FARMERS AND MERCHANTS BANK
STATEMENTS OF CASH FLOWS
Years Ended December 31, 1998 and 1997
<TABLE>
<S> <C> <C>
1998 1997
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 2,600,268 $ 2,501,063
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 191,181 201,436
(Gain) loss on sale of investments -- --
(Gain) loss on disposal of equipment 766 (5,341)
Increase (decrease) in allowance for loan losses 9,739 18,015
(Increase) decrease in other assets (217,472) 296,724
Increase (decrease) in accrued
interest and other liabilities (127,950) 164,769
------------ ------------
Net cash provided by operating activities 2,456,532 3,176,666
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of investment securities 29,364,978 26,604,612
Purchase of held-to-maturity securities -- (661,300)
Purchase of available-for-sale securities (38,847,342) (30,902,161)
(Increase) decrease in loans 2,706,630 179,028
Disposals of equipment (766) 1,038
Purchase of equipment (64,513) (219,296)
------------ ------------
Net cash used in investing activities (6,841,013) (4,998,079)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on borrowed funds (285,714) (1,785,714)
Net increase (decrease) in deposits 5,141,866 6,116,876
Dividends paid (1,123,200) (1,065,600)
------------ ------------
Net cash provided by financing activities 3,732,952 3,265,562
------------ ------------
NET INCREASE (DECREASE) IN CASH, DUE
FROM BANKS AND FEDERAL FUNDS SOLD (651,529) 1,444,149
CASH, DUE FROM BANKS AND FEDERAL
FUNDS SOLD AT BEGINNING OF YEAR 8,252,428 6,808,279
------------ ------------
CASH, DUE FROM BANKS AND FEDERAL
FUNDS SOLD AT END OF YEAR $ 7,600,899 $ 8,252,428
============ ============
</TABLE>
The Notes to Financial Statements are an integral part of these statements.
F-13
<PAGE>
FARMERS AND MERCHANTS BANK
STATEMENTS OF CASH FLOWS
Years Ended December 31, 1998 and 1997
<TABLE>
<S> <C> <C>
1998 1997
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the period for:
Interest $5,890,174 $5,301,498
Income taxes $1,163,478 $ 967,286
</TABLE>
The Notes to Financial Statements are an integral part of these statements.
F-14
<PAGE>
FARMERS AND MERCHANTS BANK
NOTES TO FINANCIAL STATEMENTS
Years Ended December 31, 1998 and 1997
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES
The Bank provides commercial and public services throughout the greater
Northwest Georgia Region. These include the accepting of time and
demand deposits, granting various types of credit and loans and various
other financial services.
Cash equivalents:
For purposes of reporting cash flows, cash and cash equivalents include
cash on hand, amounts due from banks and federal funds sold with an
original maturity of three months or less.
Securities held-to-maturity:
Securities held-to-maturity are those securities which the Bank has the
intent and the ability to hold until maturity. These securities are
stated at cost, adjusted for amortization of premiums and accretion of
discounts. Gains or losses on disposition are based on the net
proceeds and the adjusted carrying amount of the securities sold, using
the specific identification method.
Securities available-for-sale:
Available-for-sale securities consist of bonds, notes, debentures, and
certain equity securities not classified as trading securities nor as
held-to-maturity securities. Unrealized holding gains and losses, net
of tax, on available-for-sale securities are reported as a net amount
in a separate component of shareholders' equity until realized. Gains
and losses on the sale of available-for-sale securities are determined
using the specific-identification method. Premiums and discounts are
recognized in interest income using the interest method over the period
to maturity.
F-15
<PAGE>
FARMERS AND MERCHANTS BANK
NOTES TO FINANCIAL STATEMENTS
Years Ended December 31, 1998 and 1997
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Loans receivable:
Loans receivable that management has the intent and ability to hold for
the foreseeable future or until maturity or pay-off are reported at
their outstanding principal adjusted for any charge-offs, the allowance
for loan losses, and any deferred fees or costs on originated loans and
unamortized premiums or discounts on purchased loans.
Discounts and premiums on purchased residential real estate loans are
amortized to income using the interest method over the remaining period
to contractual maturity, adjusted for anticipated prepayments.
Loan origination fees and certain direct origination costs are
capitalized and recognized as an adjustment of the yield of the related
loan.
The accrual of interest on impaired loans is discontinued when, in
management's opinion, the borrower may be unable to meet payments as
they become due. When interest accrual is discontinued, all unpaid
accrued interest is reversed. Interest income is subsequently
recognized only to the extent cash payments are received.
The allowance for loan losses is increased by charges to income and
decreased by charge-offs (net of recoveries). Management's periodic
evaluation of the adequacy of the allowance is based on the Bank's past
loan loss experience, known and inherent risks in the portfolio,
adverse situations that may affect the borrower's ability to repay, the
estimated value of any underlying collateral, and current economic
conditions.
Premises and equipment:
Land is carried at cost. Bank premises, furniture and equipment are
carried at cost, less accumulated depreciation. Depreciation is
computed using accelerated and straight-line methods over the estimated
useful lives of the assets.
F-16
<PAGE>
FARMERS AND MERCHANTS BANK
NOTES TO FINANCIAL STATEMENTS
Years Ended December 31, 1998 and 1997
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Other real estate owned:
Included in other assets is real estate properties acquired through
loan foreclosure which are initially recorded at fair value at the date
of foreclosure establishing a new cost basis. After foreclosure, the
real estate is carried at the lower of carrying amount or fair value
less cost to sale. Revenue and expenses from operations and changes in
the valuation allowance are included in the loss of foreclosed real
estate.
Income taxes:
Deferred tax assets and liabilities are reflected at currently enacted
income tax rates applicable to the period in which the deferred tax
assets or liabilities are expected to be realized or settled. As
changes in tax laws or rates are enacted, deferred tax assets and
liabilities are adjusted through the provision for income taxes.
Fair values of financial instruments:
The following methods and assumptions were used by the Bank in
estimating fair values of financial instruments as disclosed herein:
Cash and due from banks and interest bearing deposits with other
banks
Fair value equals the carrying value of such assets.
Investment securities and investment securities available-for-sale
Fair values for investment securities are based on bond accounting
report.
Federal funds sold and securities purchased under agreements to
resell
Due to the short-term nature of these assets, the carrying values of
these assets approximate their fair value.
F-17
<PAGE>
FARMERS AND MERCHANTS BANK
NOTES TO FINANCIAL STATEMENTS
Years Ended December 31, 1998 and 1997
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Fair values of financial instruments: (Continued)
Loans
For variable-rate loans, those repricing within six months or less,
fair values were based on carrying values. Fixed rate commercial
loans, other installment loans, and certain real estate mortgage
loans were valued using discounted cash flows. The discount rates
used to determine the present value of these loans were based on
interest rates currently being charged by your bank on comparable
loans as to credit risk and term.
Off-balance sheet instruments
Loan commitments are negotiated at current market rates and are
relatively short-term in nature. Therefore, the estimated value of
loan commitments approximates the carrying amount, which are based
on fees charged.
Deposit liabilities
The fair values of demand deposits are, as required by FAS107, equal
to the carrying value of such deposits. Demand deposits include
noninterest bearing demand deposits, savings accounts, NOW accounts,
and money market demand accounts. Discounted cash flows have been
used to value fixed rate term deposits. The discount rate is based
on interest rates currently being offered by your bank on comparable
deposits as to amount and term.
Short-term borrowings
The carrying value of federal funds purchased, securities sold under
agreements to repurchase and other short-term borrowings
approximates their carrying values.
FHLB and other borrowings
The fair value of fixed rate borrowings are estimated using
discounted cash flows, based on current incremental borrowing rates
for similar types of borrowing arrangements. The carrying amount on
variable rate borrowings approximate their fair value.
F-18
<PAGE>
FARMERS AND MERCHANTS BANK
NOTES TO FINANCIAL STATEMENTS
Years Ended December 31, 1998 and 1997
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Concentration of credit risk:
The Bank primarily grants installment, commercial and real estate loans
to customers in Chattooga County. Although the Bank has a diversified
loan portfolio, a substantial portion of its debtors' ability to honor
their commitments is dependent upon the Chattooga County economy.
Earnings per share:
Earnings per share are calculated on the basis of the weighted average
number of shares outstanding.
Reclassifications:
Certain reclassifications of 1997 amounts have been made to conform to
those classifications adopted in 1998.
NOTE 2. INVESTMENT SECURITIES
Investment securities have been classified in the statements according
to management's intent.
F-19
<PAGE>
FARMERS AND MERCHANTS BANK
NOTES TO FINANCIAL STATEMENT
December 31, 1998
NOTE 2. INVESTMENT SECURITIES (Continued)
The carrying amount of securities and approximate fair values at
December 31 were as follows:
<TABLE>
<CAPTION>
Estimated
Available-for-Sale Amortized Cost Market Value
<S> <C> <C>
December 31, 1998
U.S. Treasury securities $ 3,752,597 $ 3,782,970
Obligations of other U.S. government agencies and
corporations 67,910,635 68,290,866
Obligations of states and political subdivisions 9,825,482 10,081,204
Other securities 37,431 38,964
----------- -----------
$81,526,145 $82,194,004
=========== ===========
December 31, 1997
U.S. Treasury securities $ 6,700,149 $ 6,733,810
Obligations of other U.S. government agencies and
corporations 56,074,697 56,265,364
Obligations of states and political subdivisions 6,364,142 6,492,315
Other securities 58,389 59,295
----------- -----------
$69,197,377 $69,550,784
=========== ===========
Held-to-Maturity
December 31, 1998
Obligations of other U.S. government agencies and
corporations $ 752,010 $ 756,502
Obligations of states and political subdivisions 6,090,792 6,377,522
FHLB stock (restricted asset) 650,200 650,200
Other securities 21,737 21,667
----------- -----------
$ 7,514,739 $ 7,805,891
=========== ===========
December 31, 1997
Obligations of other U.S. government agencies and
corporations $ 2,983,310 $ 2,988,753
Obligations of states and political subdivisions 6,685,182 6,936,468
FHLB stock (restricted asset) 650,200 650,200
Other securities 42,451 42,146
----------- -----------
$10,361,143 $10,617,567
=========== ===========
</TABLE>
F-20
<PAGE>
FARMERS AND MERCHANTS BANK
NOTES TO FINANCIAL STATEMENT
December 31, 1998
NOTE 2. INVESTMENT SECURITIES (Continued)
The schedule maturities of securities held-to-maturity excluding
restricted assets and securities available-for-sale at December 31,
1998, were as follows:
<TABLE>
<CAPTION>
Held-to-Maturity Available-for-Sale
Amortized Fair Amortized Fair
Cost Value Cost Value
<S> <C> <C> <C> <C>
Due in one year or less $ 261,814 $ 270,313 $24,517,964 $24,633,772
Due from one year to five years 2,613,411 2,687,310 31,137,912 31,369,713
Due from five years to fifteen years 3,989,314 4,198,068 20,366,091 20,605,563
Due after fifteen years -- -- 5,504,178 5,584,956
---------- ---------- ----------- -----------
$6,864,539 $7,155,691 $81,526,145 $82,194,004
========== ========== =========== ===========
</TABLE>
In 1998, the Bank had an increase in unrealized gains of $314,452 and
have adjusted equity for the after tax effect of such gains by
$207,539. Assets, principally securities, carried at approximately
$34,093,394 at December 31, 1998 and $23,616,577 at December 31, 1997
were pledged to secure public deposits and for other purposes required
or permitted by law.
