SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
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FORM S-4
Amendment No. 1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Community National Bancorporation
______________________________________________________
(Exact name of registrant as specified in its charter)
Georgia 6711 58-1856963
--------------- ----------------- ----------------
(State orother (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Identification
incorporation of Classification Number)
organization) Code Number)
561 East Washington Avenue - Box 2619
Ashburn, Georgia 31714-2619
(912) 567-9686
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(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
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With a copy to:
T. Brinson Brock, Sr. Daniel D. Dinur, Esquire
561 East Washington Avenue Dinur & Associates, P.C.
- Box 2619 990 Hammond Drive, Suite 760
Ashburn, Georgia 31714-2619 Atlanta, Georgia 30328
(912) 567-9686 (770) 395-3170
- -----------------------------------------------------------------
(Name, address, including zip code, and telephone number of agent
for service)
Approximate date of commencement of the proposed sale of the
securities to the public: As soon as practicable after the
effective date of this registration statement.
If the securities being registered on this Form are being offered
in connection with the formation of a holding company and there is
compliance with General Instruction G, check the following box.
_____
If this Form is 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 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, as amended, check the
following box and list the registration statement number of the
earlier effective registration statement for the same offering.
______
CALCULATION OF REGISTRATION FEE
_____________ ______________ __________ _____________ ____________
Title of Amount To Be Proposed Proposed Amount
Each Class Registered (1) Maximum Maximum Registration
Of Offering Aggregate Fee (2)
Securities Price Per Offering
To Be
Registered
_____________ ______________ __________ _____________ ____________
Common 248,000 shares $7.69 $1,907,120 $513.18
_____________ ______________ __________ _____________ ____________
(1) Computed as the maximum number of shares of the Registrant
which may be issued in connection with the merger of Tarpon
Financial Corporation with and into the Registrant.
(2) Computed in accordance with Rule 457(f)(2) under the
Securities Act of 1933, as amended, solely for the purpose of
calculating the registration fee, on the basis of the book value
of the common stock of Tarpon Financial Corporation at September
30, 1999, there being 155,000 shares of such stock issued and
outstanding, having an aggregate book value on that date of
$1,908,000.
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, as amended, or until the Registration
Statement shall become effective on such date as the SEC, acting
pursuant to such Section 8(a), may determine.
TARPON FINANCIAL CORPORATION
and
COMMUNITY NATIONAL BANCORPORATION
248,000 shares of Common Stock
To the Shareholders of Tarpon Financial Corporation:
You are cordially invited to attend a special meeting of the
shareholders of Tarpon Financial Corporation, or Tarpon, to be held
at 710 East Tarpon Avenue, Tarpon Springs, Florida 34689, at 10:00
A.M., on February ---, 2000.
At the meeting, you will be asked to vote on a merger that
would result in Tarpon's bank subsidiary, First National Bank,
becoming a subsidiary of Community National Bancorporation and
Tarpon ceasing to exist. Community is a bank holding company
headquartered in Ashburn, Georgia, which owns two national banks,
and has approximately $127 million in assets. Its common stock
trades on the Over-The-Counter Bulletin Board.
In the merger, each of you will receive $24 in cash and common
stock of Community for each share of Tarpon common stock you own
just before the merger. Of the total cash and stock you are
entitled to receive for your Tarpon shares, no more than 40% can be
in cash. So, for each 100 Tarpon shares you own, you can elect to
receive more than $1,440 ($24 X .6 X 100) in Community stock, but
not less than such amount. The Community shares will each be valued
at $15 for purposes of the merger. Thus, if you elected to receive
the cash and Community stock in the 40% - 60% proportion, you will
receive $960 in cash and 96 shares of Community stock for each 100
Tarpon shares you own.
Your Board of Directors has unanimously approved the proposed
merger after determining that the consideration to be paid by
Community is fair to and in the best interests of Tarpon and its
shareholders. The Board of Directors recommends that you vote FOR
the merger.
Whether or not you plan to attend the meeting, please
complete, date, sign and promptly return the enclosed proxy card in
the enclosed postage-paid envelope so that your shares may be
represented at the meeting. Your vote is very important.
Returning the proxy card does not deprive you of the right to
attend the meeting and vote your shares in person.
Please read the section entitled "Questions and Answers About
the Merger" on page 1 and "Risk Factors" on page 9 before
completing your proxy card.
Very truly yours,
Mary Z. Smitzes
Chairman of the Board of Directors
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these
securities or passed upon the adequacy or accuracy of this
prospectus. Any representation to the contrary is a criminal
offense. These securities are not earnings on deposit accounts and
they are not insured by the Federal Deposit Insurance Corporation
or any other governmental agency.
Community's common stock is listed on the OTC Bulletin Board under
the ticker symbol "CBAC."
This Proxy Statement/Prospectus is dated January --, 2000 and was
first mailed to Tarpon shareholders on or about January --, 2000.
TABLE OF CONTENTS
QUESTIONS AND ANSWERS ABOUT THE MERGER....................................1
SUMMARY...................................................................2
The Companies and Their Businesses......................................2
The Merger..............................................................2
What the Tarpon Shareholders Will Receive...............................2
Our Reasons for the Merger..............................................3
Opinion of Financial Advisor............................................3
Tarpon Special Shareholders' Meeting....................................4
Recommendation to Shareholders..........................................4
Dissenters' Rights......................................................4
Vote Required to Approve the Merger.....................................4
Interests of Certain Persons in the Merger..............................4
Conditions to the Merger; Regulator Approvals...........................5
Tax Considerations......................................................5
Effective Time of the Merger............................................6
Waiver and Amendment....................................................6
Termination of the Merger Agreement.....................................6
Effect of the Merger on Rights of Tarpon Shareholders...................6
Unaudited Comparative Pro Forma Share Data..............................7
Comparative Market Price Information....................................8
Pro Forma Financial Information.........................................9
RISK FACTORS..............................................................9
Because the exchange price is fixed, you may receive less than you
expected in value for your Tarpon shares..............................9
You may have difficulty in selling your Community shares because of the
sporadic and thin trading market for such shares......................9
It will be difficult for anyone to take over Community..................9
A WARNING ABOUT FORWARD-LOOKING STATEMENTS...............................10
THE SPECIAL MEETING......................................................10
General Information....................................................10
Voting Information.....................................................11
THE MERGER...............................................................13
The Merger Agreement...................................................13
How the Merger Will Work...............................................13
Background of and Reasons for the Merger...............................14
Recommendation of Tarpon's Board of Directors..........................15
Opinion of Financial Adviser...........................................15
Conditions Precedent to Closing........................................19
Regulatory Approvals...................................................20
Waiver and Amendment...................................................21
Termination............................................................21
Interests of Certain Persons in the Merger.............................21
Employee Benefits......................................................21
Income Tax Considerations..............................................22
Accounting Treatment...................................................24
Expenses...............................................................24
Resales of the Community Shares........................................24
OTC Bulletin Board Listing; Future NASDAQ National Market Listing......24
DESCRIPTION OF STOCK AND EFFECT OF MERGER ON THE RIGHTS OF TARPON
SHAREHOLDERS.............................................................25
Capitalization of Community............................................26
Staggered Board of Directors; Supermajority Approvals..................26
Capitalization of Tarpon...............................................26
Rights of Dissent and Appraisal........................................27
DESCRIPTION OF COMMUNITY.................................................29
Business...............................................................29
Additional Information.................................................29
Disclosure of Commission Position on Indemnification for Securities Act
Liabilities..........................................................33
SUPERVISION AND REGULATION...............................................34
Community..............................................................34
Tarpon.................................................................36
DESCRIPTION OF TARPON....................................................37
Background.............................................................37
Business...............................................................37
Market for Tarpon Shares and Related Shareholder Matters...............38
Management's Discussion and Analysis of Financial Condition and
Results of Operation For the Years Ended December 31, 1998 and 1997
and the Nine Months Ended September 30, 1999 and September 31, 1998..38
EXPERTS..................................................................42
Community..............................................................42
Tarpon.................................................................43
OTHER MATTERS............................................................43
SHAREHOLDER PROPOSALS....................................................43
WHERE YOU CAN FIND MORE INFORMATION......................................43
INDEX TO FINANCIAL STATEMENTS OF TARPON..................................45
APPENDICES
Appendix "A" - Sections 607.1301, 607.1302 and 607.1320 of the Florida
Business Corporation Act
Appendix "B" - Opinion of Alan C. Ewing & Co.
Appendix "C" - Agreement and Plan of Merger
Appendix "D" - Tax Opinion of Francis & Co., CPA's
Appendix "E" - Amended and Restated Articles of Incorporation of Community
Appendix "F" - Amended and Restated Bylaws of Community
Appendix "G" - Form 10-KSB for period ended 12-31-98
Appendix "H" - Form 10-QSB for period ended 9-30-99
TARPON FINANCIAL CORPORATION
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
Tarpon will hold a special meeting of its shareholders
at its main office at 710 East Tarpon Avenue, Tarpon
Springs, Florida, at 10:00 A.M., local time, on February --,
2000 for the following purposes:
1. To consider the approval of an Agreement and Plan of
Merger, effective October 8, 1999, by and between Community
and Tarpon, and the transactions contemplated by the
Agreement and Plan of Merger. These transactions include
the merger of Tarpon with and into Community, and all
matters necessary or incidental to the merger; and
2. Any other matters that may properly come before the
Special Meeting or any adjournment thereof.
Only shareholders of record at the close of business on
January --, 2000, will be entitled to receive notice of and
to vote at the Special Meeting or any adjournment thereof.
Tarpon shareholders will have the right to dissent from
the merger and receive payment in cash for the fair value of
their Tarpon shares by following the procedures set forth in
Section 607.1301 et. seq. of the Florida Business
Corporation Act, as amended. A copy of these sections is
attached as Appendix "A" to the enclosed Proxy
Statement/Prospectus.
____________________________
Mary Z. Smitzes
Chairman of the Board of Directors
Tarpon Springs, Florida
January --, 2000
Whether or not you plan to attend the Special Meeting ,
please complete, sign, date, and promptly return the
accompanying proxy in the enclosed self-addressed, postage-
paid envelope.
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q: What is the proposed merger?
A: Community has agreed to acquire all of the issued and
outstanding Tarpon shares in a merger of Tarpon with and
into Community. As a result, Tarpon's bank subsidiary,
First National Bank, would become a wholly-owned subsidiary
of Community and Tarpon would cease to exist. The merger is
subject to the approval of a majority of the Tarpon shares.
Community is a 10-year old bank holding company
headquartered in Ashburn, Georgia. It owns two national
banks, Community National Bank, based in Ashburn, Georgia,
and Cumberland National Bank, based in St. Mary's, Georgia.
It has assets of $126.7 million and capital of $13.3 million
and its shares are traded on the OTC Bulletin Board.
Q: What will the Tarpon shareholders receive in the merger?
A: Each Tarpon share is valued in the merger at $24. A
Tarpon shareholder my elect to receive cash and Community
shares or only Community shares in exchange for his/her
Tarpon shares, but any cash he/she elects to receive cannot
exceed 40% of the total value of the consideration he/she is
entitled to receive in the merger. The Community shares are
each valued at $15 for purposes of the merger so that 1.6
Community shares have a value equivalent to one Tarpon
share. The $15 value is equal to the average price the
Community shares have been trading in sporadic trading since
June 1999, on the OTC Bulletin Board. As a result, for each
100 Tarpon shares, a Tarpon shareholder can receive:
* 160 Community shares if he/she elects to take all of the consideration
in Community shares;
* $960 in cash and 96 Community shares if he/she elects to take the
maximum permissible cash consideration; or
* less than $960 in cash and more Community shares, if he/she decides to
take a position in between these two extremes.
Note that the $15 value and 1.6:1 exchange ratio will not be
adjusted if Community shares trade at a higher or lower
level immediately before the merger.
Q: Will the Community shares received by the Tarpon shareholders be
freely tradable?
A: Yes. This Proxy Statement/Prospectus is part of a
Registration Statement which became effective with the
Securities and Exchange Commission on January --, 2000. As a
result, the Community shares will become freely tradable
without restrictions immediately after the merger is
completed, except in the hands of those Tarpon shareholders
who serve as directors or officers or who own on the date of
this Special Meeting 10% or more of the total shares of
Community.
Q: What do I need to do now?
A: After you have carefully read this Proxy
Statement/Prospectus, mail your signed proxy card in the
enclosed envelope as soon as possible so that your Tarpon
shares may be represented at the Special Meeting. If you do
not include instructions on how to vote your properly signed
proxy, your Tarpon shares will be voted "FOR" the approval
of the merger. Your broker will not be able to vote your
Tarpon shares without instructions from you. Your failure so
to instruct your broker will result in your Tarpon shares
not being voted. If you fail to return a proxy card or
abstain from voting, the effect will be a vote "AGAINST" the
merger.
End page 1
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SUMMARY
This summary highlights selected information contained in this Proxy
Statement/Prospectus and related documents. Because this is a summary, it
does not contain all of the information that may be important to you. To
understand the merger fully, you should read this entire document and the
other documents that we have referred you to.
The Companies and Their Businesses
Community National Bancorporation
561 East Washington Street, Box 2619
Ashburn, Georgia 31714-2619
(912) 567-9686
Community, a Georgia corporation, is registered as a
bank holding company under the Bank Holding Company Act of
1956, as amended. As of September 30, 1999, Community had
total assets of $126.7 million, total deposits of $112.4
million, shareholders' equity of $13.3 million, and net
loans of $104.6 million. Through its two banking
subsidiaries, Community National Bank and Cumberland
National Bank, Community presently provides banking services
at 4 offices located in the State of Georgia. See
"Description of Community," on page 29.
Tarpon Financial Corporation
710 East Tarpon Avenue
Tarpon Springs, Florida 34689
(727) 938-9771
Tarpon, a Florida corporation, is registered as a bank
holding company under the Bank Holding Company Act. As of
September 30, 1999, Tarpon had total assets of $20.8
million, total deposits of $18.7 million, total
shareholders' equity of $1.9 million and net loans of $11.8
million. Through its banking subsidiary, First National
Bank, Tarpon Springs, Tarpon presently provides banking
services at an office in Tarpon Springs, Florida. See
"Description of Tarpon," on page 33.
The Merger
Tarpon will be merged with and into Community, with
Community being the survivor of the merger. After the
merger, Community will operate First National Bank as its
wholly-owned subsidiary.
What the Tarpon Shareholders Will Receive
In the merger, each Tarpon share will be cancelled and
converted into the right to receive, at the election of its
holder either $24.00 in cash or 1.6 Community shares,
provided, that in no event shall the total package of cash
and Community shares received by any Tarpon shareholder
contain less than 60% Community shares. No fractional
Community shares will be issued in
End page 2
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connection with the merger. Cash (without interest) will be
paid instead of issuing fractional shares.
Our Reasons for the Merger
The Board of Directors of Tarpon considered a variety
of factors in evaluating the merger. These factors included
the following:
* the value of the consideration to be received by the
Tarpon shareholders relative to the book value and earnings
per share of the Tarpon shares;
* information concerning the financial condition, results
of operations and business prospects of Community and the
compatibility of Community's community banking concept with
Tarpon's;
* the financial terms of recent mergers in the financial
services industry;
* the alternatives to the merger, including remaining an
independent institution;
* the competitive and regulatory environment for
financial institutions generally;
* the fact that the merger will enable Tarpon
shareholders to exchange their Tarpon shares, in a tax-free
or partially tax-free transaction, for shares of common
stock of a larger bank holding company, the stock of which
is publicly traded; and
* the opinion of Allen C. Ewing & Co., investment
bankers, or Ewing, that the consideration to be received by
Tarpon shareholders as a result of the merger is fair from a
financial point of view.
The Board of Directors of Community, after careful
study and evaluation of relevant factors, believes that the
merger will provide Community with expanded market
opportunities for profitable long-term growth. The
Community Board believes that the merger will result in the
profitable integration of Tarpon as a well-positioned
banking organization into Community's existing organization.
See "The Merger - Background of and Reasons for the Merger,"
on page 14.
Opinion of Financial Adviser
Ewing has rendered an opinion to Tarpon's Board of
Directors that the merger is fair from a financial point of
view to Tarpon and its shareholders. A copy of the opinion
is attached as Appendix "B" to this Proxy
Statement/Prospectus. We urge you to read the opinion in
its entirety to understand the assumptions made, other
matters considered and the reviews undertaken. See "The
Merger - Opinion of Financial Adviser," on page 15.
End page 3
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Tarpon Special Shareholders' Meeting
The Special Meeting will be held at 10:00 A.M.,
local time, on February --, 2000, at Tarpon's main office at
710 East Tarpon Avenue, Tarpon Springs, Florida 34689. Only
holders of Tarpon shares on January --, 2000, will be
entitled to vote at the Special Meeting. See "The Special
Meeting," on page 10.
Recommendation to Shareholders
The Board of Directors of Tarpon has determined that
the merger is in the best interests of the shareholders of
Tarpon and has approved the Agreement and Plan of Merger, or
the Merger Agreement, which governs the merger and a copy of
which is attached as Appendix "C" to this Proxy
Statement/Prospectus. Accordingly, the Board of Directors
unanimously recommends that the shareholders of Tarpon vote
"FOR" the merger. See "The Merger - Recommendation of
Tarpon's Board of Directors," on page 15.