F-21
<PAGE>
FARMERS AND MERCHANTS BANK
NOTES TO FINANCIAL STATEMENTS
Years Ended December 31, 1998 and 1997
NOTE 3. LOANS AND ALLOWANCE FOR LOAN LOSSES
The composition of loans as of December 31, 1998 and 1997 are
summarized as follows:
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Commercial $10,744,181 $11,588,464
Mortgage 29,602,095 31,103,970
Installment 27,784,115 28,235,506
Other 20,394 49,911
----------- -----------
68,150,785 70,977,851
Unearned interest (1,614,305) (1,734,741)
----------- -----------
66,536,480 69,243,110
Allowance for loan losses (1,069,086) (1,059,347)
----------- -----------
Loans, net $65,467,394 $68,183,763
=========== ===========
</TABLE>
Loans on which the accrual of interest has been discontinued or reduced
amounted to $1,874 and $8,717 at December 31, 1998 and 1997,
respectively.
Unamortized deferred loan fees were $12,554 and $15,042 for the years
ended December 31, 1998 and 1997.
Changes in the allowance for loan losses for the years ended December
31, 1998 and 1997 are as follows:
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Balance, beginning of year $1,059,347 $1,041,332
Provision charged to operations -- 75,000
Loans charged off (152,580) (196,252)
Recoveries 162,319 139,267
---------- ----------
Balance, end of year $1,069,086 $1,059,347
========== ==========
</TABLE>
F-22
<PAGE>
FARMERS AND MERCHANTS BANK
NOTES TO FINANCIAL STATEMENTS
Years Ended December 31, 1998 and 1997
NOTE 4. OFFICE BUILDINGS, EQUIPMENT AND AUTOMOBILES
Major classifications of these assets as of December 31, 1998 and 1997
are summarized as follows:
1998 1997
Land $ 235,810 $ 235,810
Buildings 1,337,348 1,337,348
Furniture, fixtures and equipment 1,528,924 1,485,918
Automobiles 63,708 53,704
---------- ----------
3,165,785 3,112,780
Accumulated depreciation
and amortization 2,426,651 2,246,979
---------- ----------
$ 739,134 $ 865,801
========== ==========
Depreciation expense was $191,181 in 1998 and $201,436 in 1997.
NOTE 5. DEPOSITS
The aggregate amount of jumbo CDs, each with a minimum denomination of
$100,000, was approximately $18,007,971 and $16,952,269 in 1998 and
1997, respectively.
At December 31, 1998, the scheduled maturities of CDs are as follows:
1999 $10,314,894
2000 5,726,436
2001 1,966,641
-----------
$18,007,971
===========
F-23
<PAGE>
FARMERS AND MERCHANTS BANK
NOTES TO FINANCIAL STATEMENTS
Years Ended December 31, 1998 and 1997
NOTE 6. LOANS TO RELATED PARTIES
Loans to related parties include loans made to directors, executive
officers and their associates, as defined.
The aggregate dollar amount of these loans was $795,676 and $1,841,658
at December 31, 1998 and 1997, respectively.
NOTE 7. FUNDS AVAILABLE FOR DIVIDENDS
The Bank is restricted under applicable banking laws in the payment of
cash dividends. Such laws generally restrict cash dividend payments if
total paid-in capital and appropriated retained earnings do not exceed
twenty percent of its capital stock. The Bank met this requirement at
December 31, 1998 and 1997.
NOTE 8. PROFIT SHARING PLAN
The Bank has a profit sharing plan that covers employees age 21 and
over with more than one year service. Contributions to the plan are at
the discretion of the Board of Directors. The Bank's contributions were
$57,053 and $55,939 for December 31, 1998 and 1997, respectively.
NOTE 9. PENSION PLAN
The Bank sponsors a defined benefit pension plan that covers
substantially all employees meeting age and service requirements. The
plan calls for benefits to be paid to eligible employees at retirement
based primarily upon years of service with the Bank and compensation
rates near retirement.
Contributions to the plan reflect benefits attributed to employees'
services to date, as well as services expected to be earned in the
future. During 1998, the Bank contributed $61,263 to the Plan. Plan
assets consist primarily of common and preferred stock, investment-
grade corporate bonds and U.S. government obligations.
F-24
<PAGE>
FARMERS AND MERCHANTS BANK
NOTES TO FINANCIAL STATEMENTS
Years Ended December 31, 1998 and 1997
NOTE 9. PENSION PLAN (Continued)
<TABLE>
<S> <C>
Pension expense for 1998 includes the following components:
Service cost of the current period $ 71,909
Interest cost on the projected benefit obligation 96,362
Actual return on assets held in the plan (157,842)
Amortization of prior service cost and net transition amount 32,868
----------
Pension expense $ 43,297
==========
</TABLE>
The following sets forth the funded status of the plan and amounts
shown in the accompanying balance sheet at December 31, 1998:
<TABLE>
<S> <C>
Actuarial present value of benefit obligations:
Vested benefits $1,361,504
Nonvested benefits 5,769
----------
Accumulated benefit obligation 1,367,273
Effect of anticipated future compensation
levels and other events 114,148
----------
Projected benefit obligation 1,481,421
Fair value of assets held in the plan 1,680,129
----------
Excess of plan assets over projected benefit obligation $ (198,708)
==========
The excess consists of the following:
Unamortized prior service cost $ 110,103
Net unrecognized gain from past
experience different than assumed (75,514)
Unamortized net assets at transition (24,419)
Prepaid pension cost included in the balance sheet (208,878)
----------
$ (198,708)
==========
</TABLE>
The weighted average discount rate used to measure the projected
benefit obligation is 7.00%, the rate of increase in future
compensation levels is 5.00%, and the expected long-term rate of return
on assets is 7.00%. The Bank uses the straight-line method of
amortization for prior service cost and unrecognized gains and losses.
F-25
<PAGE>
FARMERS AND MERCHANTS BANK
NOTES TO FINANCIAL STATEMENTS
Years Ended December 31, 1998 and 1997
NOTE 10. INCOME TAXES
Income tax expense for the years ended December 31, is summarized as
follows:
1998 1997
Current $999,987 $1,050,621
Deferred -- (12,211)
-------- ----------
$999,987 $1,038,410
======== ==========
Deferred taxes are provided for based on the timing differences between
financial statement and tax basis of assets and liabilities.
The principal reasons for the timing differences at December 31, are as
follows:
1998 1997
Expected income tax at federal tax rate $1,224,087 $1,211,724
Increase (decrease) resulting from:
Deferred taxes -- (12,211)
Statutory bad debt deduction -- (13,289)
Provision for loan losses per books -- 25,500
Depreciation methods (15,228) (7,678)
Tax exempt interest (306,575) (271,157)
Interest expense limitation 33,753 30,299
Other 63,950 75,221
---------- ----------
Current income tax provision $ 999,987 $1,038,409
========== ==========
F-26
<PAGE>
FARMERS AND MERCHANTS BANK
NOTES TO FINANCIAL STATEMENTS
Years Ended December 31, 1998 and 1997
NOTE 10. INCOME TAXES (Continued)
The following summarizes the source and expected tax consequences of
future taxable deductions or future income which comprise the deferred
tax asset or the deferred tax liability. The asset is included in the
line item "other assets" on the balance sheet. The liability is
included in the line item "accrued interest and other liabilities" on
the balance sheet.
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Deferred tax asset (liability):
Difference in recognition of unrealized
gain or loss of investment securities $ (227,072) $ (120,158)
Difference between financial statement and
tax bad debt deduction 294,236 294,236
----------- -----------
67,164 174,078
Less: Reserve for difference between
financial statement and tax bad debt
deduction 294,236 294,236
----------- -----------
Deferred tax asset (liability)
$ (227,072) $ (120,158)
=========== ===========
</TABLE>
NOTE 11. COMMITMENTS AND CONTINGENCIES
In the normal course of business, the Bank makes various commitments
and incurs certain contingent liabilities that are not presented in the
accompanying financial statements. The commitments and contingent
liabilities include various guarantees, commitments to extend credit,
standby letters of credit, and disparate matters of litigation, which
management believes a settlement, if any will not have material effect
on the financial condition of the Bank.
F-27
<PAGE>
FARMERS AND MERCHANTS BANK
NOTES TO FINANCIAL STATEMENTS
Years Ended December 31, 1998 and 1997
NOTE 12. FINANCIAL INSTRUMENTS
The Bank is a party to financial instruments with off-balance-sheet
risk in the normal course of business to meet the financing needs of
its customers and to reduce its own exposure to fluctuations in
interest rates. These financial instruments include commitments to
extend credit, standby letters of credit and financial guarantees.
Those instruments involve, to varying degrees, elements of credit and
interest-rate risk in excess of the amount recognized in the
consolidated statements of financial condition. The contract amount of
those instruments reflect the extent of the Bank's involvement in
particular classes of financial instruments.
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, standby letters of credit, and financial guarantees written is
represented by the contractual amount of those instruments. The Bank
uses the same credit policies in making commitments and conditional
obligations as it does for on-balance-sheet instruments. Unless noted
otherwise, the Bank does not require collateral or other security to
support financial instruments with credit risk.
Commitments to extend credit are agreements to lend to a customer as
long as there is no violation of any condition established in the
contract. Commitments generally have fixed expiration dates or other
termination clauses and may require a 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.
Standby letters of credit and financial guarantees written 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, including
commercial paper, bond financing and similar transactions.
F-28
<PAGE>
FARMERS AND MERCHANTS BANK
NOTES TO FINANCIAL STATEMENTS
Years Ended December 31, 1998 and 1997
NOTE 12. FINANCIAL INSTRUMENTS (Continued)
The estimated fair values of the Bank's financial instruments at
December 31, 1998 were as follows:
<TABLE>
<CAPTION>
Carrying Fair
Amount Value
<S> <C> <C>
Financial assets:
Cash and due from banks, interest bearing
deposits with banks, and federal funds sold $ 7,600,899 $ 7,600,899
Securities available-for-sale 82,194,004 82,194,004
Securities held-to-maturity 7,514,739 7,805,891
Loans receivable 66,536,480 67,676,000
Financial liabilities:
Deposit liabilities 140,548,142 141,064,000
Off-balance-sheet assets (liabilities):
Commitments to extend credit -- 9,382,197
Standby letters of credit -- --
</TABLE>
The estimated fair values of the Bank's financial instruments at
December 31, 1997 were as follows:
<TABLE>
<CAPTION>
Carrying Fair
Amount Value
<S> <C> <C>
Financial assets:
Cash and due from banks, interest- bearing
deposits with banks, and federal funds sold $ 8,252,428 $ 8,252,428
Securities available-for-sale 69,550,784 69,550,784
Securities held-to-maturity 10,361,143 10,617,567
Loans receivable 69,243,110 69,325,000
Financial liabilities:
Deposit liabilities 135,406,276 135,411,000
Off-balance-sheet assets (liabilities):
Commitments to extend credit -- 8,862,216
Standby letters of credit -- --
</TABLE>
F-29
<PAGE>
APPENDIX A
AGREEMENT AND PLAN OF REORGANIZATION
BY AND BETWEEN
PREMIER BANCSHARES, INC.,
PMB ACQUISITION CORP.
AND
FARMERS & MERCHANTS BANK
Dated as of April 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
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................................ 4
Shares Held By Farmers or Premier....................... 4
Fractional Shares....................................... 4
ARTICLE IV
- ----------
EXCHANGE OF SHARES...................................... 5
------------------
Exchange Procedures..................................... 5
Rights of Former Farmers Shareholders................... 5
ARTICLE V
- ---------
REPRESENTATIONS AND WARRANTIES OF FARMERS............... 6
------------------------------------------
Organization, Standing, and Power....................... 6
Authority; No Breach By Agreement....................... 6
Capital Stock........................................... 7
Farmers Subsidiaries.................................... 7
Financial Statements.................................... 7
Absence of Undisclosed Liabilities...................... 8
Absence of Certain Changes or Events.................... 8
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
Tax Matters............................................. 8
Allowance for Possible Loan Losses...................... 9
Assets.................................................. 9
Environmental Matters................................... 10
Compliance with Laws.................................... 10
Labor Relations......................................... 11
Employee Benefit Plans.................................. 11
Material Contracts...................................... 13
Legal Proceedings....................................... 13
Reports................................................. 13
Statements True and Correct............................. 13
Accounting, Tax and Regulatory Matters.................. 14
Charter Provisions...................................... 14
Millennium Compliance................................... 14
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF PREMIER AND PMB....... 15
-------------------------------------------------
Organization, Standing, and Power....................... 15
Authority; No Breach By Agreement....................... 15
Capital Stock........................................... 16
Financial Statements.................................... 17
Absence of Undisclosed Liabilities...................... 17
Absence of Certain Changes or Events.................... 17
Compliance with Laws.................................... 17
Legal Proceedings....................................... 18
Statements True and Correct............................. 18
Accounting, Tax and Regulatory Matters.................. 19
Premier Subsidiaries.................................... 19
Reports................................................. 20
Millennium Compliance................................... 20
ARTICLE VII
CONDUCT OF BUSINESS PENDING CONSUMMATION................ 20
----------------------------------------
Affirmative Covenants of Farmers........................ 20
Negative Covenants of Farmers........................... 21
Affirmative Covenants of Premier........................ 22
Adverse Changes in Condition............................ 23
Reports................................................. 23
ARTICLE VIII
ADDITIONAL AGREEMENTS................................... 23
---------------------
Registration Statement; Proxy Statement; Shareholder
Approval.......................................... 23
Exchange Listing........................................ 24
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
Applications............................................ 24
Agreement as to Efforts to Consummate................... 24
Investigation and Confidentiality....................... 24
Press Releases.......................................... 25
Acquisition Proposals................................... 25
Accounting and Tax Treatment............................ 25
Agreement of Affiliates................................. 26
Employee Benefits and Contracts......................... 26
Other Acquisitions, Mergers, or Combinations
involving a Premier Company....................... 26
ARTICLE IX
CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE....... 27
-------------------------------------------------
Conditions to Obligations of Each Party................. 27
Conditions to Obligations of Premier.................... 28
Conditions to Obligations of Farmers.................... 29
ARTICLE X
TERMINATION............................................. 31
-----------
Termination............................................. 31
Effect of Termination................................... 32
Non-Survival of Representations and Covenants........... 32
ARTICLE XI
MISCELLANEOUS........................................... 32
-------------
Definitions............................................. 32
Expenses................................................ 39
Brokers and Finders..................................... 40
Entire Agreement........................................ 40
Amendments.............................................. 40
Waivers................................................. 40
Assignment.............................................. 41
Notices................................................. 41
Governing Law........................................... 42
Counterparts............................................ 42
Captions................................................ 42
Enforcement of Agreement................................ 43
Severability............................................ 43
</TABLE>
iii
<PAGE>
LIST OF EXHIBITS
- ----------------
Exhibit Number Description
- -------------- -----------
1. Form of Agreement of Affiliates of Farmers. (Section 8.9).
2. Matters as to which Counsel for Farmers 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)).
iv
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
------------------------------------
THIS AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is made and
entered into as of April 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. ("PMB"), a corporation organized and existing under the laws of the State
of Georgia and a wholly owned subsidiary of Premier; and FARMERS & MERCHANTS
BANK ("Farmers"), a commercial bank organized and existing under the laws of the
State of Georgia, with its principal office located in Summerville, Georgia.
Preamble
--------
The Boards of Directors of Farmers 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 Farmers
by Premier pursuant to the merger (the "Merger") of PMB with and into Farmers,
and following the merger Farmers will become a wholly-owned subsidiary of
Premier. At the effective time of the Merger, the outstanding shares of the
common stock of Farmers shall be converted into the right to receive shares of
the common stock of Premier. As a result, shareholders of Farmers will become
shareholders of Premier. The transactions described in this Agreement are
subject to the approvals of the Boards of Directors of Farmers, Premier and PMB,
the shareholders of Farmers 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.
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 Farmers 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. Farmers 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 Farmers, 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 Farmers
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.
ARTICLE II
----------
TERMS OF MERGER
---------------
2.1 Name. The name of the Surviving Bank resulting from the Merger
----
shall be "Farmers & Merchants Bank" or any other legally permissible name as
Premier may in its sole discretion select.
2.2 Articles of Incorporation. The Articles of Incorporation of Farmers
-------------------------
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 Farmers 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 Farmers 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 Farmers 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 Summerville, 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 Farmers in
and to every type of property (real, personal, and mixed), and all choses in
action of both PMB and Farmers 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 Farmers at the Effective Time.
2.7 Assumption of Liabilities. All liabilities and obligations of both
-------------------------
PMB and Farmers 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 Farmers 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 Farmers Common Stock (excluding shares held by
Farmers 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 4.028 shares of Premier
Common Stock (the "Exchange Ratio").
3.2 Anti-Dilution Provisions. In the event Premier or Farmers changes the
------------------------
number of shares of Premier Common Stock or Farmers Common Stock, respectively,
issued and outstanding prior to the Effective Time as a result of a stock
split, stock dividend or similar recapitalization with respect to such stock
and the record date therefor (in the case of a stock dividend) or the effective
date therefor (in the case of a stock split or similar recapitalization) shall
be prior to the Effective Time, the Exchange Ratio shall be proportionately
adjusted.
3.3 Shares Held By Farmers or Premier. Each of the shares of Farmers
---------------------------------
Common Stock held by Farmers 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 Fractional Shares. Notwithstanding any other provision of this
-----------------
Agreement, each holder of shares of Farmers Common Stock exchanged pursuant to
the Merger, 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. The market value of one share of Premier Common Stock at
the Effective Time shall be the last sale price of the Premier Common Stock on
the American Stock Exchange (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. 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")
4
<PAGE>
to mail to the former holders of Farmers 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 Farmers Common
Stock shall pass, only upon proper delivery of such certificates to the Exchange
Agent. After the Effective Time, each holder of shares of Farmers 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 Farmers Common Stock is entitled as
a result of the Merger until such holder surrenders his or her certificate or
certificates representing the shares of Farmers Common Stock for exchange as
provided in this Section 4.1. The certificate or certificates of Farmers 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 Farmers
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 Farmers Shareholders. At the Effective Time, the
-------------------------------------
stock transfer books of Farmers shall be closed as to holders of Farmers Common
Stock immediately prior to the Effective Time and no transfer of Farmers 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 Farmers
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 Farmers 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 Farmers Common Stock
are converted, regardless of whether such holders have exchanged their
certificates representing Farmers 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 Farmers 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
Farmers 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.
5
<PAGE>
ARTICLE V
---------
REPRESENTATIONS AND WARRANTIES
------------------------------
OF FARMERS
----------
Farmers hereby represents and warrants to Premier and PMB as follows:
5.1 Organization, Standing, and Power. Farmers is a commercial bank duly
---------------------------------
organized, validly existing, and in good standing under the Laws of the
State of Georgia. Farmers has the power and authority to carry on its business
as now conducted and to own, lease and operate its Assets. Farmers 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 Farmers. Farmers 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) Farmers 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 shares of Farmers
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 Farmers, subject to the approval of this Agreement by the
holders of two-thirds of the outstanding shares of Farmers Common Stock, which
is the only shareholder vote required for approval of this Agreement and
consummation of the Merger by Farmers. Subject to such requisite shareholder
approval, this Agreement represents a legal, valid and binding obligation of
Farmers, enforceable against Farmers 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 Farmers
Disclosure Memorandum, neither the execution and delivery of this Agreement by
- ---------------------
Farmers, nor the consummation by Farmers of the transactions contemplated
hereby, nor compliance by Farmers with any of the provisions hereof will (i)
conflict with or result in a breach of any provision of Farmers' 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 Farmers under, any Contract or Permit of Farmers, 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 Farmers, or (iii)
subject
6
<PAGE>
to receipt of the requisite approvals referred to in Section 9.1(b) of this
Agreement, violate any Law or Order applicable to Farmers 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 Farmers, no notice to, filing with, or Consent of any
public body or authority is necessary for the consummation by Farmers of the
Merger and the other transactions contemplated in this Agreement.
5.3 Capital Stock.
-------------
(a) The authorized capital stock of Farmers consists of 2,000,000
shares of Farmers Common Stock, of which 720,000 shares are issued and
outstanding as of the date of this Agreement and not more than 720,000 shares
will be issued and outstanding at the Effective Time. All of the issued and
outstanding shares of common stock of Farmers are duly and validly issued and
outstanding and are fully paid and nonassessable. None of the outstanding shares
of Farmers Common Stock has been issued in violation of any preemptive rights of
the current or past shareholders of Farmers.
(b) Except as set forth in Section 5.3(a) of this Agreement,
or as disclosed in Section 5.3 of the Farmers Disclosure Memorandum, there are
---------------------
no shares of capital stock or other equity securities of Farmers outstanding and
no outstanding Rights relating to the capital stock of Farmers.
5.4 Farmers Subsidiaries. Farmers has no Subsidiaries.
--------------------
5.5 Financial Statements. Farmers has disclosed in Section 5.5 of the
--------------------
Farmers Disclosure Memorandum, and has delivered to Premier copies of, all
---------------------
Farmers Financial Statements prepared for periods ended prior to the date hereof
and will deliver to Premier copies of all Farmers Financial Statements prepared
subsequent to the date hereof. The Farmers 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 Farmers,
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 Farmers as of the dates indicated and the results of
operations, changes in shareholders' equity, and cash flows of Farmers 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).
7
<PAGE>
5.6 Absence of Undisclosed Liabilities. Farmers does not have any
----------------------------------
Liabilities that are reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on Farmers except Liabilities which are
accrued or reserved against in the balance sheets of Farmers as of December 31,
1998 and March 31, 1999, included in the Farmers Financial Statements or
reflected in the notes thereto. Farmers 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 Farmers.
5.7 Absence of Certain Changes or Events. Since March 31, 1999, except
------------------------------------
as disclosed in Section 5.7 of the Farmers 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 Farmers,
and (b) Farmers 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 Farmers provided in Article VII of this
Agreement.