Dissenters' Rights
Sections 607.1301, 607.1302 and 607.1320 of the Florida
Business Corporation Act, as amended, entitle Tarpon
shareholders to statutory dissenters' rights of appraisal
with respect to the merger. These sections are reprinted in
their entirety as Appendix "A" to this Proxy
Statement/Prospectus. You may lose these dissenters' rights
if you do not precisely follow the statutory procedure for
exercising dissenters' rights. See "Description of Stock
and Effect of Merger on the Rights of Tarpon Shareholders -
Rights of Dissent and Appraisal," on page 27.
Vote Required to Approve the Merger
The holders of a majority of the issued and
outstanding Tarpon shares entitled to vote at the Special
Meeting must approve the Merger Agreement and authorize the
merger. The Tarpon shareholders are entitled to one vote on
each matter to be considered and voted on at the Special
Meeting for each Tarpon Share held by them of record at the
close of business on January --, 2000.
In comparison to the requirement that a simple majority
approve the merger, as of December 9, 1999, Tarpon's present
directors and executive officers had the power to vote, or
direct the voting of, approximately 60.8% of the outstanding
Tarpon shares. We expect that all of the Tarpon shares as
to which Tarpon's directors and executive officers control
the voting power will be voted to approve the Merger
Agreement and the merger. Approval of the merger by the
Community shareholders is not required and will not be
sought. See "The Special Meeting - Voting Information," on
page 11.
Interests of Certain Persons in the Merger
Except for Mary Z. Smitzes, no officer or director
of Tarpon, or an associate of any such person, has any
direct or indirect material interest in the merger,
including any agreements for continued employment after the
merger. Mrs. Smitzes and Community will enter into a
End page 4
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consulting agreement which will continue for 5 years after
the merger. Tarpon's Board of Directors was aware of such
agreement and took it into account in approving the merger.
Conditions to the Merger; Regulatory Approvals
Consummation of the merger is subject to various
conditions, including:
* receipt of Tarpon shareholder approval where not
more than 5% of the Tarpon shares elect to dissent from the merger;
* receipt of the necessary regulatory approvals (described more fully
below);
* receipt of an opinion from Francis & Co., CPA's, regarding certain
tax aspects of the merger (which has been satisfied) and;
* satisfaction of other customary closing conditions.
Consummation of the merger is subject to the receipt of
the prior approval of the Board of Governors of the Federal
Reserve System, or the Fed, under the Bank Holding Company
Act. Upon such approval, the U. S. Department of Justice
will have up to 30 days to object to the merger on antitrust
grounds, but may shorten its review period to fifteen days.
An application for prior approval has been submitted but has
not yet been approved. See "The Merger - Conditions
Precedent to Closing," on page 19 and "Regulatory
Approvals," on page 20.
Tax Considerations
Community and Tarpon have received an opinion from
Francis & Co., CPA's, a copy of which is attached as
Appendix "D" to his Proxy Statement/Prospectus, that, among
other things, for federal income tax purposes:
* the merger will constitute a tax-free "reorganization" within the
meaning of Section 368(a)(1)(A) of the Internal Revenue Code of 1986,
as amended, or the Tax Code;
* Tarpon shareholders who receive only Community common stock in
exchange for their Tarpon common stock will not recognize gain or
loss in the merger except with respect to any fractional share of
Community common stock for which cash is received;
* Tarpon shareholders who receive a combination or Community common
stock and cash in exchange for their Tarpon common stock will
recognize gain equal to the lesser of
* the fair market value of the Community common stock plus the
amount of cash received, less his/her tax basis in the Tarpon
common stock surrendered, or,
* the amount of cash received;
End page 5
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* the tax basis of the Community common stock received in the merger by
a Tarpon shareholder will be the same as the tax basis of the Tarpon
common stock exchanged for such Community common stock, decreased by
an amount of cash received in the exchange and increased by the
amount of gain recognized by the Tarpon shareholder in the exchange;
and
* the holding period of the Community common stock received by a Tarpon
shareholder will period include the holding during which the Tarpon
shareholder held the Tarpon common stock exchanged provided the
Tarpon common stock is held as a capital asset at the effective date
of the merger.
For a more detailed discussion, see "The Merger -
Income Tax Considerations," on page 22. All Tarpon
shareholders are urged to consult their own tax advisors as
to the specific consequences to them of the merger under
federal, state, local and any other applicable tax laws.
Effective Time of the Merger
The merger will become effective when Articles of
Merger are filed with both the Florida and Georgia
Secretaries of State, which will take place not more than 10
business days following the later to occur of the effective
date of the last required regulatory consent and the date on
which the Tarpon shareholders approve the merger. This date
is referred to herein as the "Effective Time of the Merger."
Subject to the conditions specified in the Merger Agreement,
the parties anticipate that the merger will become effective
during the first quarter of 2000. There can be no
assurances, however, as to whether or when the merger will
occur. See "The Merger - Conditions Precedent to Closing,"
on page 19 and "Regulatory Approvals," on page 20.
Waiver and Amendment
Prior to the Effective Time of the Merger, any
provision of the Merger Agreement may be waived by the party
entitled to the benefits of such provision or by all
parties, to the extent allowed by law. Except as limited by
law, the Merger Agreement may be amended at any time by an
agreement in writing between Community and Tarpon. See "The
Merger - Waiver and Amendment," on page 21.
Termination of the Merger Agreement
The Merger Agreement may be terminated at any time
prior to the Effective Time of the Merger by the mutual
consent in writing of Community and Tarpon. The Merger
Agreement may also be terminated by either party under
certain other circumstances. See "The Merger -
Termination," on page 21.
Effect of the Merger on Rights of Tarpon Shareholders
At the Effective Time of the Merger, Tarpon
shareholders (other than shareholders who exercise their
statutory dissenters' rights against the merger) will
automatically become holders of Community shares. At that
time, their rights as shareholders of Community will be
End page 6
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determined by the Georgia Business Corporation Code and by
Community's Articles of Incorporation and Bylaws. The
rights of shareholders of Community differ from the rights
of shareholders of Tarpon with respect to certain important
matters, including the required shareholder votes as to
certain matters. See "Description of Stock and Effect of
Merger on the Rights of Tarpon Shareholders, " on page 25.
Unaudited Comparative Pro Forma Share Data
The following tables show summary historical financial
data for Community and Tarpon and also show similar
information reflecting the merger of Community and Tarpon
which is referred to as "pro forma" information. The pro
forma amounts assume that the merger had been effective
during the periods presented and had been treated as a
"purchase" for accounting and financial reporting purposes.
The information listed as "pro forma equivalent" for
Tarpon was computed by multiplying the pro forma amounts by
the per share exchange ratio of 1.6. This information
reflects the fact that Tarpon shareholders will receive more
than one Community share for each Tarpon share that they own
before the merger.
The pro forma information, while helpful in
illustrating the financial characteristics of the
continuation of Community and Tarpon under one set of
assumptions, does not attempt to predict or suggest future
results. The pro forma information also does not attempt to
show how Community and Tarpon would actually have performed
had they been combined throughout these periods. All
adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of results of
the unaudited historical interim periods have been included.
The information in the following tables is based on the
historical financial information that Community has
presented in its prior filings with the SEC and the
historical financial information for Tarpon included in this
Proxy Statement/Prospectus. When you read the summary
financial information provided in the following tables, you
should also read the historical financial information
provided in this document, which you can find beginning at
page F-1, as well as the historical financial information in
the other documents to which Community refers. See "Where
You Can Find More Information," on page 43.
As of
1998 September 30, 1999
Book value per share (period end):
Community $ 8.24 $ 8.65
Tarpon 12.87 12.12
Community pro forma combined 8.25 8.54
Tarpon pro forma combined 13.20 13.66
End page 7
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For the nine months
ended
1998 September 30, 1999
Cash dividends declared per share:
Community $ .10 $ .10
Tarpon .20 - -
Community pro forma combined .11 .09
Tarpon pro forma combined .18 .14
For the nine months
ended
1998 September 30, 1999
Diluted income per share:
Community $ .85 $ .59
Tarpon .38 (.50)
Community pro forma combined .79 .50
Tarpon pro forma combined 1.26 .80
Comparative Market Price Information
The Community shares trade on the OTC Bulletin Board.
In sporadic trading, during the three months prior to the
public announcement of the merger on October 12, 1999, and
since that date, some 2900 Community shares have traded, at
an average price of $15 per share.
No established trading market for the Tarpon shares
exists. Transactions in the Tarpon shares are infrequent
and are negotiated privately between the persons involved in
such transactions. Such transactions are not reported on an
exchange or other organized trading system. For these
reasons, Tarpon does not have reliable data regarding recent
trading activity in the Tarpon shares. As of the date of
this Proxy Statement/Prospectus, there were 307 holders of
record of Tarpon shares. To the best knowledge of Tarpon's
management, the Tarpon shares have always traded at or
around $10.00 per share. The last transaction in Tarpon
shares prior to announcement of the merger, for 100 shares,
took place in April 1999, at a price of $10.00 per share.
Based on this information, the following table sets
forth the closing price for Community common stock on
October 11, 1999, the estimated sale price of Tarpon common
stock on such date and the Tarpon common stock equivalent,
which is equal to the closing price of Community common
stock on October 11, 1999, multiplied by 1.6:
Community Tarpon Common Tarpon Common
Common Stock Stock (estimated) Stock Equivalent
------------ ----------------- ----------------
$15.00 $10.00 $24.00
End page 8
- ----------
The market price of the Community shares may fluctuate
before and after completion of the merger. No assurances
can be given as to the market price of Community shares or
Tarpon shares at, or in the case of the Community shares,
after the effectiveness of the merger.
Pro Forma Financial Information
Pro forma financial information reflecting the
acquisition of Tarpon by Community is not presented here
because the pro forma effect is not significant.
RISK FACTORS
By voting in favor of the proposal to approve the
merger, you will be choosing to invest in the Community
shares. An investment in the Community shares involves a
high degree of risk. In addition to the other information
included in this document, you should consider the matters
described below carefully in determining whether to approve
the merger.
Because the In the merger, each Tarpon share will be
exchanged price exchanged for a combination of $24 in cash and
is fixed, you 1.6 shares of Community common stock. This
may receive exchange price will not be adjusted if there is
less than you an increase or decrease in the per share price
expected in of Community from the $15 value assumed for
value for your purposes of the merger. Should such share price
Tarpon shares. decrease, due to changes in the business or
operations of Community, or due to general
market conditions, you may receive less than you
expected in value for your Tarpon shares.
You may have The Community shares you will receive in the
difficulty in merger will be freely transferable. However, at
selling your this time, Community's common stock is traded
Community sporadically and thinly on the OTC Bulletin
shares because Board. After the merger, the Community common
of the sporadic stock will become eligible for listing on the
and thin NASDAQ National Market and management intends to
trading market so list it. Nevertheless, there is no assurance
for such that an active public market for your shares
shares. will develop.
It will be After the merger, you will become a shareholder
difficult for of Community. In this connection, Community's
anyone to take Articles of Incorporation and Bylaws contain
over Community. certain anti-takeover provisions. These provisions
include:
* The power vested in the Board of Directors to
fix the terms of any preferred stock in its
sole discretion;
* Staggered terms for the directors where only a third
End page 9
- ----------
of them stand for reelection in any given year; and
* The requirement that two-thirds of the shareholders
approve mergers and similar transactions, amendments to
the Articles of Incorporation and Bylaws and removal of
directors.
These provisions may discourage non- negotiated takeover
attempts that you might consider to be in your best
interest. They will also tend to perpetuate existing
management. See "Description of Stock and Effect of
Merger on the Rights Tarpon Shareholders - Staggered
Board of Directors; Supermajority Approvals," on page 26.
A WARNING ABOUT FORWARD-LOOKING STATEMENTS
Both Community and Tarpon make forward-looking
statements in this document and in the Community public
documents, that are subject to risks and uncertainties.
These forward-looking statements include information about
possible or assumed future results of operations. Also,
when the words "believes," "expects," "anticipates" or
similar expressions are used, we are making forward-looking
statements. Many possible events or factors could affect
the financial results and performance of each of the two
companies. This could cause results or performances to
differ materially from those expressed in our forward-
looking statements.
SPECIAL MEETING
General Information
This Proxy Statement/Prospectus is being furnished
to the Tarpon shareholders in connection with the
solicitation, by and on behalf of the Board of Directors of
Tarpon, of proxies for use at the Special Meeting of
shareholders of Tarpon to be held at 10:00 A.M., local time,
on February --, 2000, at Tarpon's main office at 710 East
Tarpon Avenue, Tarpon Springs, Florida 34789, and at any
adjournment thereof, and is being mailed on January --,
2000, to the Tarpon shareholders entitled to receive notice
of and to vote at the Special Meeting.
The Special Meeting has been called by the Board of
Directors of Tarpon so that Tarpon shareholders may consider
and vote upon a proposal to merge Tarpon with Community,
with Community as the resulting bank holding company,
pursuant to the Merger Agreement, a copy of which is
attached as Appendix "C" to this Proxy Statement/Prospectus
and incorporated herein by this reference. Upon the
consummation of the merger, each Tarpon share will be
cancelled and converted into the right to receive at the
election of its holder $24.00 in cash or 1.6 Community
shares, provided that, except with respect to Tarpon shares
held by dissenting shareholders, in no event shall the total
consideration received by any Tarpon shareholder consist of
Community shares to the extent of less than 60%.
End page 10
- -----------
No fractional Community shares will be issued in
connection with the merger, but, rather, cash (without
interest) will be paid in lieu thereof, with the amount of
cash in lieu of fractional shares to be determined based
upon the $15 per share price.
Voting Information
At the close of business on January --, 2000, the
record date for determining the Tarpon shareholders eligible
to receive notice of and to vote at the Special Meeting,
155,000 Tarpon shares were issued and outstanding. With
respect to all matters to be considered and voted upon at
the Special Meeting, each holder of Tarpon shares is
entitled to one vote for each Tarpon share he or she holds
on the record date.
The presence, in person or by proxy, of at least a
majority of the total number of outstanding Tarpon shares is
necessary to constitute a quorum at the Special Meeting.
Some proxies may be broker non-votes (marked to indicate
that the shares are not being voted on the Merger
Agreement). Any proxy authorized to be voted at the Special
Meeting, whether or not the proxy is marked to "ABSTAIN" or
to effect a broker non-vote, will be counted in establishing
a quorum.
Approval of the Merger Agreement and the authorization
of the merger require the affirmative vote of the holders of
a majority of the issued and outstanding Tarpon shares
entitled to vote at the Special Meeting. Consequently, both
abstentions and broker non-votes will have the effect of a
vote "AGAINST" the approval of the Merger Agreement.
As of the record date for the Special Meeting,
Tarpon's directors, executive officers and their affiliates
had the power to vote, or direct the voting of,
approximately 60.8% of the issued and outstanding Tarpon
shares entitled to be voted at the Special Meeting. The
following table shows all persons who are "beneficial
owners" of more than five percent of Tarpon's common stock
as of January --, 2000.
Name and Address of Beneficial Owner Number of Shares Percent of Class(1)
- ------------------------------------ ---------------- ----------------
Mary Z. Smitzes 92,050* 59.39%
P. O. Box 236
Tarpon Springs, Florida 34688-0236
* Information relating to beneficial ownership of common
stock is based upon "beneficial ownership" concepts set
forth in rules of the SEC under Section 13(d) of the
Securities Exchange Act of 1934, as amended. Under such
rules, a person is deemed to be a "beneficial owner" of a
security if that person has or shares "voting power," which
includes the power to vote or direct the voting of such
security, or "investment power," which includes the power to
dispose of or to direct the disposition of such security. A
person is also deemed to be a beneficial owner of any
security of which that person has the right to acquire
beneficial ownership within sixty (60) days. Under the
rules, more than one person may be deemed to be a beneficial
owner of the same securities, and a person may be deemed to
be a beneficial owner of securities as to which he has no
beneficial interest. For instance, beneficial ownership
includes spouses, minor children and other relatives
residing in the same household, and trusts, partnerships,
corporations or deferred compensation plans which are
affiliated with the principal.
(1) The percentages are based on 155,000 shares of common
stock outstanding.
End page 11
- -----------
The following chart shows the number of shares of
Tarpon's common stock that each executive officer and
director of Tarpon beneficially owns, and the total common
stock that such person own as a group:
Name and Address of Beneficial Owner Number of Shares Percent of Class(1)
- ------------------------------------ ---------------- ----------------
Mary Jane Lindsay 900(2) .58%
P. O. Box 1913
Tarpon Springs, Florida 34688-1913
Barbara E. Richards 200 .12%
3626 Brompton Drive
Holiday, Florida 34691-4903
Mary Z. Smitzes 92,050 59.39%
P. O. Box 236
Tarpon Springs, Florida 34688-0236
Raymond C. Stinson 100(3) .05%
5900 Riverlawn Court
Holiday, Florida 34690-2526
Leah E. Underwood 1,000 .64%
90 Highland Avenue, #1404
Tarpon Springs, Florida 34689-5353 _______ ______
All directors and named 94,250 60.8%
executive officers as a group
(5 persons)
(1) The percentages are based on 155,000 shares of common
stock outstanding.
(2) Includes 350 shares held as a joint tenant with
Melpomone J. Smitzes and 350 shares held as a joint tenant
with Helen J. Smitzes.
(3) Held as joint tenant with Barbara J. Stinson.
Tarpon's management anticipates that all Tarpon shares
as to which Tarpon's present directors, executive officers
and their affiliates control the voting power will be voted
"FOR" approval of the Merger Agreement and the authorization
of the merger. There are no arrangements or undertakings
among Tarpon's present directors and their associates and
Community with respect to election of directors after the
merger or other matters.