5.8 Tax Matters.
-----------
(a) All Tax returns required to be filed by or on behalf of Farmers
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 together, are not reasonably likely to have a Material Adverse
Effect on Farmers, and all returns filed are complete and accurate to the
Knowledge of Farmers. 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 Farmers, except as reserved against in the Farmers Financial
Statements delivered prior to the date of this Agreement or as disclosed in
Section 5.8(a) of the Farmers 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 Farmers
Disclosure Memorandum, Farmers 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 Farmers, which deficiency is reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on Farmers.
(c) Adequate provision for any Taxes due or to become due for
Farmers for the period or periods through and including the date of the
respective Farmers Financial Statements has been made and is reflected on such
Farmers Financial Statements.
(d) Deferred Taxes of Farmers have been provided for in accordance
with GAAP.
8
<PAGE>
(e) Farmers 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 Farmers.
(f) There are no Liens with respect to Taxes upon any of the assets
of Farmers.
5.9 Allowance for Possible Loan Losses. The allowance for possible loan
----------------------------------
or credit losses (the "Allowance") shown on the balance sheets of Farmers
included in the most recent Farmers Financial Statements dated prior to the date
of this Agreement was, and the Allowance shown on the balance sheets of Farmers
included in the Farmers 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 Farmers and other extensions of
credit (including letters of credit and commitments to make loans or extend
credit) by Farmers 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 Farmers.
5.10 Assets. Except as disclosed in Section 5.10 of the Farmers
------
Disclosure Memorandum or as disclosed or reserved against in the Farmers
- ---------------------
Financial Statements, Farmers 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 Farmers are in good condition, reasonable wear and tear excepted,
and are usable in the ordinary course of business consistent with Farmers' past
practices. All Assets which are material to Farmers' business or held under
leases or subleases by Farmers, 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 Farmers provide adequate coverage under current
industry practices against loss or Liability, and the fidelity and blanket bonds
in effect as to which Farmers is a named insured are reasonably sufficient. The
Assets of Farmers include all assets required to operate the business of Farmers
as presently conducted.
5.11 Environmental Matters. Except as disclosed in Section 5.11 of the
---------------------
Farmers Disclosure Memorandum:
---------------------
(a) to the Knowledge of Farmers, Farmers, its Participation
Facilities and its Loan Properties are, and have been, in compliance with all
Environmental Laws, except for
9
<PAGE>
noncompliance which is not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on Farmers.
(b) to the Knowledge of Farmers, there is no Litigation pending or
threatened before any court, governmental agency or authority or other forum in
which Farmers 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 Farmers 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 Farmers and to the Knowledge of Farmers,
there is no reasonable basis for any such Litigation.
(c) to the Knowledge of Farmers, 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 Farmers.
5.12 Compliance with Laws. Farmers 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
Farmers, 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 Farmers. Except as disclosed in Section
5.12 of the Farmers Disclosure Memorandum, Farmers:
---------------------
(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 Farmers; 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 Farmers 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 Farmers,
(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
Farmers, or (iii) requiring Farmers 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. Farmers 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
10
<PAGE>
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 Farmers, pending or, to its Knowledge, threatened,
nor, to its Knowledge, is there any activity involving Farmers' employees
seeking to certify a collective bargaining unit or engaging in any other
organization activity.
5.14 Employee Benefit Plans.
----------------------
(a) Farmers has disclosed in Section 5.14 of the Farmers
Disclosure Memorandum and delivered or made available to Premier prior to the
- ---------------------
execution of this Agreement copies in each case of all pension, retirement,
profit-sharing, deferred compensation, stock option, employee stock ownership,
severance pay, vacation, bonus, or other incentive plans, all other written
employee programs, arrangements, or agreements, all medical, vision, dental, or
other health plans, all life insurance plans, and all other employee benefit
plans or fringe benefit plans, including, without limitation, "employee benefit
plans" as that term is defined in Section 3(3) of ERISA, currently adopted,
maintained by, sponsored in whole or in part by, or contributed to by Farmers 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 "Farmers Benefit Plans"). Any of the Farmers 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 "Farmers ERISA Plan." Each Farmers 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 "Farmers Pension Plan." No
Farmers Pension Plan is or has been a multi-employer plan within the meaning of
Section 3(37) of ERISA.
(b) All Farmers 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 Farmers. Each
Farmers 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 Farmers is not aware of any circumstances likely
to result in revocation of any such favorable determination letter. To the
Knowledge of Farmers, neither Farmers nor any other party has engaged in a
transaction with respect to any Farmers Benefit Plan that, assuming the taxable
period of such transaction expired as of the date hereof, would subject Farmers
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 Farmers.
(c) Neither Farmers nor any ERISA Affiliate of Farmers 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 Farmers
Disclosure Memorandum, (i) Farmers does not have any obligations for retiree
- ---------------------
health and life benefits under
11
<PAGE>
any of the Farmers 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 Farmers to amend or terminate any such Plan; and (iii) any
amendment or termination of any such Plan will not cause Farmers to incur any
Liability that is reasonably likely to have a Material Adverse Effect on
Farmers.
(e) Except as disclosed in Section 5.14(e) of the Farmers
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 Farmers from Farmers under any Farmers Benefit Plan
or otherwise, (ii) increase any benefits otherwise payable under any Farmers
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 Farmers and their respective beneficiaries
have been fully reflected on the Farmers Financial Statements to the extent
required by and in accordance with GAAP.
(g) Farmers and each ERISA Affiliate of Farmers 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 Farmers nor any ERISA Affiliate of Farmers 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
Farmers Benefit Plan, any trust or other funding agency created thereunder, or
against any fiduciary of any Farmers Benefit Plan or against the assets of any
Farmers Benefit Plan.
5.15 Material Contracts. Except as disclosed in Section 5.15 of the
------------------
Farmers Disclosure Memorandum or otherwise reflected in the Farmers Financial
---------------------
Statements, Farmers 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 Farmers or the guarantee by Farmers 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 Farmers with the SEC
12
<PAGE>
as of the date of this Agreement if Farmers 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 "Farmers Contracts"). Farmers is not in
Default under any Farmers Contract, other than Defaults which are not reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
Farmers. All of the indebtedness of Farmers for money borrowed is prepayable at
any time by Farmers without penalty or premium.
5.16 Legal Proceedings. Except as disclosed in Section 5.16 of the
-----------------
Farmers Disclosure Memorandum, there is no Litigation instituted or pending, or,
---------------------
to the Knowledge of Farmers, threatened (or unasserted but considered probable
of assertion and which if asserted would have at least a reasonable probability
of an unfavorable outcome) against Farmers, or against any Asset, interest, or
right of Farmers, that is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on Farmers, nor are there any Orders of any
Regulatory Authorities, other governmental authorities, or arbitrators
outstanding against Farmers, that are reasonably likely to have, individually or
in the aggregate, a Material Adverse Effect on Farmers.
5.17 Reports. Since January 1, 1997, Farmers 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 Farmers). 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 Farmers' 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 Farmers 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 Farmers 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 Farmers or any Affiliate thereof
for inclusion in the Proxy Statement to be mailed to Farmers' shareholders in
connection with the Farmers Shareholders' Meeting, and any other documents to be
filed by Farmers 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 Farmers, 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
13
<PAGE>
supplement thereto, at the time of the Farmers 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 Farmers Shareholders' Meeting.
All documents that Farmers 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 Farmers 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 second sentence of such
Section. To the Knowledge of Farmers, 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. Farmers 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 Farmers or restrict or impair the ability of
Premier to vote, or otherwise to exercise the rights of a shareholder with
respect to, shares of Farmers that may be acquired or controlled by it.
5.21 Millennium Compliance. Farmers 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. Farmers 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 Farmers 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. Farmers further represents and warrants that it has contacted and
received assurances from all key suppliers of goods and services to Farmers,
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
Farmers as follows:
14
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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.
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
15
<PAGE>
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 26,106,350 shares were
issued and outstanding as of the date of this 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 Farmers 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 Farmers 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
16
<PAGE>
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, included in the Premier Financial Statements or reflected in
the notes thereto. No Premier Company has incurred or paid any Liability since
December 31, 1998, except for such Liabilities incurred or paid in the ordinary
course of business consistent with past business practice and which are not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on Premier.
6.6 Absence of Certain Changes or Events. Since December 31, 1998, 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
17
<PAGE>
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 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 Farmers 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
18
<PAGE>
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 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.
19
<PAGE>
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.
ARTICLE VII
-----------
CONDUCT OF BUSINESS PENDING CONSUMMATION
----------------------------------------
7.1 Affirmative Covenants of Farmers. Unless the prior written consent of
--------------------------------
Premier shall have been obtained, and except as otherwise contemplated herein
or disclosed in the Farmers Disclosure Memorandum, Farmers 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 Farmers. Except as disclosed in the Farmers
-----------------------------
Disclosure Memorandum, from the date of this Agreement until the earlier of the
- ---------------------
Effective Time or the termination of this Agreement, Farmers 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 Farmers, 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 Farmers 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 Farmers of any material Lien
or permit any such Lien to exist (other
20
<PAGE>
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 Farmers Disclosure Memorandum); or
---------------------
(c) repurchase, redeem, or otherwise acquire or exchange (other than
exchanges in the ordinary course under employee benefit plans), directly or
indirectly, any shares, or any securities convertible into any shares, of the
capital stock of Farmers, or declare or pay any dividend or make any other
distribution in respect of the Farmers Common Stock, provided, however, that
Farmers may (to the extent legally able to do so) declare and pay, prior to the
Effective Time, quarterly dividends in accordance with its usual and customary
past practices; or
(d) except for this Agreement, or as disclosed in Section 7.2(d) of
the Farmers 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 Farmers Common Stock or any other shares of capital stock
of Farmers, 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 Farmers Disclosure
----------
Memorandum, adjust, split, combine or reclassify any capital stock of Farmers
- ----------
or issue or authorize the issuance of any other securities in respect of or in
substitution for shares of Farmers 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 Farmers in its fiduciary capacity; or
(g) grant any increase in compensation or benefits to any employee
of Farmers 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 Farmers, in each case as disclosed in Section 7.2(g) of the Farmers
Disclosure Memorandum or as required by Law; pay any severance or termination
- ---------------------
pay or any bonus other than pursuant to written policies or written Contracts
in effect on the date of this Agreement and disclosed in Section 7.2(g) of the
Farmers Disclosure Memorandum; enter into or amend any severance agreements
---------------------
with officers of Farmers; grant any general increase in compensation to all
employees; grant any increase in fees or other increases in
21
<PAGE>
compensation or other benefits to directors of Farmers; 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 Farmers and
any Person (unless such amendment is required by Law) that Farmers 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 Farmers or make any
material change in or to any existing employee benefit plans of Farmers 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) commence any Litigation other than in accordance with past
practice, settle any Litigation involving any Liability of Farmers for money
damages in excess of $50,000 or which imposes material restrictions upon the
operations of Farmers; 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 Farmers 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.
22
<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 VIII
------------
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
Farmers has provided, on a reasonably timely basis, all information concerning
Farmers 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. Farmers shall furnish all information
concerning it and the holders of its capital stock as Premier may reasonably
request in connection with such action.
(b) Farmers 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 Farmers deems appropriate.
(c) In connection with the Farmers Shareholders' Meeting, (i) Premier
shall prepare and file with the SEC, on Farmers' behalf, a Proxy Statement
(which shall be included in the Registration Statement); (ii) Farmers 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 Farmers
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
Farmers 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 the shares of
Premier Common Stock to be issued to the holders of Farmers Common Stock
pursuant to the Merger.
8.3 Applications. Premier shall promptly prepare and file, and Farmers
------------
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.
23
<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 Farmers 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
24
<PAGE>
its counsel deems necessary or advisable in order to satisfy such Party's
disclosure obligations imposed by Law.
8.7 Acquisition Proposals. Except with respect to this Agreement and the
---------------------
transactions contemplated hereby, neither Farmers nor any Affiliate of Farmers
nor any investment banker, attorney, accountant or other representative
(collectively, "Representatives") retained by Farmers shall directly or
indirectly solicit any Acquisition Proposal by any Person. Except to the extent
necessary to comply with the fiduciary duties of Farmers' Board of Directors as
advised by counsel, Farmers or any Affiliate or Representative of Farmers shall
not 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 Farmers 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. Farmers shall promptly notify Premier orally and in writing in the
event that Farmers receives any inquiry or proposal relating to any such
transaction. Unless the prior written consent of Premier is obtained, Farmers
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. Farmers has disclosed in Section 8.9 of
-----------------------
the Farmers Disclosure Memorandum all Persons whom it reasonably believes is an
---------------------
"affiliate" of Farmers for purposes of Rule 145 under the 1933 Act. Farmers
shall use its reasonable best efforts to cause each such Person to deliver to
Premier and Farmers, 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 Farmers 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 Farmers 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.
25
<PAGE>
8.10 Employee Benefits and Contracts.
-------------------------------
(a) Following the Effective Time, Premier shall provide generally to
officers and employees of Farmers 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 Farmers 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 Farmers 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 Farmers Disclosure Memorandum
---------------------
between Farmers and any current or former director, officer, or employee thereof
and all provisions for vested benefits accrued through the Effective Time under
the Farmers 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 Farmers.
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 Farmers 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 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
26
<PAGE>
have expired. No Consent obtained from any Regulatory Authority which is
necessary to consummate the transactions contemplated hereby shall be
conditioned or restricted in a manner (including, without limitation,
requirements relating to the raising of additional capital or the disposition of
Assets) which in the reasonable judgment of the Board of Directors of either
Party would so materially adversely impact the economic or business benefits of
the transactions contemplated by this Agreement 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.
(f) Tax Matters. Premier and Farmers 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 Farmers Common Stock for Premier Common Stock will not
give rise to gain or loss to the shareholders of Farmers with respect to such
exchange (except to the extent of any cash received), and (iii) neither Premier
nor Farmers 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 Farmers reasonably satisfactory in
form and substance to such counsel.
(g) Affiliate Agreements. The Parties shall have received from each
--------------------
affiliate of Farmers 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 Read, Martin & Slickman dated as of
the Effective Time, to the effect
27
<PAGE>
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.
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 Farmers 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
Farmers set forth in Section 5.3 of this Agreement shall be true and correct
(except for inaccuracies which are de minimis in amount). Each and every other
representation and warranty of Farmers set forth in Article V of this Agreement
shall be true and correct in all Material respects.
(b) Performance of Agreements and Covenants. Each and all of the
---------------------------------------
agreements and covenants of Farmers 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. Farmers 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 Farmers' 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
Farmers' Articles of Incorporation, and certified copies of Farmers' Bylaws, all
in such reasonable detail as Premier and its counsel shall request.
(d) Opinion of Counsel. Farmers shall have delivered to Premier an
------------------
opinion of Kilpatrick Stockton, LLP, counsel to Farmers, 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 Farmers shall have executed and delivered to Premier letters in substantially
the form of Exhibit "3" hereto.
-----------
(f) Premier Fairness Opinion. Premier shall have received from The
------------------------
Robinson- Humphrey Company, LLC, a letter, dated not more than five (5) business
days prior to the date of
28
<PAGE>
the Registration Statement, to the effect that, in the opinion of such firm, the
consideration to be paid to Farmers shareholders in connection with the Merger
is fair, from a financial point of view, to the shareholders of Premier.
(g) 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 Farmers' business or assets, or compel Premier
to dispose of or hold separate all or a material portion of Premier's or
Farmers' 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.
9.3 Conditions to Obligations of Farmers. The obligations of Farmers 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 Farmers 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 6.3 of this Agreement shall be true
and correct (except for inaccuracies which are de minimis in amount). Each and
every other representation and warranty of Premier or PMB set forth in Article
VI of this Agreement shall be true and correct in all Material respects.
(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 Farmers (i) a
------------
certificate, dated as of the Effective Time and signed on its behalf by its
chief executive officer and its chief financial officer, to the effect that the
conditions of its obligations set forth in Section 9.3(a) and 9.3(b) of this
Agreement have been satisfied, and (ii) 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
29
<PAGE>
transactions contemplated hereby, certified copies of Premier's Articles of
Incorporation, and certified copies of Premier's Bylaws, all in such reasonable
detail as Farmers and its counsel shall request.
(d) Opinion of Counsel. Premier shall have delivered to Farmers an
------------------
opinion of Womble Carlyle Sandridge & Rice, PLLC, counsel to Premier, dated as
of the Effective Time, in form reasonably acceptable to Farmers, 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
Farmers, it is not in the best interests of the shareholders of Farmers 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 Farmers' business or assets, or compel Premier
to dispose of or hold separate all or a material portion of Premier's or
Farmers' business or assets as a result of the Merger, which, in any case, in
the reasonable judgment of Farmers based upon a legal opinion from counsel,
could result in the relief sought being obtained.
(f) Farmers Fairness Opinion. Farmer shall have received from an
------------------------
investment banking firm to be selected by Farmers, 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
Farmers shareholders in connection with the Merger is fair, from a financial
point of view, to the shareholders of Farmers.
ARTICLE X
---------
TERMINATION
-----------
10.1 Termination. Notwithstanding any other provision of this Agreement,
-----------
and notwithstanding the approval of this Agreement by the shareholders of
Farmers, 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 Farmers and the
Board of Directors of Premier; or
(b) By the Board of Directors of either Party in the event of a
material breach by the other Party of any representation or warranty contained
in this Agreement which cannot be or has not been cured within thirty (30) days
after the giving of written notice to the breaching Party of such breach and
which breach would provide the non-breaching Party the ability to refuse to
consummate the Merger; or
30
<PAGE>
(c) By the Board of Directors of either Premier or Farmers 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; or
(d) By the Board of Directors of either Premier or Farmers 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 Farmers 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 Farmers 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 Farmers (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 Read, Martin & Slickman that the Merger
cannot be accounted for as a "pooling of interests" transaction; or
(h) By the Board of Directors of either Party, at any time on or
prior to April 30, 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
(i) By the Board of Directors of either Party, 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.
31
<PAGE>
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 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 Farmers or the acquisition
of a substantial equity interest in, or a substantial portion of the Assets of
Farmers.
"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 Section 5.9 of this
Agreement.
"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.
32
<PAGE>
"BHC Act" shall mean the federal Bank Holding Company Act of 1956, as
amended.
"Closing" shall mean the closing of the transactions contemplated hereby,
as described in Section 1.2 of this Agreement.
"Closing Date" shall 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.
"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.
33
<PAGE>
"Exchange Ratio" shall have the meaning provided in Section 3.1 of this
Agreement.
"Exhibits" 1 through 4, 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.
"Farmers Benefit Plans" shall have the meaning set forth in Section 5.14 of
this Agreement.
"Farmers Common Stock" shall mean the $5.00 par value common stock of
Farmers.
"Farmers Disclosure Memorandum" shall mean the written information
entitled "Farmers 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.
"Farmers ERISA Plan" shall have the meaning provided in Section 5.14 of
this Agreement.
"Farmers Financial Statements" shall mean (a) the balance sheets
(including related notes and schedules, if any) of Farmers 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
Farmers Disclosure Memorandum, and (b) the balance sheets (including related
---------------------
notes and schedules, if any) of Farmers 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.
"Farmers Stock Plans" shall mean the existing stock option and other
stock-based compensation plans of Farmers disclosed in Section 5.14 of the
Farmers Disclosure Memorandum.
---------------------
"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).
"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
34
<PAGE>
requiring abatement, removal or encapsulation pursuant to the requirements of
Environmental Laws, polychlorinated biphenyls, and petroleum and petroleum
products).
"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 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.
35
<PAGE>
"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 Farmers 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 Farmers, and "Parties" shall mean
all of Premier, PMB and Farmers.
"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.
"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.
36
<PAGE>
"Premier Disclosure Memorandum" shall mean the written information
entitled "Premier Disclosure Memorandum" delivered to Farmers 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 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) 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
December 31, 1998.
"Premier Subsidiaries" shall mean the Subsidiaries of Premier at the
Effective Time.
"Proxy Statement" shall mean the proxy statement used by Farmers 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
Farmers.
"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 Farmers 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.
"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.
37
<PAGE>
"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
Farmers 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.
"Surviving Bank" shall mean Farmers, 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, 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."
38
<PAGE>
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
filing, registration and application fees, printing fees, and fees and expenses
of its own financial or other consultants, investment bankers, accountants and
counsel, except that each of the Parties shall bear and pay (i) one-half of the
filing fees payable in connection with the Registration Statement and the
applications filed with other Regulatory Authorities, and (ii) one-half of the
costs incurred in connection with the printing or copying of the Proxy Statement
and the Registration Statement.
(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) an amount equal to the reasonable and documented fees and
expenses incurred by such non-breaching Party in connection with the examination
and investigation of the breaching Party, the preparation and negotiation of
this Agreement and related agreements, regulatory filings and other documents
related to the transactions contemplated hereunder, including, without
limitation, fees and expenses of investment banking consultants, accountants,
attorneys and other agents and (ii) (x) $50,000 if the breach is not willful or
(y) $300,000 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 and expenses shall be made within thirty (30) days after the
termination of 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 investment banking firm selected by Farmers for the purpose of rendering the
fairness opinion referred to in Section 9.3(f). 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 Farmers, each of Premier
and Farmers, 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
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.
39
<PAGE>
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 Farmers 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 Farmers, to waive or extend the time for the compliance or
fulfillment by Farmers 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, Farmers, 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 Farmers 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 Farmers.
(c) The failure of any Party at any time or times to require
performance of any provision hereof shall in no manner affect the right of such
Party at a later time to enforce the same or any other provision of this
Agreement. No waiver of any condition or of the breach of any term contained in
this Agreement in one or more instances shall be deemed to be or construed as a
further or continuing waiver of such condition or breach or a waiver of any
other condition or of the breach of any other term of this Agreement.
11.7 Assignment. Except as expressly contemplated hereby, neither this
----------
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by any Party hereto (whether by operation of Law or otherwise) without
the prior written consent of the other Party. Subject to the preceding sentence,
this Agreement will be binding upon, inure to the benefit of and be enforceable
by the Parties and their respective successors and assigns.
11.8 Notices. All notices or other communications which are required or
-------
permitted hereunder shall be in writing and sufficient if delivered by hand, by
facsimile transmission, 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:
40
<PAGE>
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.