Shares represented by properly executed proxies, if
such proxies are received at or prior to the Special Meeting
and not subsequently revoked, will be voted at the Special
Meeting in accordance with the choice specified therein, or,
if no choice is specified therein, will be voted
End page 12
- -----------
"FOR" approval of the Merger Agreement and the authorization
of the merger. A proxy may be revoked by its maker at any
time before it is exercised by giving written notice of
revocation to Tarpon's secretary or by properly submitting
to Tarpon a duly executed proxy bearing a later date.
Attendance at the Special Meeting will constitute revocation
of the proxy if the shareholder elects to vote in person.
The cost of soliciting proxies from holders of the
Tarpon shares will be borne by Tarpon. In addition to use
of the mail, Tarpon shareholders may be solicited by
personal contact, or by telephone, e-mail or other
electronic communications, by directors, officers or
employees of Tarpon, who will receive no additional
compensation for these activities. Tarpon will reimburse
custodians, nominees and fiduciaries for reasonable out-of-
pocket expenses incurred by them in connection with this
solicitation of proxies.
THE MERGER
The terms of the proposed merger are set forth in the
Merger Agreement, which is incorporated by reference into
and a copy of which is attached as Appendix "C" to this
Proxy Statement/Prospectus. The following description of
the merger summarizes the principal provisions of the Merger
Agreement; however, it is not complete, and is qualified in
all respects by reference to the Merger Agreement. All
Tarpon shareholders are urged to read carefully the Merger
Agreement, as well as all other appendices, in their
entirety.
The Merger Agreement
The Board of Directors of Tarpon has approved, and the
proper officers of Tarpon have executed and delivered, the
Merger Agreement. The Merger Agreement sets forth the terms
of the merger and contains representations and warranties of
each of Community and Tarpon, conditions precedent to each
of Community's and Tarpon's obligations to consummate the
merger, provisions relating to Tarpon's operations pending
consummation of the merger and certain other provisions.
How the Merger Will Work
At the Effective Time of the Merger, which is the date
of or to be specified in the certificate to be issued by the
Secretaries of State of Georgia and Florida causing the
merger to become effective, the issued and outstanding
shares of Tarpon common stock will be converted into the
right to receive either $24 in cash or 1.6 shares of
Community common stock. Within 10 business days after the
Effective Time of the Merger, Community, as the Exchange
Agent, will send to each Tarpon shareholder a letter of
transmittal. In this letter, each Tarpon shareholder will be
asked to select the relative percentage of cash (not to
exceed 40%) and Community shares he/she desires, and to
attach his/her Tarpon stock certificates. The cash and stock
certificates representing the Community shares will be
distributed by Community as promptly as practicable after
receipt of each letter of transmittal and the Tarpon stock
certificates.
End page 13
- -----------
Community will not issue fractional shares of Community
common stock in connection with the merger. Instead,
Community will pay cash (without interest) in lieu of
fractional shares, with the amount of cash to be paid in
lieu of fractional shares being determined based upon the
$15 per share purchase price.
The delivery of cash and Community stock certificates
may be subject to possible forfeiture under applicable
escheat laws if Tarpon stock certificates are not
surrendered for exchange within the legally specified
periods of time, which periods vary with the state of
residence of the certificate holder. Therefore, we urge all
Tarpon shareholders to surrender their Tarpon stock
certificates at the earliest possible date after
consummation of the merger.
On the basis of the number of shares of Tarpon common
stock which were outstanding on the date of this Proxy
Statement/Prospectus, a maximum of 248,000 shares and a
minimum of 148,800 shares of Community common stock may be
issued to the Tarpon shareholders pursuant to the terms of
the Merger Agreement.
Background of and Reasons for the Merger
In early April 1999, shortly before his death on April
18, 1999, Louis J. Smitzes, then Chairman of the Board and
President of Tarpon, having been introduced to Community by
Francis & Co., CPA's, inquired with Community about a
possible affiliation. Immediately after Mr. Smitzes' death,
the Board of Directors of Tarpon intensified its efforts to
examine all strategic alternatives available to Tarpon,
including a possible merger with Community. After a thorough
analysis of these alternatives, it became apparent to the
Board of Directors that a merger with and into a larger,
better capitalized bank holding company, but one which will
allow First National Bank to preserve its local identity as
a community bank and yet make First National Bank better
equipped to compete within its marketplace of Pinellas
County, would be the alternative best suited for Tarpon. The
Board of Directors then determined that a merger with and
into Community, not a large multi-state financial
institution already having banking subsidies in Florida,
would meet Tarpon's objectives, including the preservation
of the local identity of First National Bank as a community
bank.
After a period of mutual due diligence and to allow
Tarpon to settle certain litigation, the Merger Agreement
was unanimously approved by the Board of Directors of both
companies on September 29, 1999, became effective on October
8, 1999 and was publicly announced on October 12, 1999.
The terms of the merger were the result of arms'-length
negotiations between representatives of Tarpon and
representatives of Community. Without assigning any relative
or specific weights to the factors, the Board of Directors
of Tarpon considered the following material factors:
* the value of the consideration to be received by Tarpon shareholders
relative to the book value and earnings per share of Tarpon common
stock;
End page 14
- -----------
* information concerning the financial condition, results of operations
and business prospects of Community and the compatibility of
Community's banking concept with Tarpon's;
* the financial terms of recent business combinations in the financial
services industry;
* the alternatives to the merger, including remaining an independent
institution;
* the competitive and regulatory environment for financial institutions
generally;
* the fact that the merger will enable Tarpon shareholders to exchange
their Tarpon shares, in a tax-free or partially tax-free transaction,
for shares of common stock of a larger bank holding company, the
stock of which is publicly traded; and
* the opinion of Ewing, that the consideration to be received by Tarpon
shareholders as a result of the merger is fair from a financial point
of view.
Each member of the Board of Directors of Tarpon has
agreed to vote his/her shares of Tarpon common stock in
favor of the merger.
TARPON'S BOARD OF DIRECTORS RECOMMENDS THAT TARPON
SHAREHOLDERS VOTE FOR THE PROPOSAL TO APPROVE THE MERGER
AGREEMENT.
Management of Community believes that the merger will
provide Community with expanded market opportunities for
profitable long-term growth. Management of Community also
believes that the merger will result in a profitable
integration of Tarpon as a well positioned banking
organization into Community's existing organization.
Opinion of Financial Adviser
Tarpon has retained Ewing to render to Tarpon's 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 December 2, 1999,
Ewing delivered to Tarpon a letter confirming the
consideration to be received as fair from a financial point
of view. The full text of the letter appearing as Appendix
"B" to this Proxy Statement/Prospectus, should be read
carefully and in its entirety. Ewing did not recommend
the amount of consideration to be paid in the merger and
Ewing's 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 Ewing as of the date the
opinion was rendered.
In rendering its opinion, Ewing has, among other
things:
* reviewed certain publicly available financial and other data with
respect to Community, including audited financial statements for the
past three years, Tarpon's
End page 15
- -----------
audited financial statements for the past three years, and certain
other relevant financial and operating records of Tarpon and
Community;
* reviewed the Merger Agreement;
* reviewed certain historical market prices and trading volumes of the
Community common stock as reported by the OTC Bulletin Board and
historical and current market prices for the Tarpon shares;
* considered the financial terms, to the extent publicly available, of
selected recent acquisitions of financial institutions which Ewing
deemed to be comparable, in whole or in part, to the merger;
* analyzed the business prospects of Tarpon and Community, and the
economies of their respective markets;
* inquired about and discussed the Merger Agreement and other related
matters with Tarpon's counsel; and
* performed such other analyses and examinations as Ewing deemed
appropriate.
In connection with this review, Ewing assumed and
relied on the accuracy and completeness of the financial and
other information provided to it by Tarpon and Community.
Ewing made no independent verification of the supplied
information, did not make or obtain any evaluation or
appraisal of the assets or liabilities of Tarpon and did not
review any credit or loan files from Tarpon's loan
portfolio. Ewing did hold discussions with the management of
Tarpon concerning its historical operations and future
prospects and the decision of its Board of Directors to
negotiate with Community. The opinion is based upon market
and economic conditions as they existed on the date of the
opinion. Events occurring after the date of issuance of the
opinion, including but not limited to, changes in the market
price of securities, the results of operations, or material
changes in the value of the assets or liabilities of Tarpon
could affect the assumptions used and the conclusions of the
opinion.
Ewing is a regional investment banking firm that
specializes in the research, trading, and provision of
corporate finance services to the banking and thrift
industries. Tarpon's Board of Directors selected Ewing to
provide the opinion on the basis of the firm's expertise in
mergers and acquisitions of community banks, prior
experience with Community, and knowledge of the history of
Tarpon.
The following summary of the analysis performed by
Ewing in connection with its opinion is not a complete
description of the analysis performed by Ewing. The
evaluation of the fairness, from a financial point of view,
of the consideration to be received in the merger was to
some extent a subjective one based on the experience and
judgment of Ewing and not merely the result of mathematical
analysis of financial data. The preparation of a fairness
opinion involves a 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.
End page 16
- -----------
Ewing believes that its analysis must be considered as a
whole and that selecting only portions of the analysis and
factors considered by Ewing could create an incomplete view
of the process underlying Ewing's opinion. In addition,
Ewing 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,
Ewing incorporated numerous assumptions with respect to
business, market, monetary and economic conditions, industry
performance and other matters, many of which are beyond
Tarpon's and Community's control. Any estimates contained
in Ewing's 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 Ewing's analysis of the fairness to
Tarpon's shareholders of the consideration to be paid in the
merger.
Value and Liquidity of Community Shares. Ewing
reviewed the terms of the proposed consideration as
reflected in the Merger Agreement, which include the
issuance of Community shares plus cash for shares of Tarpon.
Ewing observed that the six-month average trading price of
Community shares which are listed on the OTC Bulletin Board
market has been approximately $15.00 per share. Ewing
observed that the trading volume in the shares has been
nominal, as the average trading volume for the period July
1999-November 1999 has been not more than 2000 shares per
month, and that there is only one broker-dealer making a
market in the stock. As the number of Community shares to
be issued in the merger will be at a minimum 148,800 shares
with a maximum of 248,000 shares, the impact on the market
price of Community shares caused by even a small percentage
of these shares being offered for resale could be
significant. For this reason, Ewing believes that a "lack
of marketability" discount should be applied to the
indicated market value of $15.00 per share to determine a
range of market value for the Community shares after their
issuance to Tarpon shareholders. Ewing applied a 20%
discount to the $15.00 price per share and determined that a
range of value for Community shares would be between $12.00
and $15.00 per share.
Selection of Valuation Method. Of the four likely
methods, the Comparison Method, Control Premium Method, Net
Asset or Liquidating Value Method and Discounted Cash Flow
Method, Ewing found that the Comparison Method is the only
one appropriate for use in Tarpon's circumstances. Under
this method, a comparison is made between the purchase price
of the transaction in question with prices paid for similar
banks during periods of similar economic activity where
prices are compared on the basis of ratios commonly used in
the industry, including price-to-book, price-to-earnings,
and price-to-deposits.
Analysis of Comparable Companies. Using industry
information, including information prepared by SNL
Securities, Ewing compared the financial performance of
Tarpon with the average performance of 201 independent
Florida community banks. The performance indicators, taken
from the 1998 results, utilized by Ewing for this comparison
included:
* the return on average assets, which was .26% for Tarpon compared to
.87% for the 201 banks;
* the return on average equity, which was 2.91% for Tarpon compared to
9.68% for the 201 banks;
End page 17
- -----------
* the equity-to-assets ratio, which was 9.16% for Tarpon compared to
8.56% for the 201 Florida banks; and
* the ratio of non-performing assets-to-assets, which was .28% for
Tarpon compared to .29% for the 201 banks.
On the whole, Ewing observed that Tarpon's operating
performance in 1998 and in 1999 did not compare favorably
with the average performance of Florida's 201 community
banks.
Analysis of Comparable Transactions. Ewing reviewed
the terms and financial characteristics of selected
transactions involving the acquisition of Florida banks by
commercial bank holding companies in 1998 and 1999. For
comparison, Ewing selected transactions involving similarly
performing banks in Florida during the 21 month period
commencing January 1, 1998 and ending September 30, 1999. A
total of 30 transactions were identified, which Ewing
believed was a sufficiently large number for comparison
purposes. After eliminating all transactions involving
selling banks with assets in excess of $75 million,
transactions in which the operations of the selling bank
were unprofitable in the year of acquisition and
transactions involving selling banks with non-performing
assets in excess of 1% of assets, Ewing used 12 of the 30
transactions as the basis for comparison.. In the
comparison, Ewing analyzed the two ratios that are generally
utilized in the banking industry for comparing the prices
paid in transactions involving banks. These ratios are
price-to-book value ratio, which was between 1.73 and 1.92
for the Tarpon/Community transaction compared to an average
of 2.67 for the 12 transactions, and price-to-earnings
ratio, which was between 57.0 and 65.0 for the
Tarpon/Community transaction compared to 22.74 for the 12
transactions. On the whole, Ewing observed that the price to
be paid by Community is somewhat lower than the price paid
in the comparable transactions when based on the price-to-
book ratio, but is very much higher when based on the price-
to-earnings ratio.
Because the reasons for and circumstances surrounding
each of the transactions analyzed were diverse and because
of the inherent differences between the operations of Tarpon
and the 12 banks in the selected transactions, Ewing
believed that a strict reliance on the quantitative
comparable transaction analysis is not meaningful without
further qualitative considerations. Ewing believed that the
proper use of a comparable transaction analysis would
involve qualitative judgments concerning differences between
the characteristics of these transactions and the Tarpon
merger which may have affected the acquisition value of the
acquired companies and Tarpon. The qualitative factors
considered by Ewing in connection with its opinion included
Ewing's views as to the number of potential buyers in each
of these transactions and the ability of the acquirors to
implement cost savings and business synergies as a result of
each merger.
Analysis of Community's Financial Performance. Ewing
performed an analysis as to the relative profitability and
quality of the shares of Community including a comparison of
Community's operating performance with the average of 5
other publicly traded smaller bank holding companies that
serve smaller markets in Georgia. Ewing observed that for
the twelve-month period ended June 30, 1999, Community
produced an return on assets of 1.21% compared to an average
of .98% for the 5 bank holding companies, a return on equity
of 11.50% compared to an average of 10.51% for the 5 bank
holding companies, and had non-performing assets-to-assets
of .67% compared to an average of .45% for the 5 bank
holding companies, and an equity-
End page 18
- -----------
to-assets ratio of 10.48% compared to an average of 9.21%
for the 5 bank holding companies. On the whole, Ewing
observed that Community performed better than its peers with
respect to 4 out of the 5 typical indicators of financial
strength and performance.
There was no one company or transaction used in the
above analysis as a comparison that is identical to Tarpon,
Community, 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 company
data. Analysis must also be given to the consolidation
issues within the financial services industry.
Ewing also analyzed the value that Community would add
in terms of:
* liquidity,
* capital required to continue the growth patterns of Tarpon, and
the ability of senior management of Tarpon to complement that of
Community as Community expands its franchise in Pinellas County,
Florida.
* payment of future dividends.
Trading in Community shares is currently being
conducted on the OTC Bulletin Board, and upon the
effectiveness of the merger, Community will apply to list
the Community shares on the NASDAQ National Market. Ewing
concluded that such listing will enhance the liquidity of
the Community shares.
Ewing is continually engaged in the valuation of
businesses and their securities in connection with mergers
and acquisitions, and valuations for estate, tax, corporate
and other purposes. Tarpon has paid Ewing a fee of $6,000
in connection with its engagement. No compensation payable
to Ewing is contingent on the conclusions reached in the
opinion of Ewing. Tarpon has also agreed to indemnify Ewing
and certain related persons against certain liabilities
relating to or arising out of its engagement.
The foregoing description of Ewing's opinion is
qualified in its entirety by reference to the full text of
such opinion which is attached as Appendix "B" to this Proxy
Statement/Prospectus. A copy of the report which
accompanied the opinion may be obtained by Tarpon
shareholders by calling Barbara Richards at (727) 938-9771.
Conditions Precedent to Closing
In addition to approval of the Merger Agreement by the
shareholders of Tarpon, consummation of the merger is
subject to the fulfillment, on or prior to the Effective
Time of Merger, of certain other conditions. Such
conditions include, among others, the following:
End page 19
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* the receipt of all necessary consents of the regulatory authorities;
* there shall not be pending or threatened any action, proceeding or
investigation in connection with the merger;
* the accuracy of the representations and warranties of each of
Community and Tarpon;
* each of Community and Tarpon shall have performed and complied with
all agreements and conditions to be performed or complied with by
them under the Merger Agreement;
* each of Community and Tarpon shall have delivered to the other party
certain documents described in the Merger Agreement;
* there shall have been no determination by either Community or Tarpon
that any fact, event or condition exists or has occurred that, in the
reasonable judgment of either party would have a material adverse
effect on the other party or that would otherwise render inadvisable
the consummation of the merger;
* all employment agreements between Tarpon, First National Bank and any
officer or employee shall be terminated as of the Effective Time of
the Merger, and, at Community's election, satisfactory replacement
agreements, if any, will have been executed and delivered;
* Community shall have received the resignation of all officers and
directors of Tarpon; and
* the holders of not more than 5% of the Tarpon shares have elected to
exercise their right to dissent for the merger and demand payment for
cash for the fair value of their shares.
Regulatory Approvals
Consummation of the merger and the transactions
contemplated by the Merger Agreement are subject to, and
conditioned upon, receipt of approval from the Fed.
Application for prior approval pursuant to Section 3(a)(5)
of the Bank Holding Company Act has been filed with the Fed
on or about December 3, 1999. As of the date of this Proxy
Statement/Prospectus, the Fed has not yet approved the
merger. The merger may be consummated 30 days after the Fed
grants its approval, although this period may be shortened
to 15 days by the Attorney General of the United States.
During this period, the United States Justice Department may
challenge the merger on antitrust grounds.
There can be no assurance that the Fed will approve or
take other required action with respect to the merger.
Community and Tarpon are not aware of any governmental
approvals or actions that are required in order to
consummate the merger except as described above. Should any
such other approval or action be required, Community and
Tarpon expect to seek the
End page 20
- -----------
approval or action. However, there can be no assurance as
to whether or when any other approval or action, if
required, could be obtained.
Waiver and Amendment
Prior to the Effective Time of the Merger, any
provision of the Merger Agreement may be waived by the party
entitled to the benefits of such provision or by all
parties, to the extent allowed by law. In addition, the
Merger Agreement may be amended at any time, to the extent
allowed by law, by an agreement in writing between Community
and Tarpon.
Termination
The Merger Agreement may be terminated prior to the
Effective Time of the Merger, either before or after its
approval by the shareholders of Tarpon:
* by the mutual consent of Community and Tarpon
* by Community or Tarpon if consummation if the merger does not occur
by reason of the failure of any of the conditions precedent set forth
in the Merger Agreement; or
* by Community or Tarpon, in the event that the merger is not
consummated by March 31, 2000, unless the failure to consummate by
such time is due to the breach of the Merger Agreement by the party
seeking to terminate.
Interests of Certain Persons in the Merger
Except for Mary Z. Smitzes, no officer or director of
Tarpon, or any associate of any such party, has any direct
or indirect material interest in the merger, including
agreements for the continued employment by Community after
the merger. Effective after the merger, Community and Mary
Z. Smitzes will enter into a consulting agreement under
which Mrs. Smitzes will receive an annual consulting fee of
$50,000 for 5 years, as well as reimbursement for medical
coverage and life insurance premiums both at levels in
effect on December 31, 1998. The consulting agreement will
terminate should Mrs. Smitzes die prior to the expiration of
the 5-year period. Community's decision to enter into this
agreement was based on the fact that Mrs. Smitzes has been
actively involved with First National Bank since its
inception and has many valuable contacts in the community.
The Tarpon Board was aware of these interests and considered
them, among other matters, in approving the Merger
Agreement.
Employee Benefits
Under the Merger Agreement, Tarpon and Community will
take appropriate steps to terminate all employee benefit
plans of Tarpon and First National Bank as of the Effective
Time of the Merger, or as promptly as practicable
thereafter, except for the health plan currently in effect
for employees of First National Bank, which shall continue
in effect after the Effective Time of the Merger. After the
termination of all such plans, the officers and employees of
Tarpon will be eligible to participate in Community's
employee benefit plans, including welfare
End page 21
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and fringe benefit plans, on the same basis as any newly-
hired employee of Community, but effective at the earliest
applicable entry date set forth in such plans.
Income Tax Considerations
The following summarizes the opinion of Francis &
Co. with respect to the material federal income tax
consequences of the merger to Community, Tarpon and the
Tarpon shareholders. This summary is based on current law,
which is subject to change at any time, possibly with
retroactive effect. This summary is not a complete
description of all tax consequences of the merger and, in
particular, may not address federal income tax consequences
applicable to you if you are subject to special treatment
under federal income tax law, such as rules relating to
Tarpon shareholders who are not citizens or residents of the
United States, who are financial institutions, tax exempt
organizations, insurance companies or dealers in securities,
or shareholders who acquired their shares of Tarpon common
stock pursuant to the exerciserof options or otherwise as
compensation. In addition, this summary does not address
the tax consequences of the merger under applicable state,
local or foreign laws. This discussion assumes you hold your
shares of Tarpon common stock as a capital asset within the
meaning of Section 1221 of the tax code. Each Tarpon
shareholder should consult with his or her tax advisor about
the tax consequences of the merger in light of his or her
individual circumstances, including the application of any
federal, state, local or foreign law.
The merger will qualify as a "reorganization" under
Section 368(a)(1)(A) of the Tax Code. If the merger does
qualify as a reorganization, neither Tarpon nor Community
will recognize any gain or loss for federal income tax
purposes.
The federal income tax consequences to you as a Tarpon
shareholder will depend on whether you receive only shares
of Community common stock or a combination of Community
common stock and cash for your Tarpon common stock. The
consequences of each of these two alternatives are
summarized below.
If you receive only shares of Community common stock,
or only shares of Community common stock plus cash instead
of a fractional share, in exchange for all your Tarpon
common stock, then
* You will not recognize any gain or loss on the exchange of your
Tarpon common stock for Community common stock, except for the
receipt of cash instead of a fractional share;
* Your aggregate tax basis for the shares of Community common stock,
including any fractional share interest, received for your Tarpon
common stock will be the same as your aggregate tax basis for the
Tarpon common stock;
* Your holding period for shares of Community common stock, including
any fractional share interest, received for your Tarpon common stock
will include your holding period for the Tarpon common stock
exchanged for the Community common stock.
End page 22
- -----------
* If you receive cash instead of a fractional share of Community common
stock, you will recognize gain or loss equal to the difference
between the amount of the cash received and your tax basis allocable
to the fractional share. This gain or loss generally will be capital
gain or loss.
If you exchange your Tarpon common stock for shares of
Community common stock and cash, not counting any cash
received instead of a fractional share, then:
* You will recognize any gain you realize up to the amount of cash
received, excluding cash paid instead of a fractional share, but will
not recognize any loss on the exchange of your Tarpon common stock
for Community common stock and cash. The amount of gain or loss you
realize will be the difference between your tax basis for your Tarpon
common stock and the sum of the fair market value, on the date of the
merger, of the Community common stock you receive and the cash you
receive.
* The amount of gain recognized generally will be a capital gain. Under
certain circumstances, however, the amount of gain you recognize
could be taxable as a dividend to the extent of the portion of
Tarpon's accumulated earnings, as computed for federal income tax
purposes, allocable to your stock at the time of the merger. None of
your gain should be treated as a dividend if
* The Community common stock you and related persons, directly or
indirectly, own after the merger, as a percentage of all
Community common stock, is less than
* The percentage of all Community common stock that you and
related persons would, directly or indirectly, own after the
merger if all the outstanding Tarpon common stock were exchanged
solely for shares of Community common stock.
* Your aggregate tax basis for the shares of Community common stock,
including any fractional share interest, received for your Tarpon
common stock will be the same as your aggregate tax basis for the
Tarpon common stock, plus the amount of gain you recognize, minus the
amount of cash you receive, excluding cash paid instead of a
fractional share.
* If you exchange two or more "blocks" of Tarpon common stock for which
you paid different prices per share or otherwise have different tax
bases, the amounts of gain realized and recognized should be computed
separately for each block. As a result, you may not reduce the amount
of gain to be recognized for one block of Tarpon common stock by a
loss you realize on another block.
* If you receive cash instead of a fractional share, you will recognize
gain or loss equal to the difference between the amount of cash
received and your tax basis allocable to the fractional share. This
gain or loss generally will be capital gain or loss.
End page 23
- -----------
You should consult your tax advisor to determine
whether the gain you recognize on the exchange of your
Tarpon common stock for Community common stock and cash is
to be treated as a capital gain or as a dividend.
Accounting Treatment
It is anticipated that the merger will be accounted for
as a "purchase" for financial reporting purposes.
Expenses
The Merger Agreement provides that Community and Tarpon
will each pay its own expenses in connection with the merger
and related transactions, including, but not limited to, the
fees and expenses of its own counsel and accountants.
Resales of the Community Shares
The Community shares issued pursuant to the Merger
Agreement will be freely transferable under the Securities
Act of 1933, except for shares issued to any Tarpon
shareholder who may be deemed to be an "affiliate" of Tarpon
for purposes of Rule 145 under the Securities Act as of the
date of the Special Meeting. Persons who may be deemed to be
"affiliates" of Tarpon will include certain officers and
directors of Tarpon as well as principal (10% or more)
shareholders of Tarpon. Affiliates may not sell their
Community shares acquired in connection with the merger,
except pursuant to an effective registration statement under
the Securities Act covering such shares or in compliance
with Rule 145 or another applicable exemption from the
registration requirements of the Securities Act. Under Rule
145, a former director of Tarpon will be able to sell
his/her Community shares immediately after the merger if
he/she does not become a director or an officer of
Community, but subject to the volume limitations of Rule
144(e) under the Securities Act. The former director will
be able to sell his/her Community shares without being
subject to the volume limitations after the expiration of an
one-year period after the Effective Time of the Merger.
This Proxy Statement/Prospectus does not cover resales
of Community shares following consummation of the merger,
and no person may make use of this Proxy
Statement/Prospectus in connection with any such resale.
OTC Bulletin Board Listing; Future NASDAQ National Market Listing
Community common stock is listed and traded on the OTC
Bulletin Board. The Community shares issued to the Tarpon
shareholders pursuant to the Merger Agreement will also be
so listed. After the merger, Community intends to list the
Community shares on the NASDAQ National Market, in order to
facilitate broader trading and to enhance the liquidity of
the Community common stock.
End page 24
- -----------
DESCRIPTION OF SECURITIES AND EFFECT OF MERGER ON THE RIGHTS
OF THE TARPON SHAREHOLDERS
If the merger is consummated, Tarpon shareholders
(other than shareholders who perfect their statutory
dissenters' rights against the merger) will become holders
of Community shares.
The following table sets forth, in summary form, a
comparison of certain rights of shareholders owning
Community shares and shareholders owning Tarpon shares.
Community
Tarpon
One vote for each share held
One vote for each share held
No cumulative voting rights in
the election of directors,
meaning that the holders of a
plurality of the Community
shares elect the Board of
Directors
No cumulative voting rights in
the election of directors,
meaning that the holders of a
plurality of the Tarpon shares
elect the Board of Directors
Dividends may be paid from funds
legally available, subject to
contractual and regulatory
restrictions
Dividends may be paid from funds
legally available, subject to
contractual and regulatory
restrictions
Right to participate pro rata in
distribution of assets upon
liquidation
Right to participate pro rata in
Distribution of assets upon
liquidation
No pre-emptive or other rights
to subscribe for any additional
shares or securities
No pre-emptive or other rights
to subscribe for any additional
shares or securities
No conversion rights
No conversion rights
Directors serve staggered three-year terms
Directors serve one-year terms
Certain corporate actions,
including business combinations,
an amendment of the Articles of
Incorporation, and the removal
of a director, require the
affirmative vote of two-thirds
of the votes entitled to be cast
by the holders of all voting
shares
Corporate actions require the
affirmative vote of a majority
of the votes actually cast at a
shareholders' meeting, except
that an amendment of the
Articles of Incorporation
requires the affirmative vote of
75% of the votes entitled to be
cast by the holders of all
voting shares
Preferred stock is authorized
No preferred stock is authorized
A copy of Community's Amended and Restated Articles of
Incorporation, dated May 21, 1999, and its Amended and
Restated Bylaws, is attached as Appendix "E" and "F,"
respectively, to this Proxy Statement/Prospectus.
End of page 25
- --------------
Capitalization of Community
Community is authorized to issue 60,000,000 shares of
capital stock, consisting of 50,000,000 shares of common
stock and 10,000,000 shares of no par value preferred stock.
As of January __, 2000, there were 1,518,871 shares
of Community common stock issued and outstanding, and no
shares of preferred stock issued and outstanding.
Community's Board of Directors may at any time, without
additional approval of the Community shareholders, issue
authorized but unissued shares of Community common or
preferred stock.
Staggered Board of Directors; Supermajority Approvals
Community's Articles of Incorporation and Bylaws
contain several provisions that may make Community a less
attractive target for an acquisition of control by an
outsider who does not have the support of Community's Board
of Directors.
Pursuant to Community's Articles of Incorporation and
Bylaws, Community's Board of Directors is divided into three
classes of directors serving staggered three-year terms,
with the terms of each class of directors expiring each
succeeding year. Also pursuant to Community's Articles of
Incorporation and Bylaws, the vote or action of shareholders
possessing two-thirds of the votes entitled to be cast by
the shareholders of all the issued and outstanding shares of
Community capital stock is required to:
* remove a member of Community's Board of Directors;
* approve any merger or consolidation of Community with or into any
other corporation, and the sale, lease, exchange or other disposition
of all, or substantially all, of Community's assets to or with any
other corporation, person or entity, with respect to which the
approval of Community's shareholders is required by the provisions of
the corporate laws of the State of Georgia; and
* alter, delete or rescind any provision of Community's Articles of
Incorporation.
Because vacancies on the Board of Directors can only be
filled by a majority vote of the directors then in office,
Community's staggered Board of Directors makes it more
difficult for its shareholders to force an immediate change
in the composition of the majority of the Board. A
potential acquirer of Community may, therefore, be
discouraged or prevented from soliciting proxies for the
purpose of electing directors other than those nominated by
current management for the purpose of changing the policies
or control of Community.
Capitalization of Tarpon
Tarpon is authorized to issue 500,000 shares of common
stock, $.1 par value. As of January __, 2000,
155,000 Tarpon shares were issued and outstanding. All
outstanding Tarpon shares are fully paid and nonassessable.
End of page 26
- --------------
The foregoing summary relating to both Community and
Tarpon is not complete and is qualified in all respects by
reference to the Articles of Incorporation and Bylaws of
each of Community and Tarpon and the laws of the States of
Georgia and Florida, respectively.
Rights of Dissent and Appraisal
In the event that the proposal is approved, under
Florida law, each Tarpon shareholder may dissent from the
merger and receive in cash the fair value, as of the day
prior to the Special Meeting, of his/her Tarpon shares.
Such fair value is exclusive of any appreciation or
depreciation in anticipation of the merger. The appraisal
value of the Tarpon shares may differ from the consideration
that a Tarpon shareholder would be entitled to receive under
the terms of the merger. The following description
summarizes the shareholder dissent provisions of the Florida
Business Corporation Act, the full text of which is set
forth as Appendix "A" to this Proxy Statement/Prospectus.
Under Florida law, a Tarpon shareholder may dissent
from the merger by complying with the following procedures:
* the dissenting shareholder must deliver to Tarpon, prior to the
Special Meeting, written notice of his or her intent to demand
payment for his or her Tarpon shares;
* the dissenting shareholder must refrain from voting in favor of the
proposal herein, i.e. a failure to vote against the proposal will
not constitute a waiver of the shareholder's appraisal rights;
* within 10 days after the date of the Special Meeting, Tarpon shall
give written notice of authorization of the merger by the
shareholders to such dissenting shareholder; and
* within 20 days after the dissenting shareholder receives such notice
of authorization of the merger, the dissenting shareholder shall file
with Tarpon a notice of his or her election to dissent and a demand
for payment of the fair value of his or her shares. A mere vote
against the proposal herein will not be deemed to satisfy such notice
requirement. The notice must state the name and address of the
dissenting shareholder and the number of shares to which the
shareholder is dissenting. Any dissenting shareholder filing an
election to dissent shall deposit his or her certificates for
certificated shares with Tarpon simultaneously with the filing of the
election to dissent. Any shareholder who fails to file this notice
of election within this period of time will be bound by the merger.
A shareholder may dissent as to less than all of the
Tarpon shares held by him or her, and in such event, such
dissenting shareholder is treated as two separate
shareholders. Once Tarpon offers to pay the dissenting
shareholder for such shares, the notice of election cannot
be withdrawn except with the consent of Tarpon. However,
the right of a dissenting shareholder to be paid the fair
value of his or her shares shall cease if:
* the demand is withdrawn;
End of page 27
- --------------
* the merger is abandoned;
* no demand or petition for determination of fair value is filed with
the appropriate court within the time provided by law; or
* a court of competent jurisdiction determines that such shareholder is
not entitled to the relief provided under Florida law.
Within 10 days after the later of the expiration of the
period in which the dissenting shareholder may file a notice
of election to dissent, or the Effective Time of the Merger
(but in no event later than 90 days after the Special
Meeting), Tarpon is required to make a written offer to each
dissenting shareholder to purchase such shareholder's Tarpon
shares at a price deemed by Tarpon to be the fair value of
such shares. If, within 30 days after the making of such
offer, any shareholder accepts the same, payment therefor
shall be made within 90 days after the later of the date
such offer was made or the consummation of the merger.
However, if Tarpon has failed to make an offer to purchase
or, within the 30 day period after Tarpon has made an offer
to purchase, Tarpon and the dissenting shareholder are
unable to agree with respect to a price, then Tarpon, within
30 days after receipt of written demand from such dissenting
shareholder given within 60 days after the Effective Time of
the Merger, shall, or at its election within such period,
may, file an action in a court of competent jurisdiction in
the county in which Tarpon maintains its registered office
requesting that the fair value of the Tarpon shares be found
and determined. If Tarpon shall fail to institute such
proceedings, any dissenting shareholder may do so in the
name of Tarpon. All dissenting shareholders, other than
dissenting shareholders who have agreed with Tarpon as to
the value of their Tarpon shares, shall be deemed to be
parties to the proceeding as an action against their shares.