Farmers: Farmers & Merchants Bank
9861 Rome Boulevard
Summerville, Georgia 30747
Telecopy Number: (706) 857-2289
Attention: Bill M. Gilbert
President and Chief
Executive Officer
41
<PAGE>
Copy to Counsel: Kilpatrick Stockton, LLP
1100 Peachtree Street
Suite 2800
Atlanta, Georgia 30309
Telecopy Number: (404) 815-6555
Attention: F. Sheffield Hale, 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.
[Signatures contained on following page]
42
<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: FARMERS & MERCHANTS BANK
/s/ W. E. Ellenburg, Jr. By: /s/ Bill M. Gilbert
- ------------------------------- -----------------------------
Name: W. E. Ellenburg, Jr. Bill M. Gilbert
Title: Sr. Vice President President and Chief Executive
Officer
[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]
43
<PAGE>
EXHIBIT 1
---------
AFFILIATE AGREEMENT
Premier Bancshares, Inc.
2180 Atlanta Plaza
950 East Paces Ferry Road
Atlanta, Georgia 30326
Farmers & Merchants Bank
9861 Rome Boulevard
Summerville, Georgia 30747
Ladies and Gentlemen:
The undersigned is a shareholder of Farmers & Merchants Bank
("Farmers"), 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 April 20, 1999 (the "Agreement"), by and between
Farmers, Premier and PMB Acquisition Corp. ("PMB"). Under the terms of the
Agreement, PMB and Farmers will be merged (the "Merger") and the shares of
common stock of Farmers ("Farmers 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 Farmers 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
Farmers 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 publication of financial
results of post-Merger combined operations of Premier and Farmers.
<PAGE>
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 Farmers
Common Stock beneficially owned by the undersigned as of the date of
the shareholders' meeting of Farmers 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 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
2
<PAGE>
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 Farmers.
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 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
3
<PAGE>
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 April, 1999.
Very truly yours,
----------------------------
Signature
----------------------------
Print Name
AGREED TO AND ACCEPTED as of April __, 1999.
PREMIER BANCSHARES, INC.
By:_____________________________
Darrell D. Pittard, Chairman and
Chief Executive Officer
AGREED TO AND ACCEPTED as of April __, 1999.
FARMERS & MERCHANTS BANK
By:_____________________________
Bill M. Gilbert, President and
Chief Executive Officer
5
<PAGE>
EXHIBIT 2
---------
MATTERS AS TO WHICH
COUNSEL TO FARMERS WILL OPINE*
1. Farmers 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. Farmers' authorized capital stock consists of 2,000,000 shares of
Farmers Common Stock, of which 720,000 shares were outstanding as of the date
hereof. The outstanding shares of Farmers Common Stock have been duly
authorized, validly issued, and are fully paid and nonassessable. None of the
outstanding shares of Farmers Common Stock has been issued in violation of any
statutory preemptive rights. Except as disclosed in Farmers' Disclosure
----------
Memorandum to our knowledge, there are no options, subscriptions, warrants,
- ----------
calls, rights or commitments obligating Farmers to issue equity securities or
acquire its equity securities.
3. The execution and delivery by Farmers of the Agreement do not, and
if Farmers 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 Farmers, or, to our knowledge, result in any breach of, or default
or acceleration under, any material Contract or Order to which Farmers is a
party or by which Farmers is bound.
4. Farmers has duly authorized the execution and delivery of the
Agreement and all performance by Farmers thereunder, and has duly executed and
delivered the Agreement.
5. The Agreement is enforceable against Farmers 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
April __, 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 April 20, 1999, by and
between Farmers & Merchants Bank ("Farmers"), Premier Bancshares, Inc.
("Premier") and PMB Acquisition Corp. ("PMB") which provides for the merger (the
"Merger") of PMB with and into Farmers.
Concerning claims which I may have against Farmers in my capacity as an
officer or director:
(a) Premier shall assume all liability (to the extent Farmers
was so liable) for claims for indemnification arising under Farmers'
Articles of Incorporation or Bylaws or under any indemnification
contract disclosed to Premier, as existing on April 20, 1999, 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 Farmers (other than routine deposit, loan and other
banking services conducted in the ordinary course of business with
Farmers); and
(c) I hereby release Farmers 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.
<PAGE>
By executing this letter on behalf of Premier, you shall acknowledge
the assumption by Premier of the liabilities described in paragraph (a) above.
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 April, 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 26,106,350 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>
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
1
<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
B-6
<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
B-7
<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
October , 1999
Board of Directors
Farmers & Merchants Bank
9861 Rome Boulevard
Summerville, Georgia 30747
Ladies and Gentlemen:
You have asked us to advise you with respect to the fairness to the
shareholders of Farmers & Merchants Bank ("Farmers"), from a financial point of
view, of the exchange ratio (the "Exchange Ratio") provided for in the Agreement
and Plan of Merger dated as of April 20, 1999, (the "Merger Agreement") between
Farmers and Premier Bancshares, Inc. ("Premier"). The Merger Agreement provides
for a merger (the "Merger") of Farmers and Premier pursuant to which the common
shareholders of the Farmers will receive 4.028 common shares of Premier for
every common share of Farmers.
Termination rights to the Merger are available, as fully described in
Section 10 of the Merger Agreement, at any time prior to the effective time:
(a) By mutual consent of the Board of Directors of Farmers and the Board of
Directors of Premier; or
(b) By the Board of Directors of either Party in the event of a material breach
by the other Party of any representation or warranty contained in the
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
(c) By the Board of Directors of either Premier of Farmers in the event of a
material breach by the other Party of any covenant or agreement
contained in the 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; or
(d) By the Board of Directors of either Premier of Farmers 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 Farmers fail to vote their approval of the Agreement and
the transactions contemplated
<PAGE>
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 Farmers 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 the Agreement by the Party electing to terminate pursuant to the
Section 10.1(e); or
(f) By the Board of Directors of either Premier or Farmers (provided that the
terminating Party is not then in breach of any representation or
warranty contained in the Agreement or in the material breach of any
covenant or other agreement contained in the 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 the Agreement) cannot be satisfied or fulfilled by the date
specified in Section 10.1 (e) of the Agreement; or
(g) By the Board of Directors of Premier, at any time, if it is determined by
Ernst & Young, LLP or Read, Martin & Slickman that the Merger cannot
by accounted for as a "pooling of interests" transaction; or
(h) By the Board of Directors of either Party, at any time on or prior to April
30, 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 the Agreement so as to render inadvisable to the consummation of
the Merger; or
(i) By the Board of Directors of either Party, 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.
In arriving at our opinion, we have reviewed certain publicly available
business and financial information relating to Premier and Farmers. We have also
reviewed certain other information, including financial forecasts and budgets
and have discussed with Farmers' management the business and prospects of
Farmers.
We have also considered certain financial and stock market data of Premier
and we have compared that data with similar data for other publicly held bank
holding companies and we have
<PAGE>
considered the financial terms of certain other comparable transactions, which
have recently been effected. We also considered such other information,
financial studies, analyses and investigations and financial, economic and
market criteria which we deemed relevant. In connection with our review, we have
not independently verified any of the foregoing information and have relied on
its being complete and accurate in all material respects. With respect to the
financial forecasts and budgets, we have assumed that they have been reasonably
prepared on bases reflecting the best currently available estimates and
judgments of Farmers' management as to the future financial performance of
Farmers. We have not made an independent evaluation or appraisal of the assets
of Premier or Farmers and we have assumed that the aggregate allowances for loan
losses for Premier and Farmers are adequate to cover such losses. We have not
solicited third party indications of interest in acquiring Farmers.
It should be noted that this opinion is based on market conditions and
other circumstances existing on the date hereof and this opinion does not
represent our view as to what the value of the Premier common stock necessarily
will be when the Premier common stock is issued to the stockholders of Farmers
upon consummation of the Merger.
Stevens & Company is a financial consulting and investment banking firm
that specializes in community bank transactions. We have acted as financial
advisor to Farmers in connection with the Merger and will receive a fee for our
services, a significant portion of which is contingent upon the consummation of
the Merger.
Based on the above, it is our opinion that the Exchange Ratio to be
received of the Merger is fair, as of the date hereof, from a financial point of
view, to the common shareholders of Farmers.
This opinion is being delivered to the Board of Directors of Farmers, and
is not to be reproduced or, delivered to any third party without the expressed
written consent of Stevens & Company, except as required by law. However, it is
understood that this opinion may be included in its entirety in any
communication by Farmers or its Board of Directors to Farmers' shareholders.
Sincerely,
STEVENS & COMPANY
--------------------
R. Charles Stevens
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers.
The provisions of the Georgia Business Corporation Code and Premier's
Bylaws set forth the extent to which Premier's directors and officers may be
indemnified against liabilities they may incur while serving in such capacities.
Under Premier's Bylaws, Premier is required to indemnify its officers and
directors against reasonable expenses (including attorneys' fees) incurred by
them in the defense of any action, suit or proceeding to which they were made a
party, or in defense of any claim, issue or matter therein, by reason of the
fact that they are or were officers, directors, employees or agents of Premier,
to the extent that they have been successful, on the merits or otherwise, in
such defense. Premier's Bylaws also permit indemnification of its directors and
officers against any liability incurred in connection with any threatened,
pending or completed action, suit or proceeding by reason of the fact that they
are or were directors or officers of Premier or who, while directors or officers
of Premier, are or were serving at Premier's request as directors, officers,
partners, trustees, employees or agents of another entity, if they acted in a
manner they believed in good faith to be in, or not opposed to, the best
interests of Premier, or, with respect to any criminal proceeding, had no
reasonable cause to believe their conduct was unlawful, if a determination has
been made that they have met these standards of conduct. Such indemnification
in connection with a proceeding by or in the right of Premier, however, is
limited to reasonable expenses, including attorneys' fees, incurred in
connection with the proceeding. Premier must also advance expenses incurred by
any director or officer in defending any such action, suit or proceeding upon
receipt of an undertaking by or on behalf of such officer or director to repay
such advances unless it is ultimately determined that he or she is not entitled
to indemnification by Premier.
Premier may not indemnify a director or officer in connection with a
proceeding by or in the right of Premier in which the director or officer was
adjudged liable to Premier for appropriation of a business opportunity or
payment of unlawful dividends, in connection with a proceeding in which he or
she was adjudged liable on the basis that he or she improperly received a
personal benefit or for intentional misconduct or a knowing violation of law.
The indemnification provisions of the Georgia Business Corporation Code are
essentially identical to those set forth above, except that the Georgia Business
Corporation Code permits, but does not require, a corporation to advance
expenses under the circumstances for such payments described above.
Premier maintains an insurance policy insuring Premier and its directors
and officers against certain liabilities, including liabilities under the
Securities Act.
II-1
<PAGE>
Premier's Articles of Incorporation provide that no director of Premier
shall be personally liable to Premier or its shareholders for monetary damages
for a breach of the duty of care or of any other duty as a director, except in
the case of: (i) wrongful appropriation of any business opportunity of Premier;
(ii) acts or omissions not in good faith or involving intentional misconduct or
a knowing violation of law; (iii) liability for unlawful distributions; or (iv)
any transaction from which the director derived an improper personal benefit.
Item 21. Exhibits and Financial Statement Schedules.
(a) Exhibits (See exhibit index immediately preceding the exhibits for the
page number where each exhibit can be found)
II-2
<PAGE>
Exhibit
Number Description of Exhibits
- ------ -----------------------
2.1 Agreement and Plan of Reorganization dated April 20, 1999 between
Premier, PMB Acquisition Corp. and Farmers & Merchants (Included as
Appendix A to the proxy statement/prospectus contained herein.)
3.1 Restated Articles of Incorporation. (Incorporated by reference as
Exhibit 3.1 to Premier's Form 10-Q for the quarter ended June 30,
1999)
3.2 Bylaws of Premier, as amended. (Incorporated by reference as
Exhibit 3.2 from Premier's Form 10-K for the year ended December
31, 1998)
4.1 Form of Common Stock Certificate. (Incorporated by reference as
Exhibit 4.1 to Premier's Form 10-K for the fiscal year ended
December 31, 1996)
4.2 Form of Preferred Stock Certificate (Incorporated by reference as
Exhibit 4.2 to Premier's Form S-4, file No. 333-82661)
5.1 Legal opinion of Womble Carlyle Sandridge & Rice, PLLC
8.1 Tax opinion of Womble Carlyle Sandridge & Rice, PLLC
21.1 Subsidiaries of Premier
23.1 Consent of Womble Carlyle Sandridge & Rice, PLLC (included in
Exhibit 5.1 and 8.1)
23.2 Consent of Ernst & Young LLP
23.3 Consent of Mauldin & Jenkins, LLC
23.4 Consent of Porter Keadle Moore, LLP
23.5 Consent of Porter Keadle Moore, LLP
23.6 Consent of Mauldin & Jenkins, LLC
23.7 Consent of Mauldin & Jenkins, LLC
23.8 Consent of Bricker & Melton, P.A.
23.9 Consent of Read Martin & Slickman
23.10 Consent of Stevens & Company
II-3
<PAGE>
24.1 Power of Attorney (See signature page to the Registration
Statement.)
99.1 Proxy Card for Farmers & Merchants
______________
(b) Financial Statement Schedules
Schedules are omitted because they are not required or are not
applicable, or the required information is shown in the financial statements or
notes thereto.
Item 22. Undertakings.
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(A) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at the time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination
of the offering.
(b) The undersigned registrant hereby undertakes as follows: That prior to
any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other Items of the applicable form.
(c) The registrant undertakes that every prospectus (i) that is filed
pursuant to Paragraph (b) immediately preceding, or (ii) that purports to meet
the requirements of section 10(a)(3) of the Securities Act of 1933 and is used
in connection with an offering of securities subject to Rule 415, will be filed
as a part of an amendment to the registration statement and will not be used
until such amendment is effective, and that, for purposes of determining any
liability under the Securities Act of 1933, each such post-effective amendment
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Atlanta, State of
Georgia, on September 28, 1999.
Premier Bancshares, Inc.
By: /s/ Darrell D. Pittard
-----------------------
Darrell D. Pittard,
Chairman and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each person whose signature appears on the
signature pages to this Registration Statement constitutes and appoints Darrell
D. Pittard and Robert C. Oliver, and each of them, his or her true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for the undersigned and in his or her name, place, and stead, in
any and all capacities, to sign any and all amendments to this Registration
Statement, and to file the same, with all exhibits hereto and other documents in
connection herewith with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents and each of them, full power and authority to
do so and to perform each and every act and thing requisite and necessary to be
done in and about the premises, as fully to all intents and purposes as he or
she might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or either of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
Signature Title Date
- --------- -----
/s/ James L. Coxwell, Sr. Director September 28, 1999
- ---------------------------------
James L. Coxwell, Sr.
/s/ William M. Evans, Jr. Director September 28, 1999
- ---------------------------------
William M. Evans, Jr.
/s/ John H. Ferguson Director September 28, 1999
- ---------------------------------
John H. Ferguson
<PAGE>
<TABLE>
<S> <C> <C>
/s/ Robert E. Flourney III Director September 28, 1999
- ---------------------------------
Robert E. Flourney III
/s/ James E. Freeman Director September 28, 1999
- ---------------------------------
James E. Freeman
/s/ A. F. Gandy Director September 28, 1999
- ---------------------------------
A. F. Gandy
/s/ Robin R. Howell Director September 28, 1999
- ---------------------------------
Robin R. Howell
/s/ Billy H. Martin Director September 28, 1999
- ---------------------------------
Billy H. Martin
/s/ C. Steven McQuig Director September 28, 1999
- ---------------------------------
C. Steven McQuaig
/s/ Robert C. Oliver Director September 28, 1999
- ---------------------------------
Robert C. Oliver
/s/ Thomas E. Owen, Jr. Director September 28, 1999
- ---------------------------------
Thomas E. Owen, Jr.
/s/ Darrell D. Pittard Chairman and Chief Executive Officer September 28, 1999
- ---------------------------------
Darrell D. Pittard (Principal Executive Officer)
/s/ John D. Stephens Director September 28, 1999
- ---------------------------------
John D. Stephens
/s/ James E. Sutherland, Sr. Director September 28, 1999
- ---------------------------------
James E. Sutherland, Sr.
/s/ Michael E. Ricketson Executive Vice President and Chief September 28, 1999
- ---------------------------------
Michael E. Ricketson Executive Officer (Principal Financial
and Accounting Officer)
</TABLE>
<PAGE>
EXHIBIT 5.1
September 28, 1999
Board of Directors
Premier Bancshares, Inc.
2180 Atlanta Plaza
950 E. Paces Ferry Road
Atlanta, Georgia 30326
RE: Premier Bancshares, Inc.
Registration Statement on Form S-4
2,900,160 Shares of Common Stock (the "Registration Statement")
Ladies and Gentlemen:
We have acted as counsel for Premier Bancshares, Inc. (the "Company") in
connection with the proposed public offering of the shares of its Common Stock
covered by the above-described Registration Statement.
In connection therewith, we have examined the following:
(1) The Articles of Incorporation, as amended and restated, of the
Company, certified by the Secretary of State of the State of Georgia;
(2) The Bylaws, as amended and restated, of the Company, certified as
complete and correct by the Secretary of the Company;
(3) The minute book of the Company, certified as correct and complete by
the Secretary of the Company;
(4) Certificate of Good Standing with respect to the Company, issued by
the Georgia Secretary of State; and
(5) The Registration Statement (including exhibits thereto).
<PAGE>
Board of Directors
Premier Banchares, Inc.
September 28, 1999
Page 2
Based upon such examination and upon examination of such other instruments
and records as we have deemed necessary, we are of the opinion that:
(A) The Company has been duly incorporated under the laws of the State of
Georgia and is validly existing and in good standing under the laws of
Georgia.
(B) The 2,900,160 shares of Common Stock covered by the Registration
Statement have been legally authorized and when issued in accordance
with the terms described in said Registration Statement, will be
validly issued, fully paid and nonassessable.
We consent to the filing of this opinion as an exhibit to the Registration
Statement and to the reference to this firm under the caption "Legal Matters" in
the Proxy Statement/ Prospectus. In giving this consent, we do not thereby
admit that we come within the category of persons whose consent is required
under Section 7 of the Securities Act of 1933, or the rules and regulations of
the Securities and Exchange Commission thereunder.
Very truly yours,
WOMBLE CARLYLE SANDRIDGE & RICE
A Professional Limited Liability Company
/s/ Womble Carlyle Sandridge & Rice, PLLC
<PAGE>
Phone: (404) 872-7000
Facsimile: (404) 888-7490
E-mail: www.wcsr.com
September 29, 1999
Exhibit 8.1
Premier Bancshares, Inc.
2180 Atlanta Plaza
950 East Paces Ferry Road
Atlanta, Georgia 30326
RE: Registration Statement on Form S-4 (the "Registration Statement") with
Respect to Shares Issued Pursuant to the Agreement and Plan of
Reorganization, dated as of April 20, 1999, by and among Premier
Bancshares, Inc., PMB Acquisition Corp. and Farmers & Merchants Bank
("Farmers & Merchants")
Ladies and Gentlemen:
We have acted as counsel to Premier Bancshares, Inc.("Premier") in
connection with the registration of 2,900,160 shares of its Common Stock (the
"Premier Common Stock"), issuable pursuant to the Agreement, as set forth in the
registration statement that is being filed on the date hereof by Premier with
the Securities and Exchange Commission (the "Commission") pursuant to the
Securities Act of 1933, as amended (the "Securities Act"). This opinion is
provided pursuant to the requirements of Item 21(a) of Form S-4 and Item
601(b)(8) of Regulation S-K. All capitalized terms not otherwise defined herein
shall have the meanings attributed to them in the Agreement
In giving this opinion, we have reviewed and, with your permission, relied
upon representations and warranties contained in, or the facts described in, the
Agreement, the registration statement and certificates dated September 29,
1999, in which officers of Premier and officers of Farmers & Merchants make
certain representations on behalf of Premier and Farmers & Merchants regarding
the Merger (the "Tax Certificates"). We also have reviewed such other documents
as we have considered necessary and appropriate for the purposes of this
opinion.
In giving this opinion, with your permission, we have assumed that the
statements in the Tax Certificates are correct as of the date of this opinion
and as of the date of the Effective Time, and any representation or statement
made "to the best of knowledge" or similarly qualified as correct without such
qualification. As to all matters in which a person or entity is represented as
such person or entity, either is not a party to, or does not have, or is not
aware of, any plan or
<PAGE>
Premier Bancshares, Inc.
September 29, 1999
Page 2
intention, understanding or agreement, we have assumed that there is in fact no
such plan or intention, understanding or agreement. We also assumed that (a) the
Merger will be consummated in accordance with the Agreement, and (b) Farmers &
Merchants's only outstanding stock (as the term is used in Section 368 of the
Internal Revenue Code of 1986, as amended (the "Code")) is the Farmers &
Merchants Common Stock.
In the Merger, Farmers & Merchants will become a subsidiary of Premier
through the Merger of PMB Acquisition Corp. ("PMB Acquisition") into Farmers &
Merchants pursuant to Georgia law. In the Merger, each outstanding share of
Farmers & Merchants Common Stock is to be converted into a predetermined number
of shares of Premier Common Stock, plus cash in lieu of fractional shares.
Farmers & Merchants shareholders are entitled to dissenters' rights with respect
to the Merger. Each outstanding share of PMB Acquisition stock will be
converted into one share of Farmers & Merchants Common Stock in the Merger.
On the basis of the foregoing and subject to the limitations herein, we are
of the opinion that (under existing law) for federal income tax purposes:
a. The Merger will constitute a "reorganization" within the meaning of
Section 368(a) of the Code.
b. No gain or loss will be recognized by Premier or Farmers & Merchants
by reason of the Merger.
c. No gain or loss will be recognized by the shareholders of Farmers &
Merchants upon the exchange of Farmers & Merchants Common Stock solely
for shares of Premier Common Stock in the Merger.
d. A shareholder of Farmers & Merchants who receives cash in lieu of a
fractional share of Premier Common Stock will recognize gain or loss
as if the fractional share has been received and then redeemed for
cash equal to the amount paid by Premier in respect of such fractional
share.
e. The aggregate tax basis of the shares of Premier Common Stock
(including any fractional share interest deemed received) to be
received by shareholders of Farmers & Merchants will be the same as
the aggregate tax basis of the shares of Frederica Common Stock
surrendered in exchange therefor.
f. The holding period of the shares of Premier Common Stock received in
the Merger (including any fractional share interest deemed received)
will include the period during which the shares of Farmers & Merchants
Common Stock surrendered in
<PAGE>
Premier Bancshares, Inc.