In such proceeding, the court may, if it so elects, appoint
one or more persons as appraisers to receive evidence and
recommend a decision on the question of fair value. Tarpon
shall pay each dissenting shareholder the amount found to be
due to such shareholder within 10 days after a final
determination of such proceedings. Upon payment of such
judgment, the dissenting shareholder will cease to have any
interest in the Tarpon shares.
Any judgment rendered in any dissent proceeding may, at
the discretion of the court, include an allowance for
interest at such rate as the court may deem fair and
equitable. The cost and expenses of any such dissent
proceeding shall be determined by the court and shall be
assessed against Tarpon, but all or any part of such costs
and expenses may be apportioned and assessed against the
dissenting shareholders, in such amount as the court deems
equitable, if the court determines that Tarpon made an offer
to the dissenting shareholders and the shareholders' failure
to accept such offer was arbitrary, vexatious, or not in
good faith. The expenses awarded by the court shall include
reimbursement for reasonable compensation for, and
reasonable expenses of the appraisers, but not fees and
expenses of any attorney or expert employed by any of the
parties in the proceedings. However, reasonable
compensation of attorneys and experts of shareholders who
are party to the proceedings may be awarded at the court's
discretion, if it is determined that the fair value of the
shares materially exceeds Community's offer to purchase such
shares.
End of page 28
- --------------
The foregoing is only a summary of the Florida law
relating to shareholders rights of dissent. The full text
of such provisions is set forth as Appendix "A" to this
Proxy Statement/Prospectus and each Tarpon shareholder is
urged to read these provisions carefully.
DESCRIPTION OF COMMUNITY
Business
The disclosures made in this Proxy
Statement/Prospectus, together with the following
information, which is specifically incorporated herein by
this reference, describe the business of Community:
1. Community's Annual Report on Form 10-KSB for the
fiscal year ended December 31, 1998.
2. Community's Quarterly Reports on Form 10-QSB for
the quarters ended March 31, 1999. June 30, 1999 and
September 30, 1999.
3. Community's Current Report on Form 8-K, dated
October 12, 1999.
The Forms 10-KSB and 10-QSB referred to above are
attached as Appendix G and Appendix H, respectively, to this
Proxy Statement/Prospectus.
Additional Information
Information relating to executive compensation, voting
securities and securities held by directors and principal
holders, and other related matters as to Community is
incorporated by reference as set forth in Community's
Schedule 14A, filed with the SEC on April 13, 1999,
which is incorporated herein by reference. Tarpon
shareholders desiring copies of any of these documents may
read and/or copy them at the SEC or obtain them from
Community, all as stated under "Where You Can Find More
Information," on page 43.
Asset Quality. The following schedule summarizes
Community's asset quality position at September 30, 1999 and
December 31, 1998:
September 30, December 31,
1999 1998
------------- ------------
Non Accruing loans $360,011 $ 67,467
Loans 90 days past due
and still accruing interest 113,920 572,000
Troubled debt restructuring - - - -
Potential problem loans 685,542 1,143,988
Potential problem loans include non-accruing loans,
loans 90 days past due and still accruing interest, troubled
debt restructuring, and any other loans exhibiting above-average
End of page 29
- --------------
credit weaknesses. As evidenced by the above Schedule,
potential problem loans were reduced from $1,143,988 at
December 31, 1998 to $685,542 at September 30, 1999. The
majority of the above reduction was due to charge-offs
recorded during the nine-month period ended September 30,
1999.
Accrual of interest on loans is discontinued when
reasonable doubt exists as to the full, timely collection of
interest or principal or they become contractually in
default for 90 days or more as to either interest or
principle unless they are both well secured and in the
process of collection.
Management is not aware of any loans classified for
regulatory purposes as loss, doubtful, substandard or
special mention that have not been disclosed above, which
(a) represent or result from trends or uncertainties which
management reasonably expects will materially impact future
operating results, liquidity, or capital resources, or (b)
represent material credits about which management is aware
of information which causes it to have serious doubts as to
the ability of such borrowers to comply with the loan
repayment terms.
Allowance for Loan Losses. Community maintains an
allowance for loan losses appropriate for the quality of the
loan portfolio and sufficient to meet anticipated future
loan losses. Community utilizes a comprehensive loan review
and risk identification process to determine the adequacy of
the allowance. Many factors are considered when evaluating
the allowance, including historical loss trends; migration
trends in criticized and classified loans in the portfolio;
trends in past due and non-accrual loans; trends in
portfolio volume, composition, maturity and concentrations;
changes in local and regional economic market conditions;
the accuracy of the loan review and risk identification
system; and the experience, ability, and depth of lending
personnel and management.
In determining the appropriate level of the allowance,
Community relies primarily on analysis of the major
components of the loan portfolio such as commercial loans,
commercial real estate loans, consumer loans, construction
loans, residential real estate loans, and all other loans
and unfunded commitments. Community has established a
minimum loss factor for certain problem loan grade
categories and for general categories of non-performing
loans. All significant problem loans are reviewed
individually to establish either the minimum loss factor
(formula) or a specific reserve higher than the formula. All
significant non-problem loans are reserved at the greater of
the minimum loss rate for the category of loans or the
weighted average historical loss rate over a defined loss
horizon as computed from the migration analysis. Other
homogenous loan pools such as the consumer loans,
construction loans, and residential mortgage loans are
reserved at the greater of the minimum loss rate or the
weighted average historical loss rate as computed in the
migration analysis
Approximately 96% of Community's loan portfolio was
made to borrowers residing in Turner County, Georgia and
Crisp County, Georgia. These two counties are heavily
dependent upon the agricultural industry and the ultimate
collectibility of a substantial portion of Community's loan
portfolio is thus dependent on or susceptible to
agricultural production, commodity prices and land values.
End of page 30
- --------------
The allowance for loan losses approximated 1.66% of
outstanding loans at September 30, 1999 as compared to 2.02%
at December 31, 1998. The reason for the above decline is
twofold: (i) The allowance was reduced by approximately
$62,000 due to heavy charge-offs experienced during 1999,
and (ii) the loan portfolio grew by approximately $16.2
million due to a strong loan demand.
The table below summarizes the changes in the allowance
for loan losses for the nine-month period ended September
30, 1999 and the year ended December 31, ;998.
Nine-month
Period ended Year ended
September 30, 1999 December 31, 1998
Allowance for loan losses
at beginning of period $ 1,824,179 $ 1,115,706
Less: loans charged off (753,802) (571,777)
Recoveries on loans
previously charged off 31,846 110,033
---------- ----------
Net loans charged off 721,956 461,744
Provision for loan losses
charged to income 660,000 720,000
---------- ----------
Allowance for loan losses
at end of period $ 1,762,223 $1,824,179
========== ===========
Ratio of net charge offs to average
loans outstanding (annualized) .98% .55%
As evidenced in the above schedule, Community is
experiencing heavier losses in 1999 when compared to 1998.
This is mainly due to weaknesses in the agricultural
industry (low commodity prices, drought conditions) upon
which a significant portion of Community's loans are
dependent. Also note that 69.3 % of the charge-offs in 1999
resulted from a single customer relationship. Absent that
single relationship, net charge-offs to average loans would
have amounted to only .30%.
Management considers the allowance for loan losses to
be adequate and sufficient to absorb possible future losses;
however, there can be no assurance that charge-offs in
future periods will not exceed the allowance for loan losses
or that additional provisions to the allowance will not be
required.
Liquidity and Sources of Capital. As of September 30,
1999, Community National Bank's capital was $9.5 million.
This level of capitalization is adequate based on the
following capital ratios and guidelines.
End of page 31
- --------------
Bank's Minimum required
September 30, 1999 by the OCC
------------------ ----------
Leverage ratio 7.9% 4.0%.
Risk weighted ratio 10.6% 8.0%
Total assets increased by $5.1 million to $126.7
million during the nine-month period ended September 30,
1999. The increase is attributed to a single deposit, the
majority of which had been withdrawn by October 15, 1999.
Liquidity is Community's ability to meet all deposit
withdrawals immediately, while also providing for the credit
needs of customers. The September 30, 1999 financial
statements evidenced a satisfactory liquidity position as
total cash and cash equivalents amounted to $4.8 million,
representing 3.8% of total assets. Investment securities
amounted to $8.7 million, representing 6.9% of total assets;
these securities provide a secondary source of liquidity
since they can be converted into cash in a timely manner.
Community National Bank is a member of the Federal Reserve
System and is maintaining relationships with several
correspondent banks and, thus, could obtain funds on short
notice. Community's management closely monitors and
maintains appropriate levels of interest earning assets and
interest bearing liabilities, so that maturities of assets
are such that adequate funds are provided to meet customer
withdrawals and loan demand. There are no trends, demands,
commitments, events or uncertainties that will result in or
are reasonably likely to result in Community's liquidity
increasing or decreasing in any material way.
Results of Operations. Net income for the three months
ended September 30, 1999 amounted to $404,551 or $.23 per
diluted share. For the three-month period ended September
30, 1998, net income amounted to $303,702 or $.25 per
diluted share, Basic earnings per share for each of the
three-month periods ended September 30, 1999 and 1998
amounted to $.27. The reduction in diluted earnings per
share figures for the three-month period ended September 30,
1999 as compared to the three-month period ended September
30, 1998 is mainly due to the fact that the average number
of shares outstanding increased by approximately 400,000,
and due to the granting of 110,000 stock options in
connection with the organization of Cumberland National
Bank. Net income over the above periods, however, has
increased by $100,849 due to increases of $158,610 in net
interest income, and $38,629 in service charges, and
decreases of $19,026 in operating expenses and $77,300 in
tax provisions.
For the nine-month periods ended September 30, 1999 and
1998, net income amounted to $1,054,004 and $850,216,
respectively. Despite the higher income in the first nine-
months of 1999, earnings per share declined 'when compared
to the nine-month period ended September 30, 1998. As
mentioned earlier, this is due to the significantly higher
average number of shares of common stock and stock options
outstanding in the 1999 period. For the nine-month periods
ended September 30, 1999 and 1998, diluted earnings per
share amounted to $.59, and $.69, respectively; basic
earnings per share for the above, periods amounted to $.69
and $.77, respectively. Below is a more detailed discussion
concerning results of operations for the nine-month periods
ended September 30, 1999 and 1998:
End of page 32
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* Earning assets have increased from $103.9 million at September 30,
1998 to $117.5 million at September 30, 1999. As a consequence, net
interest income, which represents the difference between interest
received on interest earning assets and interest paid on interest
bearing liabilities, has increased from $3,814,645 to $4,195,863 for
the same period one year later, representing an increase of $381,218,
or 10.0%.
* Other income increased from $410,245 for the nine-month period ended
September 30, 1998 to $572,148 for the nine-month period ended
September 30, 1999. The above increase of $161, 903 represents a
39.5% improvement. This increase is primarily due to increased
activity in transactional accounts due to a higher deposit base, as
well as to increases in the fee structure.
* Other operating expenses increased from $2,181,669 for the nine-month
period ended September 30, 1998 to $2,413,143 for the nine-month
period ended September 30, 1999. The above increase amounting to
$231,474 represents an increase of 10.6%. The primary reasons for
the increase are expenses associated with the preparation for the
opening of Cumberland National Bank. Such expenses include personnel
and professional costs. Note, however, that as a percent of average
assets, operating expenses declined from 2.89% for the nine-month
period ended September 30, 1998, to 2.59% for the same period one
year later.
At September 30, 1999, the allowance for loan losses
amounted to $1,762,223, or 1.66% of gross loans. At
December 31, 1998, the allowance amounted to $1,824,179, or
2.02% of gross loans. The primary reasons for the reduction
in the reserve for loan losses can be attributed to heavier
than normal charge-offs. For the nine-month period ended
September 30, 1999, net charge-offs amounted to a
proximately $721, 957, of which $453,000 was associated with
a single credit relationship. Management considers the
allowance for loan losses to be adequate and sufficient to
absorb possible future losses; however, there can be no
assurance that charge-offs in future periods will not exceed
the allowance for loan losses or that additional provisions
to the allowance will not be required.
Community is not aware of any current recommendation by
the regulatory authorities which, if they were to be
implemented, would have a material effect on the Company's
liquidity, capital resources, or results of operations.
Disclosure of Commission Position on Indemnification for
Securities Act Liabilities.
Insofar as indemnification for liabilities arising
under the Securities Act of 1933, as amended (the "Act"),
may be permitted to directors, officers and controlling
persons of Community pursuant to the foregoing provisions,
or otherwise, Community has been advised that in the opinion
of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other
than the payment by Community of expenses incurred or paid
by a director, officer or controlling person of Community in
the successful
End of page 33
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defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection
with the securities being registered, Community will, unless
in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it
is against public policy as expressed in the Act and will be
governed by the final adjudication of such issue.
SUPERVISION AND REGULATION
Community
General. Community is a bank holding company within
the meaning of the Bank Holding Company Act and is
registered with the Fed. Community National Bank and
Cumberland National Bank, Community's banking subsidiaries,
are each subject to restrictions under federal law which
limit the transfer of funds by it to Community, whether in
the form of loans, extensions of credit, investments or
asset purchases, to 10% of its capital and surplus.
Furthermore, such loans and extensions of credit are
required to be secured in specified amounts. Except as
allowed under the recently enacted Financial Services
Modernization Act of 1999 (see discussion below), the Bank
Holding Company Act also prohibits, subject to certain
exceptions, a bank holding company from engaging in or
acquiring direct or indirect control of more than 5% of the
voting stock of any company engaged in nonbanking
activities. An exception to this prohibition is for
activities expressly found by the Fed to be so closely
related to banking or managing or controlling banks as to be
a proper incident thereto.
As a bank holding company, Community is required to
file with the Fed periodic reports and such additional
information as the Fed may require. The Fed may also make
examinations of Community and each of its subsidiaries.
The approval of the Office of the Comptroller of the
Currency, or the OCC, is required for any dividend proposed
to be paid by a national bank subsidiary to Community if the
total of all dividends declared by the bank in any calendar
year would exceed the total of its net profits, as defined
by the OCC, for that year, combined with its retained net
profits for the preceding 2 years, less any required
transfers to surplus or a fund for the retirement of any
preferred stock. Under the foregoing laws and regulations,
at December 31, 1998, approximately $967,191 was available
for payment of dividends to Community by its subsidiaries,
primarily Community National Bank. In addition to the
foregoing restrictions, the Fed has the power to prohibit
the payment of dividends by bank holding companies, if their
actions constitute unsafe or unsound practices and the OCC
has the authority to prohibit the payment of dividends by a
national bank when it determines such payment to be an
unsafe and unsound banking practice.
Capital Adequacy. Under the Fed's risk-based capital
guidelines currently applicable to Community, the minimum
ratio of capital to risk-weighted assets (including certain
off-balance sheet items, such as standby letters of credit)
is 8%. To be considered a "well capitalized" bank under the
guidelines, a bank must have a total risk-based capital
ratio in excess of 10%. At December 31, 1998, Community
National Bank, Community's then only existing subsidiary,
was considered "well capitalized." Under these guidelines,
at least half of the total capital must be
End of page 34
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comprised of common equity, retained earnings and a limited
amount of perpetual preferred stock, after subtracting
certain intangibles, and certain other adjustments ("Tier 1
capital"). The remainder may consist of perpetual debt,
mandatory convertible debt securities, a limited amount of
subordinated debt, other preferred stock not qualifying for
Tier 1 capital and a limited amount of loan loss reserves.
Community National Bank and Cumberland National Bank is each
subject to similar capital requirements adopted by the OCC.
In addition, the Fed, the OCC and the Federal Deposit
Insurance Corporation, or the FDIC, have adopted a minimum
leverage ratio (Tier 1 capital to adjusted quarterly average
assets) of 3%. Generally, banking organizations are
expected to operate well above the minimum required capital
level of 3%, unless they meet certain specified criteria,
including that they have the highest regulatory ratings.
Most banking organizations are required to maintain a
leverage ratio of 3% plus an additional cushion of at least
1% to 2%. The guidelines also provide that banking
organizations experiencing internal growth or making
acquisitions will be expected to maintain strong capital
positions substantially above the minimum supervisory levels
without significant reliance upon intangible assets. On
December 31, 1998, Community's consolidated Tier 1 capital
ratio was 13.8%, the total risk-based capital ratio was
15.1% and the leverage ratio was 11.9%. Each of these
ratios exceeds the current Fed and OCC capital guidelines.
Each of Community's subsidiary banks is in compliance with
the applicable minimum capital requirements as of the date
of this Proxy Statement/Prospectus.
Failure to meet capital guidelines could subject a
banking institution to a variety of enforcement remedies
available to federal regulatory authorities, including the
termination of deposit insurance by the FDIC, issuance of a
capital directive, a prohibition on the taking of brokered
deposits and certain other restrictions on its business.
The Federal Deposit Insurance Corporation Improvement
Act of 1991, or FDICIA, substantially revised the depositary
institution regulatory and funding provisions of the Federal
Deposit Insurance Act as well as several other federal
banking statutes. Among other things, FDICIA requires the
federal banking regulators to take prompt corrective action
in respect of depositary institutions that do not meet
minimum capital requirements. FDICIA establishes five
capital tiers: "well capitalized," "adequately capitalized,"
"undercapitalized," "significantly undercapitalized" and
"critically undercapitalized." A depository institution is
well capitalized if it significantly exceeds the minimum
level required by regulation for each relevant capital
measure, is adequately capitalized if it meets each such
measure, is undercapitalized if it fails to meet any such
measure, is significantly undercapitalized if it is
significantly below any such measure and is critically
undercapitalized if it fails to meet any critical capital
level set forth in applicable regulations. The critically
undercapitalized level occurs where tangible equity is less
than 2% of total tangible assets or less than 65% of the
minimum leverage ratio to be prescribed by regulation
(except to the extent that 2% would be higher than such 65%
level). 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.
Significantly undercapitalized depository institutions
may be subject to a number of requirements and restrictions,
including orders to sell sufficient voting stock to become
adequately capitalized, requirements to reduce total assets
and cessation of receipt of deposits
End of page 35
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from correspondent banks. Critically undercapitalized
depository institutions are subject to appointment of a
receiver or conservator.
Source of Strength. According to Fed policy, bank
holding companies are expected to act as a source of
financial strength to each subsidiary bank and to commit
resources to support each such subsidiary. This support may
be required at times when a bank holding company may not be
able to provide such support.
Recent Legislation. Under the Riegle-Neal Interstate
Banking and Branching Efficiency Act of 1999, as of
September 29, 1995, adequately capitalized and managed bank
holding companies are permitted to acquire banks in any
state. State laws prohibiting interstate banking or
discriminating against out-of-state banks were preempted as
of the effective date, although states were permitted to
require that target banks located within the state be in
existence for a period of up to five years before such bank
may be subject to the Interstate Banking Act. The Interstate
Banking Act establishes deposit caps which prohibit
acquisitions that would result in the acquiror controlling
30% or more of the deposits of insured banks and thrifts
held in the state in which the acquisition or merger is
occurring or in any state in which the target maintains a
branch or 10% or more of the deposits nationwide. State-
level deposit caps are not preempted as long as they do not
discriminate against out-of-state acquirors, and the federal
deposit caps apply only to initial entry acquisitions. In
addition, the Interstate Banking Act provides that as of
June 1, 1997, adequately capitalized and managed banks may
engage in interstate branching by merging banks in different
states and allowing banks to maintain branches in states
other than the states where they maintain their principal
place of business.
On November 12, 1999, President Clinton signed into law
Public Law 106-102, known as the Gramm-Leach-Bliley Act, or
the Financial Services Modernization Act of 1999. The
Modernization Act repeals the Glass-Stegall Act by allowing
full affiliation between banks, securities firms and
insurance companies. After March 19, 2000, the effective
date of the relevant provisions of the Modernization Act,
this act is likely to result in mergers among banks,
securities firms and insurance companies and the formation
of financial holding companies subject to the supervision of
both the Fed and the SEC. Passage of the Modernization Act
is very likely to increase competition faced by Community it
its markets, with some of the competitors having
significantly greater resources than Community.
Tarpon
Because Tarpon is a bank holding company within the
meaning of the Bank Holding Company Act and is registered
with the Fed, and because First National Bank, Tarpon's sole
banking subsidiary, is a national banking association,
Tarpon and First National Bank are subject to regulations
substantially the same as those to which Community and its
national bank subsidiaries are subject. On December 31,
1998, the First National Bank had a Tier 1 capital ratio of
21.0%, a total risk-based capital ratio of 22.2% and a
leverage ratio of 9.3%.
End of page 36
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DESCRIPTION OF TARPON
Background
Tarpon was chartered on November 13, 1984, and has
operated its wholly-owned direct subsidiary First National
Bank, Tarpon Springs, Florida, since August 1985.
Business
Services Offered. The principal business of Tarpon is
to operate First National Bank, which accepts deposits from
the public and makes loans and other investments in and
around its primary service area of Tarpon Springs, Florida.
The principal sources of income for First National Bank are
interest and fees collected on loans, interest and dividends
collected on other investments, and service charges on
deposit accounts. The principal expenses of the First
National Bank are interest paid on deposits, employee
compensation, office expenses, and other overhead expenses.
First National Bank offers a full range of deposit
services that are typically available from financial
institutions, including NOW accounts, demand accounts,
savings accounts, and other time deposit accounts. In
addition, retirement accounts such as Individual Retirement
Accounts are available. All deposit accounts are insured by
the FDIC up to the maximum amount currently permitted by
law, which is generally $100,000 per depositor subject to
certain aggregation rules.
First National Bank also provides loans to businesses,
including both secured and unsecured short-term loans for
working capital purposes, term loans for fixed asset and
expansion needs such as real estate acquisition and
improvements, real estate construction loans, and other
commercial loans suitable to the needs of its business
customers. Loans to individuals which are offered by First
National Bank include second mortgage loans and installment
loans for personal use such as education and personal
investment, or for the purchase of automobiles or other
consumer items.
Market Area and Competition. First National Bank's
primary service area is northern Pinellas County, Florida,
including the city of Tarpon Springs and the contiguous
towns of Holiday and Palm Harbor. Pinellas County occupies
a peninsula bordered by the Gulf of Mexico on the west and
by Tampa Bay on the east, covering approximately 264 square
miles. As of June 1998, the county had a permanent
population of approximately 878,000, some 40,921 additional
seasonal residents, and an estimated 4,251,045 visitors.
Tarpon Springs is the county's oldest city. It was
incorporated in 1887 and quickly developed as a winter
resort and vacation destination. In 1905, Greek immigrants
began harvesting natural sponges from the adjacent Spring
Bayou, and today Tarpon Springs ranks among the world's
leading producer of natural sponges. Tourism and service
industries are the area's other principal industries. There
are currently 8 banks serving Tarpon Springs, Holiday and
Palm Harbor. In Pinellas County as a whole, as of June 1998,
there were 317 banking branches with total deposits of $15.6
billion, with First National Bank having less than 1% of
such deposits.
End of page 37
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First National Bank's loan portfolio at September 30,
1999, consisted of approximately 85% real estate mortgage
loans and 15% commercial loans and consumer loans.
First National Bank's marketing plan relies heavily
upon local advertising and promotional activity and upon
personal contacts by its directors, officers and employees
to attract business and to acquaint potential customers with
First National Bank's personalized services. First National
Bank emphasizes a high degree of personalized client service
to provide for each customer's banking needs.
Market for Tarpon Shares and Related Shareholder Matters
As of January --, 2000, 155,000 Tarpon shares were
issued and outstanding to 144 holders of record.
There is no established public market for the Tarpon
shares. In Tarpon's initial public offering completed in
1985, Tarpon sold 155,000 Tarpon shares at a price of $10.00
per share. Tarpon's management is aware of isolated private
sales that have occurred since December 31, 1998, in which
the average per share price was $10.00.
During the first three quarters of 1999, Tarpon
declared and paid a dividend of $31,000, i.e. $0.20 per
Tarpon share. As explained above, First National Bank is
restricted in its ability to pay dividends under the
national banking laws and by regulations of the OCC.
Management's Discussion and Analysis of Financial Condition
and Results of Operations for the Years ended December 31,
1998 and 1997 and the Nine Months Ended September
30, 1999 and September 30, 1998.
Total consolidated assets increased by $3.2 million
to $22.2 million during calendar year 1998. The increase
was generated primarily through a $3.1 million increase in
deposits. Tarpon utilized the above funds by increasing its
investment in federal funds sold. For the nine-month period
ended September 30, 1999, total consolidated assets
decreased by $1.4 million to $20.8 million. The majority of
the reduction, or $1.3 million, was due to a lower level of
deposits.
Asset Quality. The following schedule summarizes the
Tarpon's asset quality position at December 31, 1998 and
1997:
As of December 31,
1998 1997
---- ----
Non accruing loans $ 63,495 $67,467
Loans 90 days past due
and still accruing interest - - - -
Troubled debt restructuring - - - -
Interest income that would have
been recorded on the above
loans had they been current 5,930 7,466
End of page 38
- --------------
Interest income from the above
loans included in net income - - - -
Potential problem loans 118,366 99,428
Potential problem loans include non-accruing loans,
loans 90 days past due and still accruing interest, troubled
debt restructuring, and any other loans exhibiting above-
average credit weaknesses. Accrual of interest on loans is
discontinued when reasonable doubt exists as to the full,
timely collection of interest or principal. or they become
contractually in default for 90 days or more as to either
interest or principal unless they are both well secured and
in the process of collection.
Management is not aware of any loans classified for
regulatory purposes as loss, doubtful, substandard or
special mention that have not been disclosed above, which
(a) represent or result from trends or uncertainties which
management reasonably expects will materially impact future
operating results, liquidity, or capital resources, or (b)
represent material credits about which management is aware
of information which causes it to have serious doubts as to
the ability of such borrowers to comply with the loan
repayment terms.
Allowance for Loan Losses. Tarpon maintains an
allowance for loan losses appropriate for the quality of the
loan portfolio and sufficient to meet anticipated future
loan losses. Tarpon utilizes a comprehensive loan review and
risk identification process to determine the adequacy of the
allowance. Many factors are considered when evaluating the
allowance, including historical loss trends; migration
trends in criticized and classified loans in the portfolio;
trends in past duo and non-accrual loans; trends in
portfolio volume, composition, maturity and concentrations;
changes in local and regional economic market conditions;
the accuracy of the loan review and risk identification
system; and the experience, ability, and depth of lending
personnel and management.
In determining the appropriate level of the allowance,
Tarpon relies primarily on analysis of the major components
of' the loan portfolio such as commercial loans, commercial
real estate loans, consumer loans, construction loans,
residential real estate loans, and all other loans and
unfunded commitments. Tarpon has established a minimum loss
factor for certain problem loan grade categories and for
general categories of nonperforming loans. All significant
problem loans are reviewed individually to establish either
the minimum loss factor (formula) or a specific reserve
higher than the formula. All significant non-problem loans
are reserved at the greater of the minimum loss rate for the
category of loans or the weighted average historical loss
rate over a defined loss horizon as computed from the
migration analysis. other homogenous loan pools such as the
consumer loans, construction loans, and residential mortgage
loans are reserved at the greater of the minimum loss rate
or the weighted average historical loss rate as computed in
the migration analysis.
Approximately 85% of Tarpon's loan portfolio is secured
by real estate located in and around Pinellas County,
Florida. The ultimate collectibility of a substantial
portion of Tarpon's loan portfolio is dependent on or
susceptible to changes in the Pinellas County real estate
market.
The allowance for loan losses, approximated .94% of
outstanding loans at September 30, 1999 as compared to 1.10%
at December 31, 1999. The reason for the above decline
rests in an increase in loans rather than a decrease in the
allowance.
End of page 39
- --------------
The table below summarizes the changes in the allowance
for loan losses for the years ended December 31, 1998 and
1997.
1998 1997
Allowance for loan losses
at beginning of the year $ 115,706 $ 115,706
Loans charged off - - - -
Recoveries on loans
previously charged off - - - -
-------- --------
Net loans charged off - - - -
Provision for loan losses
charged to income - - - -
-------- --------
Allowance for loan losses
at end of year $ 115,706 $ 115,706
========= =========
Ratio of net charge offs
to average loans outstanding - - - -
Management considers the allowance for loan losses to
be adequate and sufficient to absorb possible future losses,
however, there can be no assurance that charge-offs in
future periods will not exceed the allowance for loan losses
or that additional provisions to the allowance will not be
required.
Liquidity and Sources of Capital. Liquidity is
Tarpon's ability to meet all deposit withdrawals
immediately, while also providing for the credit needs of
customers. The September 30, 1999 financial statements
evidence a sound liquidity position as total cash and cash
equivalents amounted to $7.7 million, representing 37.l% of
total assets. In addition, the loan to deposit ratio of
63.1% also evidences a sound liquidity posture. Tarpon's
management closely monitors and maintains appropriate levels
of interest earning assets and interest bearing liabilities
so that maturities of assets are such that adequate funds
are provided to meet customer withdrawals and loan demand.
There are no trends, demands, commitments, events or
uncertainties that will result in or are reasonably likely
to result in the company's liquidity increasing or
decreasing in any material way.
First National Bank maintains an adequate level of
capitalization as measured by the following capital ratios
and the respective minimum capital requirements by the OCC:
First National's Bank's Actual Minimum required
September 30, 1999 by the OCC
------------------ ----------
Leverage ratio 9.3% 4.0%
Risk weighted ratio 18.6% 8.0%
End of page 40
- --------------
As evidenced above, First National Bank's capital
ratios are well above the OCC's required minimums.
Results of Operations. For the years ended December
31, 1998 and 1997, net income amounted to $58,142 and
$83,070, respectively. On a per share basis, basic income
per share amounted to $.38 (1998) and $.54 (1997). The
reasons for the reduction in net income in 1998 when
compared to 1997 were as follows:
* The net yield on earning assets decreased from 4.6% for the year
ended December 31, 1997 to 4.3%- for the year ended December 31,
1998. This situation occurred despite the fact that average earning
assets in 1998 were higher than the average earning asset level in
1997. However, the asset mix changed dramatically, moving toward
categories which produced lower yields. For example, during 1998 the
loan portfolio, which represents Tarpon's highest yielding earning
asset, declined by 11.7% to $10.4 million, while federal funds sold,
which represent Tarpon's lowest yielding earning asset, increased by
301% to $8.2 million.
* Service fees on deposit accounts declined from $273,601 (1997) to
$230,858 (1998), representing a decline of 15.6%, despite an 18.8%
increase in total deposits. This situation occurred because
customers are doing a better job in managing their financial affairs.
* Total operating expenses increased from $970,631 (1997) to $992,044
(1998), representing an increase of 2.2%. The majority of the
increase is due to higher personnel expense.
For the nine-month period ended September 30, 1999, net
loss amounted to $(78,220), or $(.50) per share. These
results compare unfavorably to the nine-months ended
September 30, 1998 when net income amounted to $60,848, or
$.39 per share. The primary reasons for the decline in net
income for the nine-month period ended September 30, 1999 as
compared to the nine-month period ended September 30, 1998
are as follows:
* Net yield on earning assets declined from 4.3% for the nine-month
period ended September 30, 1998 to 3.9% for the nine-month period
ended September 30, 1999. The primary reason for the decline was due
to a shift in the asset mix, with concentration moving from the
highest earning asset (loans) to the lowest earning asset (federal
funds sold).
* Other income, in the amount of $199,900 for the nine-month period
ended September 30, 1999, was $8,126 lower than the $208,026
generated during the nine-month period ended September 30, 1998.
* Other operating expenses were slightly higher for the nine-month
period ended September 30, 1999 when compared to the nine-month
period ended September 30, 1998.
End of page 41
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* During the nine-month period ended September 30, 1999, Tarpon
incurred an $140,000 expense in settlement of a lawsuit. See
discussion below. For the nine-month period ended September 30, 1998,
there were no expenses resulting from a settlement of a lawsuit.
The Company is not aware of any current recommendation
by the regulatory authorities which, if they were to be
implemented, would have a material effect on the Company's
liquidity, capital resources, or results of operations.
The lawsuit mentioned above, styled as Aris Kazouris v.
Denise Kazouris and First National Bank Pinellas County,
Civil Division Case No. 95-6831-Cl-21, was filed by a
depositor who alleged that First National Bank breached a
promise not to follow any instructions by his wife designed
to allow her to cash a deposit, held in the depositor's and
the wife's joint names, without his permission and thus
breached a fiduciary duty to the depositor.
After extensive discovery, the case went to a jury
trial on July 19, 1999. The jury returned a verdict of
$302,062.50 against First National Bank and in favor of the
plaintiff, an amount significantly below the $800,000 being
sought by plaintiff. First National Bank filed a Motion for
Directed Verdict which was granted by the court, thus
overturning the jury's verdict. Plaintiff immediately
appealed. Tarpon and its insurance carrier decided to
settle the case for the following reasons:
* Legal fees incurred by the insurance carrier had already exceeded
$150,000 and were expected to increase significantly in the appeal
process.
* The time and effort expended by management in managing the lawsuit
had a negative effect on the performance of Tarpon.
The case was settled for $240,000, $140,000 of which
was paid by Tarpon and $100,000 of which was paid by the
insurance carrier.
EXPERTS
Community
The consolidated balance sheets of Community and its
subsidiaries as of December 31, 1998 and 1997, and the
related consolidated statements of income, changes in
shareholders' equity and cash flows for each of the two
years, all of which are incorporated by reference in this
Proxy Statement/Prospectus, have been audited by Francis &
Co., CPA's, independent certified public accountants, whose
report thereon is incorporated herein by reference. Such
financial statements have been so incorporated herein by
reference in reliance upon the report of Francis & Co.,
CPA's, and upon their authority as experts in accounting and
auditing.
End of page 42
- --------------
Tarpon
The consolidated balance sheets of Tarpon as of
December 31, 1998 and 1997, and the related consolidated
statements of income, stockholders' equity and cash flows
for each of the years included in this Proxy
Statement/Prospectus have been audited by Francis & Co.,
CPA's, independent certified public accountants, in reliance
upon their report appearing elsewhere herein, and upon their
authority as experts in accounting and auditing.
OTHER MATTERS
Tarpon's Board of Directors does not know of any
matters to be presented at the Special Meeting other than
those set forth above. If any other matters are properly
brought before the Special Meeting or any adjournment
thereof, the enclosed proxy will be deemed to confer
discretionary authority on the individuals named as proxies
therein to vote the shares represented by the proxy as to
any such matters.
SHAREHOLDER PROPOSALS
Community's management expects to hold its next annual
meeting of shareholders during May 2000. Under the rules of
the SEC, proposals of shareholders intended to be presented
at that meeting must have been received by Community at its
principal executive offices on or before December 15, 1999,
for consideration by Community for possible inclusion in
such proxy materials.