September 29, 1999
Page 3
exchange therefor were held, provided such shares of Farmers &
Merchants Common Stock were held as capital assets at the Effective
Time.
We express no opinion as to the laws of any jurisdiction other than the
United States of America. Further, our opinion is limited to the specific
conclusions set forth above, and no other opinions are expressed or implied.
The opinions stated with respect to shares of Farmers & Merchants Common Stock
do not apply to any stock rights, warrants or options to acquire Farmers &
Merchants Common Stock. The opinions stated as to Farmers & Merchants
shareholders are general in nature and do not necessarily apply to any
particular Farmers & Merchants shareholder, and, for example, may not apply to
shareholders who are corporations, trusts, dealers in securities, financial
institutions, insurance companies or tax exempt organizations; or to persons who
are not United States citizens or resident aliens or domestic entities
(partnerships or trusts), are subject to the alternative minimum tax (to the
extent that tax affects the tax consequences), or are subject to the "golden
parachute" provisions of the Code (to the extent that tax affects the tax
consequences); or to shareholders who acquired Farmers & Merchants Common Stock
pursuant to employee stock options or otherwise as compensation if such shares
are subject to any restriction related to employment, who do not hold their
shares as capital assets, or who hold their shares as part of a "straddle" or
"conversion transaction."
The references to Code Sections and other authority above are not intended
to be complete citations of all relevant authority. Changes to the Code,
regulations, the rulings thereunder, or changes by the courts in the
interpretation of the authorities relied upon, may be applied retroactively and
may affect the opinion expressed herein.
The foregoing opinion is furnished to you solely in connection with the
above-described transaction and may not be relied on by any other person or
entity other than the addressees of this letter or used for any other purpose.
Unless the prior written consent of our firm is obtained, this opinion is not to
be quoted or otherwise referred to in any report, proxy statement, or
registration statement, except as otherwise required by law.
This opinion represents our best legal judgment, but it has no binding
effect or official status of any kind. Changes to the Code or in regulations or
rulings thereunder, or changes by the courts in the interpretation of the
authorities relied upon, may be applied retroactively and may affect the
opinions expressed herein. Any material defect in any assumption or
representation on which we have relied would adversely affect our opinion.
We furnish this opinion to you solely to support the discussion set forth
under the headings "SUMMARY--The Merger--Certain Federal Income Tax
Consequences," "THE MERGER--The Reorganization Agreement--Conditions to the
Merger," "THE MERGER--Certain Federal Income Tax Consequences of the Merger" and
"LEGAL MATTERS" in the Registration Statement, and we
<PAGE>
Premier Bancshares, Inc.
September 29, 1999
Page 4
do not consent to its use for any other purpose. We hereby consent to be named
in the Registration Statement under the foregoing heading and to the filing of a
copy of this opinion as Exhibit 8 to the Registration Statement. In giving this
consent, we do not admit that we are within the category of persons whose
consent is required by Section 7 of the Securities Act or the rules and
regulations of the Commission thereunder.
Sincerely,
WOMBLE CARLYLE SANDRIDGE & RICE, PLLC
/s/ Womble Carlyle Sandridge & Rice, PLLC
------------------------------------------------------
<PAGE>
EXHIBIT 21
All of the following are Georgia corporations:
Premier Bank
Premier Lending Corporation
Milton National Bank
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-4 No. 333-00000) and related Prospectus of
Premier Bancshares, Inc. and Subsidiaries for the registration of 2,900,160
shares of its common stock and to the incorporation by reference of our report
dated February 5, 1999, with respect to the consolidated financial statements of
Premier Bancshares, Inc. and Subsidiaries included in its Annual Report (Form
10-K) for the year ended December 31, 1998, filed with the Securities and
Exchange Commission.
/s/ Ernst & Young LLP
Atlanta, Georgia
September 27, 1999
<PAGE>
EXHIBIT 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the September 28,
1999 Registration Statement on Form S-4 of our report, dated January 31, 1997,
except for Note 2 as to which the date is June 23, 1997, December 12, 1997, June
9, 1998, July 1, 1998 and July 2, 1998, relating to the consolidated statements
of income, stockholders' equity and cash flows of Premier Bancshares, Inc. and
subsidiaries for the year ended December 31, 1996, contained in the annual
report on Form 10-K for the year ended December 31, 1998, and to the reference
to our Firm under the caption "Experts" in the Prospectus.
/s/ Mauldin & Jenkins, LLC
Atlanta, Georgia
September 28, 1999
<PAGE>
EXHIBIT 23.4
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We have issued our report dated February 4, 1997, accompanying the consolidated
financial statements of Citizens Gwinnett Bankshares, Inc. for the year ended
December 31, 1996, included in the Form 10-K for Premier Bancshares, Inc. for
the year ended December 31, 1998. We hereby consent to the incorporation by
reference of said report in the Registration Statement and Prospectus of Premier
Bancshares, Inc. on Form S-4, and the use of our name under the caption
"Experts".
PORTER KEADLE MOORE, LLP
/s/ Porter Keadle Moore, LLP
Atlanta, Georgia
September 28, 1999
<PAGE>
EXHIBIT 23.5
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We have issued our report dated January 23, 1997, accompanying the consolidated
financial statements of Central and Southern Holding Company for the year ended
December 31, 1996, included in the Form 10-K for Premier Bancshares, Inc. for
the year ended December 31, 1998. We hereby consent to the incorporation by
reference of said report in the Registration Statement of Premier Bancshares,
Inc. and Prospectus on Form S-4 and the use of our name as it appears under the
caption "Experts".
PORTER KEADLE MOORE, LLP
/s/ Porter Keadle Moore, LLP
Atlanta, Georgia
September 28, 1999
<PAGE>
EXHIBIT 23.6
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the September 28,
1999 Registration Statement on Form S-4 of our report, dated January 14, 1998,
except for Note 14 as to which the date is February 5, 1998, relating to the
consolidated financial statements of Button Gwinnett Financial Corporation and
subsidiary for the two years ended December 31, 1997, contained in the annual
report on Form 10-K for the year ended December 31, 1998, and to the reference
to our Firm under the caption "Experts" in the Prospectus.
/s/ Mauldin & Jenkins, LLC
Atlanta, Georgia
September 28, 1999
<PAGE>
EXHIBIT 23.7
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the September 28,
1999 Registration Statement on Form S-4 of our report, dated January 29, 1998,
relating to the consolidated financial statements of The Bank Holding Company
and subsidiaries for the two years ended December 31, 1997, contained in the
annual report on Form 10-K for the year ended December 31, 1998, and to the
reference to our Firm under the caption "Experts" in the Prospectus.
/s/ Mauldin & Jenkins, LLC
Atlanta, Georgia
September 28, 1999
<PAGE>
EXHIBIT 23.8
[LETTERHEAD OF B&M APPEARS HERE]
Consent of Independent Certified Public Accountant
We consent to the incorporation in the Registration Statement on Form S-4
of our report dated January 16, 1998, which appears in the annual report on
Form 10-K of Premier Bancshares, Inc. and Subsidiaries for the year ended
December 31, 1998, quarterly reports on Form 10-Q for the fiscal quarters ended
March 31, 1999, and June 30, 1999, current report on Form 8-K dated April 6,
1999, April 20, 1999, May 27, 1999, and August 3, 1999, and Registration
Statements on Form 8-A/A dated May 27, 1999, (for Common Stock); dated May 27,
1999, (for Preferred Securities of Premier Capital Trust I), Registration
Statement on Form S-4 dated July 16, 1999. Registration Statement on Form S-8
dated July 27, 1999, Post-Effective Amendment No. 1 to Form S-4 Registration
Statement dated September 22, 1999, and Registration Statement on Form S-4 dated
September 27, 1999.
Bricker & Melton, P.A.
Duluth, Georgia
September 27, 1999
<PAGE>
EXHIBIT 23.9
[READ MARTIN & SLICKMAN LETTERHEAD]
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
---------------------------------------------------
We hereby consent to the use of our report dated March 19, 1999, relating
to the financial statements of Farmers & Merchants Bank as of and for the years
ended December 31, 1998 and 1997, included in this Registration Statement and to
the reference to our firm under the heading "Experts" in the Prospectus.
/s/ Read Martin & Slickman, CPA's
---------------------------------
Rome, Georgia
September 27, 1999
<PAGE>
EXHIBIT 23.10
[LETTERHEAD OF STEVENS & COMPANY APPEARS HERE]
CONSENT OF STEVENS & COMPANY
We hereby consent to the inclusion to the Proxy-Prospectus constituting part of
the Registration Statement on Form S-4 of Premier Bancshares, Inc., of our
letter to the Board of Directors of Farmers and Merchants Bank, Summerville,
Georgia, and to the references made to such letter and to the firm in such Proxy
Statement-Prospectus. In giving such consent, we do not hereby admit that we
come within the category of persons whose consent is required under Section 7 of
the Securities Act of 1933 or the rules and regulations of the Securities and
Exchange Commission thereunder.
STEVENS & COMPANY
/s/ Charles Stevens
-------------------
Charles Stevens
LaGrange, Georgia
September 26, 1999
<PAGE>
EXHIBIT 99.1
FARMERS & MERCHANTS BANK
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby acknowledges receipt of the Notice of the Special
Meeting of Shareholders and Proxy Statement and does hereby appoint
______________ and _______________ and either of them with full power of
substitution, as proxies of the undersigned to represent the undersigned and to
vote all shares of Farmers & Merchants Bank ("Farmers & Merchants ") common
stock which the undersigned would be entitled to vote if personally present at
the Special Meeting of Shareholders of Farmers & Merchants, to be held at the
main office of Farmers & Merchants at 9861 Rome Boulevard, Summerville, Georgia,
at 9:00 a.m. local time, on November 4, 1999, and at any adjournment thereof.
PROPOSAL
Proposal to: approve the Agreement and Plan of Reorganization, dated April 20,
1999 between Premier Bancshares, Inc. ("Premier"), PMB Acquisition Corp. and
Farmers & Merchants Bank and to approve the merger pursuant to which PMB
Acquisition Corp. will be merged with and into Farmers & Merchants (the
"Merger") and will be operated as a wholly-owned banking subsidiary of Premier
following the effective date of the merger upon consummation of the merger, each
issued and outstanding share of Farmers & Merchants common stock will be
converted into the right to receive 4.028 shares of Premier common stock, as
described more fully in the accompanying proxy statement/prospectus.
[_] FOR [_] AGAINST [_] ABSTAIN
In their discretion, the Proxies are authorized to vote on such other
business as may properly come before the meeting or any adjournment(s),
including adjourning the Special Meeting to permit, if necessary, further
solicitation of proxies. This Proxy may be revoked at any time prior to voting
hereof.
This proxy, when properly executed, duly returned and not revoked will be
voted in accordance with the directions given by the undersigned shareholder.
If no direction is made, it will be voted in favor of the Proposal listed on
this Proxy.
Signature(s)
_____________________________________________
_____________________________________________
Dated: ________________________, 1999
NOTE: Joint owners should each sign. When
signing as attorney, executor, administrator,
trustee or guardian, please give full title as
such. If the signatory is a corporation, sign
the full corporate name by a duly authorized
officer.