If the merger is not consummated, Tarpon will inform
its shareholders of the date and time of the 2000 annual
meeting of shareholders of Tarpon.
WHERE YOU CAN FIND MORE INFORMATION
Community files annual, quarterly and special reports,
proxy statements and other information with the SEC. You
may read and copy any reports, statements or other
information that Community files with the SEC at the SEC's
public reference rooms in Washington, D.C., New York, New
York and Chicago, Illinois. Please call the SEC at 1-800-
SEC-0330 for further information on the public reference
rooms. These SEC filings are also available to the public
from commercial document retrieval services and at the
Internet world wide web site maintained by the SEC at
"http://www.sec.gov."
Community filed a Registration Statement on Form S-4 to
register with the SEC the Community shares to be issued to
holders of the Tarpon shares pursuant to the merger. This
Proxy Statement/Prospectus is a part of that Registration
Statement and constitutes a prospectus of Community. As
allowed by SEC rules, this Proxy Statement/Prospectus does
not contain all the information you can find in Community's
Registration Statement or the exhibits to that Registration
Statement.
The SEC allows Community to "incorporate by reference"
information into this Proxy Statement/Prospectus, which
means that Community can disclose important information to
you
End of page 43
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by referring you to another document filed separately with
the SEC. 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 set forth below that Community has
previously filed with the SEC. These documents contain
important information about Community and its finances.
Community SEC Filings (File No. 33-31013-A)
* Community's Annual Report on Form 10-KSB for the year ended December
31, 1998;
* Community's Quarterly Reports on Form 10-QSB for the quarters ended
March 31, 1999, June 30, 1999 and September 30, 1999;
* Community's Schedule 14A, filed with the SEC on April 13, 1999; and
* Community's Current Report on Form 8-K, dated October 12, 1999.
Community also incorporates by reference additional
documents that may be filed by it with the SEC between the
date of this Proxy Statement/Prospectus and the consummation
of the merger or the termination of the Merger Agreement.
These include periodic reports, such as Quarterly Reports on
Form 10-QSB and Current Reports on Form 8-K, as well as
proxy statements.
Community has supplied all information contained or
incorporated by reference in this Proxy Statement/Prospectus
relating to Community and Tarpon has supplied all
information contained in this Proxy Statement/Prospectus
relating to Tarpon.
You can obtain any of the documents incorporated by
reference from Community, the SEC or the SEC's Internet web
site as described above. Documents incorporated by
reference are also available from Community without charge,
excluding all exhibits, except that if Community has
specifically incorporated by reference an exhibit in this
Proxy Statement/Prospectus, the exhibit will also be
available without charge. You may obtain documents
incorporated by reference in this Proxy Statement/Prospectus
by requesting them in writing or by telephone from:
Community National Bancorporation
561 East Washington Avenue -- Box 2619
Ashburn, Georgia 31714-2619
Attention: T. Brinson Brock, Sr., President
(912) 567-9686
End of page 44
- --------------
INDEX TO FINANCIAL STATEMENTS OF
TARPON
Independent Auditor's Report F-1
Consolidated Balance Sheets - December 31, 1998 and 1997 F-2
Consolidated Statements of Income for the years ended
December 31, 1998 and 1997 F-3
Consolidated Statements of Changes in Shareholders' Equity
for the years ended December 31, 1998 and 1997 F-4
Consolidated Statements of Cash Flows for the years ended
December 31, 1998 and 1997 F-5
Notes to Financial Statements F-6
Unaudited Balance Sheet - September 30, 1999 F-23
Unaudited Statements of Income for the Nine Months Ended
September 30, 1999 and 1998 F-24
Unaudited Statements of Cash Flow for the Nine Months Ended
September 30, 1999 and 1998 F-25
End of page 45
- --------------
(COVER PAGE to FINANCIAL STATEMENTS)
TARPON FINANCIAL CORPORATION
TARPON SPRINGS, FLORIDA
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED
DECEMBER 31, 1998 AND 1997
End Cover Page
- --------------
TABLE OF CONTENTS
-----------------
REPORT OF INDEPENDENT ACCOUNTANTS.................1
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheets..................2
Consolidated Statements of Income............3
Consolidated Statements of Changes
in Shareholders' Equity....................4
Consolidated Statements of Cash Flows........5
Notes to Consolidated Financial Statements...6
End page
- ---------
On Letterhead of Francis & Co., CPAs
Report of Independent Accountants
---------------------------------
Board of Directors
Tarpon Financial Corporation
Tarpon Springs, Florida
We have audited the accompanying consolidated balance
sheets of Tarpon Financial Corporation, (the "Company"), and
subsidiary as of December 31, 1998 and 1997, and the related
consolidated statements of income, changes in shareholders'
equity and cash flows for the years then ended. These
consolidated financial statements are the responsibility of
the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on
our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that
we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the consolidated
financial position of Tarpon Financial Corporation, and subsidiary at
December 31, 1998 and 1997, and the consolidated results of their
operations and their cash flows for each of the years in the two-year
period ended December 31, 1998, in conformity with generally accepted
accounting principles.
/S/ Francis & Co., CPAs
Atlanta, Georgia
October 15, 1999
End page F-1
- ------------------------------------------------------------
TARPON FINANCIAL CORPORATION
TARPON SPRINGS, FLORIDA
Consolidated Balance Sheets
ASSETS
------
As of December 31,
1998 1997
---- ----
Cash and due from banks $1,828,171 $1,057,335
Federal funds sold, net (Note 3) 8,200,000 2,720,000
--------- ---------
Total cash and cash equivalents $10,028,171 $3,777,335
Securities: (Notes 2 & 4)
Available-for-sale at fair value 1,343,729 3,139,016
Loans, net (Notes 2, 5, 6 & 13) 10,367,867 11,610,959
Property and equipment,
net (Notes 2 & 7) 244,969 250,268
Other assets 173,121 165,807
---------- ----------
Total Assets $22,157,857 $18,943,385
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Liabilities:
- -----------
Deposits
Non-interest bearing deposits $ 4,200,868 $ 3,470,601
Interest bearing deposits 15,736,384 13,309,757
---------- ----------
Total deposits (Note 9) $19,937,252 $16,780,358
Other liabilities 226,475 192,502
---------- ----------
Total Liabilities $20,163,727 $16,972,860
---------- ----------
Commitments and Contingencies (Note 8)
- -----------------------------
Shareholders' Equity: (Notes 1 & 15)
- ---------------------
Common stock, .10 par value,
500,000 shares authorized;
155,000 shares issued and
outstanding $ 15,500 $ 15,500
Paid-in-capital 1,534,500 1,534,500
Retained earnings 437,315 410,173
Unrealized gain on securities, net 6,815 10,352
---------- ----------
Total Shareholders' Equity $ 1,994,130 $ 1,970,525
---------- ----------
Total Liabilities and
Shareholders' Equity $22,157,857 $18,943,385
========== ==========
Refer to notes to the consolidated financial statements.
End Page F-2
- ------------
- -----------------------------------------------------------
TARPON FINANCIAL CORPORATION
TARPON SPRINGS, FLORIDA
Consolidated Statements of Income
Years Ended December 31,
------------------------
Interest Income: 1998 1997
- ---------------- ---- ----
Interest and fees on loans
(Note 2) $ 1,002,748 $ 1,006,372
Interest on investment
securities 146,927 185,646
Interest on federal funds sold 233,423 114,584
---------- -----------
Total interest income $ 1,383,098 $ 1,306,602
Interest Expense:
- ----------------
Interest on deposits (Note 10) 597,177 533,562
---------- ----------
Net interest income $ 785,921 $ 773,040
Provision for possible loan
losses (Note 6) - - - -
---------- ----------
Net interest income after provision
for possible loan losses $ 785,921 $ 773,040
---------- ----------
Other Income:
- -------------
Service fees on
deposit accounts $ 230,858 $ 273,601
Miscellaneous, other 45,422 34,163
---------- ----------
Total other income $ 276,280 $ 307,764
---------- ----------
Other Expenses:
- ---------------
Salaries $ 495,627 $ 477,910
Employee benefits 99,760 94,866
Occupancy and Maintenance 128,997 127,856
Depreciation 5,827 16,114
Data processing 67,298 64,910
Professional fees 48,125 46,652
Other operating
expenses (Note 11) 146,410 142,323
----------- ----------
Total other expenses $ 992,044 $ 970,631
---------- ----------
Income before income tax $ 70,157 $ 110,173
Income tax (Notes 2 & 12) 12,015 27,103
---------- ----------
Net income $ 58,142 $ 83,070
Unrealized gain/(loss), securities (3,537) 5,756
---------- ----------
Comprehensive income $ 54,605 $ 88,826
========== ==========
Basic earnings per share (Note 2) $ .38 $.54
===== ====
Refer to notes to the consolidated financial statements.
End page F-3
- -----------------------------------------------------------
TARPON FINANCIAL CORPORATION
TARPON SPRINGS, FLORIDA
Consolidated Statements of Changes in Shareholders' Equity
For the years ended December 31, 1998 and 1997
Unrealized
Gain on
Common Securities
Stock Available
Par Paid-In Retained for
Value Capital Earnings Sale, net
Total
Balance,
December 31,
1995 -
155,000
shares $15,500 $1,534,500 $314,121 $(3,713) $1,860,408
------ --------- ------- ------ ---------
Net income,
1996 - - - - 74,982 - - 74,982
Net
unrealized
gains,
securities - - - - - - 8,309 8,309
Less
dividends
paid - - - - (31,000) - - (31,000)
------- ------- ------- ------- -------
Balance,
December 31,
1996
155,000
shares $15,500 $1,534,500 $358,103 $ 4,596 $1,912,699
------ --------- ------- ------ ---------
Net
income,
1997 - - - - 83,070 - - 83,070
Net
unrealized
gains,
securities - - - - - - 5,756 5,756
Less
dividends
paid - - - - (31,000) - - (31,000)
------- ------- ------- ------- -------
Balance,
December 31,
1997
155,000
shares $15,500 $1,534,500 $410,173 $10,352 $1,970,525
------ --------- ------- ------ ---------
Net income,
1998 - - - - 58,142 - - 58,142
Net
unrealized
(loss),
securities - - - - - - (3,537) (3,537)
Less
dividends
paid - - - - (31,000) - - (31,000)
------- ------- ------- ------- -------
Balance,
December 31,
1998
155,000
shares $15,500 $1,534,500 $437,315 $ 6,815 $1,994,130
------ --------- ------- ------ ---------
Refer to notes to the consolidated financial statements.
End page F-4
- -----------------------------------------------------------
TARPON FINANCIAL CORPORATION
TARPON SPRINGS, FLORIDA
Consolidated Statements of Cash Flows
Years Ended December 31,
Cash flows from 1998 1997
operating activities: ---- ----
- ----------------------
Net income 58,142 83,070
Adjustments to
reconcile net income to
net cash provided by
operating activities:
Depreciation 5,827 16,114
Net accretion on securities (14,160) (26,260)
(Increase) in receivables and
other assets (7,314) (32,270)
Increase in payables and
other liabilities 33,973 (28,223)
----------- -----------
Net cash provided by
operating activities 76,468 12,431
------------ -----------
Cash flows from
investing activities:
- ----------------------
Purchase of securities $ - - $(1,085,500)
Maturity of securities 1,805,910 1,000,000
Decrease in loans, net 1,243,092 98,604
Purchase of premises
and equipment (528) (24,949)
--------- -----------
Net cash provided from
investing activities $ 3,048,474 $ (11,845)
---------- -----------
Cash flows from
financing activities:
- ----------------------
Dividends paid $ (31,000) $ (31,000)
Increase in deposits 3,156,894 (325,463)
---------- -----------
Net cash provided by
financing activities $ 3,125,894 $ (356,463)
---------- -----------
Net increase in cash
and cash equivalents $ 6,250,836 $ (355,877)
Cash and cash equivalents,
beginning of period 3,777,335 4,133,212
---------- -----------
Cash and cash equivalents,
end period $10,028,171 $ 3,777,335
========== ===========
Supplemental Information:
Income taxes paid $ 26,790 $ 30,040
========== ==========
Interest paid $ 565,280 $ 526,651
========== ==========
Refer to notes to the consolidated financial statements.
End page F-5
- ---------------------------------------------------------------
TARPON FINANCIAL CORPORATION
TARPON SPRINGS, FLORIDA
Notes to Consolidated Financial Statements
Note 1 - Organization of the Business
Tarpon Financial Corporation, Tarpon Springs, Florida (the
"Company") was formed in late 1984 to serve as a holding company
for a de novo bank, First National Bank, Tarpon Springs, Florida
(the "Bank"). The Bank is regulated by the Office of the Comptroller of
the Currency and its deposits are each insured up to $100,000 by the Federal
Deposit Insurance Corporation. The Company owns 100 percent of the voting
shares of the Bank.
Note 2 - Summary of Significant Accounting Policies
Basis of Presentation and Reclassification.
------------------------------------------
The consolidated financial statements include the accounts
of the Company and the Bank. All significant intercompany
accounts and transactions have been eliminated in consolidation.
Certain prior year amounts have been reclassified to conform
to the current year presentation. Such reclassifications had
no impact on net income or shareholders' equity.
Basis of Accounting.
-------------------
The accounting and reporting policies of the Company
conform to generally accepted accounting principles and to
general practices in the banking industry. In preparing the
financial statements, management is required to make
estimates and assumptions that affect the reported amounts of assets
and liabilities as of the date of the balance sheet and revenues
and expenses for the period. Actual results could differ
significantly from those estimates. Material estimates that
are particularly susceptible to significant change in the near
term relate to the determination of the allowance for loan losses
and the valuation of real estate acquired in connection with
foreclosures or in satisfaction of loans.
Investment Securities.
---------------------
The Company adopted Statement of Financial Accounting
Standards No. 115, "Accounting for Certain Investment in
Debtand Equity Securities" ("SFAS 115") on January 1, 1994.
SFAS 115 requires investments in equity and debt securities to be
classified into three categories:
1. Held-to-maturity securities.
---------------------------
These are securities which the Company has the ability and
intent to hold until maturity. These securities are stated
at cost, adjusted for amortization of premiums and the
accretion of discounts. As of December 31, 1998 and 1997,
the Company had no securities in this category.
2. Trading securities.
------------------
These are securities which are bought and held principally
for the purpose of selling in the near future. Trading
securities are reported at fair market value, and related
unrealized gains and losses are recognized in the income
statement. As of December 31, 1998 and 1997, the Company had
no securities in this category.
End page F-6
- --------------------------------------------------------------------------
3. Available-for-sale securities.
-----------------------------
These are securities which are not classified as either
held-to-maturity or as trading securities. These securities
are reported at fair market value. Unrealized gains and
losses are reported, net of tax, as separate components of
shareholders' equity. Unrealized gains and losses are
excluded from the income statement.
A decline below cost in the fair value of any available-
for-sale or held-to-maturity security that is deemed other
than temporary, results in a charge to income and the
establishment of a new cost basis for the security.
Purchase premiums and discounts on investment
securities are amortized and accreted to interest income using the
level yield method on the outstanding principal balances. In
establishing the accretion of discounts and amortization of
premiums, the Company utilizes market based prepayment
assumptions. Interest and dividend income are recognized
when earned. Realized gains and losses for securities sold are
included in income and are derived using the specific
identification method for determining the costs of securities sold.
Loans, Interest and Fee Income on Loans.
---------------------------------------
Loans are stated at the principal balance outstanding. Unearned
discount, unamortized loan fees and the allowance for possible
loan losses are deducted from total loans in the statement of
condition. Interest income is recognized over the term of the
loan based on the principal amount outstanding. Points on real
estate loans are taken into income to the extent they represent
the direct cost of initiating a loan. The amount in excess of
direct costs is deferred and amortized over the expected life of
the loan.
Accrual of interest on loans is discontinued either when
reasonable doubt exists as to the full or timely collection of
interest or principal or when a loan becomes contractually past
due by 90 days or more with respect to interest or principal.
When a loan is placed on non-accrual status, all interest
previously accrued but not collected is reversed against
current period interest income. Income on such loans is then
recognized only to the extent that cash is received and where the
future collection of principal is probable. Loans are returned to
accruing status only when they are brought fully current with
respect to interest and principal and when, in the judgment of
management, the loans are estimated to be fully collectible as
to both principal and interest.
The Company adopted the provisions of SFAS No. 114,
"Accounting by Creditors for Impairment of a Loan," as amended
by SFAS No. 118, "Accounting for Impairment of a Loan - Income
Recognition and Disclosure." These standards require impaired
loans to be measured based on the present value of expected
future cash flows discounted at the loan's original effective
interest rate, or at the loan's observable market price, or the
fair value of the collateral
End page F-7
- -----------------------------------------------------------------------------
if the loan is collateral dependent. A loan is considered
impaired when, based on current information and events, it
is probable that the Company will be unable to collect all
amounts due according to the contractual terms of the note agreement.
Cash receipts on impaired loans which are accruing interest are applied to
principal and interest under the contractual terms of the loan agreement.
Cash receipts on impaired loans for which the accrual of
interest has been discontinued are applied to reduce the
principal amount of such loans until the principal has been
recovered and are recognized as interest income thereafter.
Allowance for Loan Losses.
-------------------------
The allowance for loan losses is established through provisions
charged to operations. Such provisions are based on
management's evaluation of the loan portfolio under current
economic conditions, past loan loss experience, adequacy of
underlying collateral, changes in the nature and volume of the
loan portfolio, review of specific problem loans and such other
factors which, in management's judgment, deserve recognition in
estimating loan losses. Loans are charged off when, in the
opinion of management, such loans are deemed to be
uncollectible. Subsequent recoveries are added to the allowance.
Management believes that the allowance for loan losses is
adequate. While management uses available information to
recognize losses of loans, future additions to the allowance may
be necessary based on changes in economic conditions. In
addition, various regulatory agencies, as an integral part of
their examination process, periodically review the Company's
allowance for loan losses. Such agencies may require the
Company to recognize additions to the allowance based on their
judgments about information available to them at the time of
their examination.
Property and Equipment.
----------------------
Furniture, equipment and leasehold improvements are stated at
cost, net of accumulated depreciation. Depreciation is computed
using the straight line method over the estimated useful lives
of the related assets. Maintenance and repairs are charged to
operations, while major improvements are capitalized. Upon
retirement, sale or other disposition of property and equipment,
the cost and accumulated depreciation are eliminated from the
accounts, and gain or loss is included in income from operations.
Other Real Estate.
-----------------
Other real estate represents property acquired through
foreclosure or in satisfaction of loans. Other real estate is
carried at the lower of: (i) cost; or (ii) fair value less
estimated selling costs. Fair value is determined on the basis
of current appraisals, comparable sales and other estimates of
value obtained principally from independent sources. Any excess
of the loan balance at the time of foreclosure or acceptance in
satisfaction of loans over the fair value of the real estate
held as collateral is treated as a loan loss and charged against
the allowance for loan losses. Gain or loss on sale and any
subsequent adjustments to reflect changes in fair value and
selling costs are recorded as a component of income. Costs of
End page F-8
- --------------------------------------------------------------------------
improvements to other real estate are capitalized, while costs
associated with holding other real estate are charged to operations.
Income Taxes.
------------
Income tax expense consists of current and deferred taxes.
Current income tax provisions approximate taxes to be paid or
refunded for the applicable year. Deferred tax assets and
liabilities are recognized on the temporary differences between
the bases of assets and liabilities as measured by tax laws and
their bases as reported in the financial statements. Deferred
tax expense or benefit is then recognized for the change in
deferred tax assets or liabilities between periods.
Recognition of deferred tax balance sheet amounts is based
on management's belief that it is more likely than not that the
tax benefit associated with certain temporary differences, tax
operating loss carryforwards, and tax credits will be realized.
A valuation allowance is recorded for those deferred tax items
for which it is more likely than not that realization will not
occur.
Statement of Cash Flows.
-----------------------
For purposes of reporting cash flows, cash and cash equivalents
include cash on hand, amounts due from banks and federal funds
sold. Generally, federal funds are purchased or sold for one
day periods.
Earnings Per Share ("EPS").
--------------------------
The Company adopted Statement of Financial Accounting Standards
No. 128, "Earnings Per Share" ("SFAS 128"). SFAS 128 establishes standards for
computing and presenting EPS. Because the Company has a simple capital
structure, it is only required to report basic EPS. Basic EPS is defined as
the amount of earnings available to each share of common stock outstanding
during the reporting period.
Basic EPS is computed by dividing income available to
common shareholders by the weighted-average number of common
shares outstanding during the period. Basic EPS for the years
ended December 31, 1998 and 1997 was computed as follows:
1998 Basic EPS 1997 Basic EPS
Numerator Denominator Numerator Denominator
-------- ---------- -------- ----------
Net income $58,142 $83,070
Weighted
average
shares 155,000 155,000
------- ------- ------ -------
Totals $58, 142 155,000 $83,070 155,000
======= ======= ====== =======
EPS $.38 $.54
==== ====
End page F-9
- --------------------------------------------------------------------------
Recent Accounting Pronouncements.
- --------------------------------
Beginning January 1, 1998, the Company adopted the provisions of
SFAS No. 131, "Disclosures About Segments of an Enterprise and
Related Information," which is effective for annual and interim
periods beginning after December 15, 1997. This Statement
establishes standards for the method that public entities are to
use when reporting information about operating segments in
annual financial statements and requires that those enterprise
reports be issued to shareholders, beginning with annual
financial statements in 1998 and for interim and annual
financial statements thereafter. SFAS 131 also established
standards for related disclosures about products and services,
geographic areas and major customers.
SFAS 132, "Employers' Disclosures About Pensions and Other
Postretirement Benefits" revises and standardizes certain disclosures which
were required under SFAS 87, 88 and 106. Generally, the new Statement uses a
separate but parallel format, eliminates less useful information, requires
additional data deemed useful by analysts, and allows some aggregation of
presentation. This Statement was adopted by the Company during 1998.
SFAS 133, "Accounting for Derivative Instruments and Hedging
Activities" was issued in June, 1998 and is effective for all
calendar-year entities beginning in January, 2000. This Statement
applies to all entities and requires that all derivatives be
recognized as assets or liabilities in the balance sheet, at fair
values. Gains and losses of derivative instruments not designated as
hedges will be recognized in the income statement. The Company has
not made an assessment of the expected impact that SFAS 133 will have
on its financial statements.
Note 3 - Federal Funds Sold
The Bank is required to maintain legal cash reserves
computed by applying prescribed percentages to its various types
of deposits. When the Bank's cash reserves are in excess of the
required amount, the Bank may lend the excess to other banks on
a daily basis. At December 31, 1998 and 1997, the Bank sold
$8,200,000 and $2,720,000, respectively, to other banks through
the federal funds market.
End page F-10
- --------------------------------------------------------------------------
NOTE 4 - SECURITIES AVAILABLE-FOR-SALE
The amortized costs and estimated market values of
securities available-for-sale as of December 31, 1998 follow:
Gross Estimated
Amortized Unrealized Market
Description Costs Gains Losses Values
- ----------- ---------- --------- ------ ---------
U.S. Treasury
securities $ 598,759 $ 5,929 $ - - $ 604,688
U.S. Agencies 395,833 4,397 - - 400,230
FRB stock 46,500 - - - - 46,500
Time deposits 292,311 - - - - 292,311
--------- --------- ----- ---------
Total securities $1,333,403 $ 10,326 $ - - $1,343,729
All national banks are required to hold FRB stock. No ready
market exists for the FRB stock nor does the stock have a quoted
market value. Accordingly, the FRB stock is reported at cost.
The amortized costs and estimated market values of securities
available-for-sale as of December 31, 1997 follow:
Gross Estimated
Amortized Unrealized Market
Description Costs Gains Losses Values
- ----------- ---------- --------- ------ ---------
U.S. Treasury
securities $2,980,432 $14,499 $(415) $2,994,516
FRB stock 46,500 - - - - 46,500
Other securities 98,000 - - - - 98,000
--------- ------ ---- ---------
Total securities $3,124,932 $14,499 $(415) $3,139,016
========= ====== ==== =========
The amortized costs and estimated market values of securities
available-for-sale at December 31, 1998, by contractual maturity,
are shown in the following chart. Expected
End page F-11
- --------------------------------------------------------------------------
maturities may differ from contractual maturities because issuers may have
the right to call or prepay obligations with or without call or prepayment
penalties.
Amortized Estimated
Costs Market Values
--------------- -------------
Due in one year or less $ 1,286,903 $ 1,297,229
FRB stock (no maturity) 46,500 46,500
---------- -----------
Total securities $ 1,333,403 $ 1,343,729
========== ===========
There were no sales of securities during 1998 and 1997. At
December 31, 1998 and 1997, none of the securities was pledged.
Note 5 - Loans
The composition of net loans by major loan category, as of
December 31, 1998 and 1997, follows:
December 31,
--------------------
1998 1997
---- ----
Commercial, financial, agricultural $ 667,923 $ 1,060,351
Real estate - mortgage 9,001,805 10,057,923
Installment 813,845 608,391
---------- ---------
Loans, gross $10,483,573 $11,726,665
Deduct:
Allowance for loan losses (115,706) (115,706)
---------- ---------
Loans, net $10,367,867 $11,610,959
========== ==========
At December 31, 1998 and 1997 the only impaired loans were
those which were placed on non-accrual status, or $63,495 and
$67,467, respectively. The average impaired loans for the years
ended December 31, 1998 and 1997 aggregated $65,394 and $83,263,
respectively. No interest income was recognized on impaired
loans during 1998 or 1997.
Note 6 - Allowance for Possible Loan Losses
The allowance for possible loan losses is a valuation
reserve available to absorb future loan charge-offs. The
allowance is increased by provisions charged to operating
expenses and by recoveries of loans which were previously
written-off. The allowance is decreased by the aggregate loan
balances, if any, which were deemed uncollectible during the year.
End page F-12
- --------------------------------------------------------------------------
Activity within the allowance for loan losses account for
the years ended December 31, 1998 and 1997 follows:
Years ended December 31,
------------------------
1998 1997
---- ----
Balance, beginning of year $ 115,706 $ 115,706
Add: Provision for loan losses - - - -
Add: Recoveries of previously
charged off amounts - - - -
-------- ----------
Total $ 115,706 $ 115,706
Deduct: Amount charged-off - - - -
-------- ----------
Balance, end of year $ 115,706 $ 115,706
======== ==========
Note 7 - Property and Equipment
Furniture, equipment leasehold and land improvements are stated
at cost less accumulated depreciation. Components of property and
equipment included in the consolidated balance sheets at December 31,
1998 and 1997 follow:
December 31,
1998 1997
---- ----
Land $ 236,869 $ 236,869
Land improvements 66,222 66,222
Furniture, equipment 331,280 352,145
Leasehold improvements 45,459 45,459
--------- ---------
Property and equipment, gross $ 679,830 $ 700,695
Deduct:
Accumulated depreciation (434,861) (450,427)
--------- ---------
Property and equipment, net $ 244,969 $ 250,268
========= =========
Depreciation expense for the years ended December 31, 1998
and 1997 amounted to $5,827 and $16,114, respectively. Depreciation is
charged to operations over the estimated useful lives of the assets. The
estimated useful lives and methods of depreciation for the principal items
follow:
Type of Asset Life in Years Depreciation Method
Land improvements 5 to 7 Straight-line
Furniture and equipment 3 to 18 Straight-line
Leasehold improvements 5 to 7 Straight-line
End page F-13
- --------------------------------------------------------------------------
Note 8 - Commitments and Contingencies
Please refer to Note 13 concerning the lease of the Bank
building.
Please refer to Note 14 concerning financial instruments
with off-balance sheet risk.
The Company is a defendant in one lawsuit incident to the
ordinary course of business. it is not possible to determine with
precision the probable outcome or the amount of liability,
if any, under the aforementioned lawsuit. Subsequent to the date of
the financial statements but before the issuance of this report,
a Court of Law found the Bank liable in the amount of $302,000 in
the above lawsuit; however, upon appeal, the Bank prevailed. There
are no charges against earnings for the years ended December 31,
1998 and 1997 resulting from the above lawsuit.
Note 9 - Deposits
The following details deposit accounts at December 31, 1998
and 1997:
December 31,
1998 1997
Non-interest bearing deposits $ 4,200,868 $ 3,470,601
Interest bearing deposits:
NOW accounts 2,699,429 2,209,393
Money market 1,304,969 998,732
Savings 2,250,778 2,267,605
Time, less than $100,000 8,093,465 7,051,969
Time, $100,000 and over 1,387,743 782,058
---------- ----------
Total deposits $19,937,252 $16,780,358
========== ==========
End page F-14
- --------------------------------------------------------------------------
NOTE 10 - INTEREST ON DEPOSITS
A summary of interest expense for the years ended December
31, 1998 and 1997 follows:
December 31,
1998 1997
---- ----
Interest on NOW accounts $ 49,621 $ 47,152
Interest on money market accounts 37,674 30,354
Interest on savings accounts 51,968 53,129
Interest on CDs under $100,000 391,471 372,920
Interest on CDs $100,000 and over 66,443 30,007
------- -------
Total interest on deposits $597,177 $533,562
======= =======
NOTE 11 - OTHER OPERATING EXPENSES
A summary of other operating expenses for the years ended
December 31, 1998 and 1997 follows:
December 31,
1998 1997
---- ----
Supplies and printing 22,492 24,838
Insurance 27,366 26,440
Telephone and postage 23,539 24,021
Regulatory assessments 14,943 14,598
All other operating expenses 58,070 52,426
------- -------
Total other operating expenses $146,410 $142,323
======= =======
NOTE 12 - INCOME TAXES
As of December 31, 1998 and 1997, the Company's provision for
income taxes consisted of the following:
December 31,
1998 1997
---- ----
Current $ 12,015 $ 25,353
Deferred - - 1,750
------- -------
Federal income tax expense $ 12,015 $ 27,103
======= =======
End page F-15
- --------------------------------------------------------------------------
Deferred income taxes consist of the following:
1998 1997
Depreciation $ - - $ 1,750
------ ------
Total $ - - $ 1,750
======= ======
The Company's provision for income taxes differs from the amounts
computed by applying the federal income tax statutory rates to income
before income taxes. A reconciliation of federal statutory income
taxes to the Company's actual income tax provision follows:
December 31,
1998 1997
Income taxes at statutory rate $ 23,857 $ 37,459
Federal surtax exemption (11,951) (11,241)
Other 109 885
------- -------
Total $ 12,015 $ 27,103
======= ========
The tax effects of the temporary differences that comprise
the net deferred tax assets at December 31, 1998 and 1997 are
presented below:
1998 1997
---- ----
Deferred tax assets:
Allowance for loan losses $17,014 $17,014
Unrealized gain, securities (3,511) (3,732)
Deferred asset, depreciation - - 2,017
Valuation reserve (6,773) (6,886)
------ ------
Net deferred tax asset $ 6,730 $ 8,413
======= =======
There was a net change in the valuation allowance during 1998.
In assessing the realizability of deferred tax assets, management
considers whether it is more likely than not that some portion or all
of the deferred tax assets will not be realized. The ultimate
realization of deferred tax assets is dependent upon the generation of
future taxable income during the periods in which those temporary
differences become deductible. Management considers the scheduled
reversal of deferred tax liabilities, projected future taxable income
and tax planning strategies in making this assessment. Based upon the
level of historical taxable income and projection for future taxable
income over the periods which the temporary differences resulting in
the deferred tax assets are deductible, management believes it is more
likely than not that the Company will realize the benefits of those
deductible differences, net of the existing valuation allowance at
December 31, 1998.
End page F-16
- --------------------------------------------------------------------------
Note 13 - Related Party Transactions
Lease of Bank Building.
----------------------
The Bank leases the building from which it operates from
certain directors of the Company. The term of the lease is for
twenty years beginning June 1, 1985 and ending May 31, 2005. In
accordance with the lease agreement, the lease expense is the
higher of either $4,974 per month or all of monthly principal
and interest payments due from the lessor on the mortgage. In
addition, the Bank is accountable for all property taxes, insurance and
assessments, and all applicable sales taxes which
may become due. Lease expense for the years ended December 31
1998 and 1997 approximated $59,690 per year. During 1998 and
1997, taxes paid with respect to this lease were $9,629 and
$9,896, respectively. Also during the years ended December 31,
1998 and 1997, insurance paid with respect to this lease was
$9,274 and $8,236, respectively. There were no sales taxes due.
Subsequent to the date of the financial statements but before the
issuance of this report, the Bank purchased the building from which it
operates from certain directs. The purchase price of $400,000 was
based on an independent appraisal of a like-amount.
Payments to Directors.
---------------------
For their services as directors of the Company/Bank, the
directors received a combined aggregate total of $6,800 and $7,200 for
the years ended December 31, 1998 and 1997, respectively. In
addition, one director was paid $5,400 during 1997, for providing
periodic loan reviews of the Bank's loan portfolio. Another director
was paid $3,000 in 1997 for the use of an off-site records storage
facility.
Loans from and Deposits in the Bank.
-----------------------------------
Certain directors, executive officers, and companies with
which they are affiliated, are customers of and have banking transactions
with the Bank, in the ordinary course of business. As of December 31, 1998
and 1997, there were $149,551 and zero loans outstanding to directors,
executive officers and their related interests. Deposits by directors and their
related interests, as of December 31, 1998 and 1997, approximated
$233,615 and $249,526, respectively.
NOTE 14 - FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
In the ordinary course of business, and to meet the financing
needs of its customers, the Company is a party to various financial
instruments with off-balance sheet risk. These financial instruments,
which include commitments to extend credit and standby letters of
credit, involve, to varying degrees, elements of credit and interest
rate risk in excess of the amounts recognized in the balance sheets.
The contract amount of those instruments reflects the extent of
involvement the Company has in particular classes of financial
instruments.
End page F-17
- --------------------------------------------------------------------------
The Company's exposure to credit loss in the event of
nonperformance by the other party to the financial instrument
for commitments to extend credit and standby letters of credit
is represented by the contractual amounts of those instruments.
The Company uses the same credit policies in making commitments
and conditional obligations as it does for on-balance sheet
instruments.
Commitments to extend credit are agreements to lend to a
customer as long as there is no violation of any material condition
established in the contract. Commitments generally
have fixed expiration dates or other termination clauses and may
require the payment of a fee. At December 31, 1998 and 1997,
there were no unfunded commitments to extend credit. If and
when there exists unfunded commitments to extend credit, the
Company evaluates each customer's credit worthiness on a case-
by-case basis. The amount of collateral obtained, if deemed
necessary by the Company upon extension of credit, is based on
management's credit evaluation of the borrower. Collateral
varies, but may include accounts receivable, inventory,
property, plant and equipment, residential homes and income
producing commercial properties.
At December 31, 1998 and 1997, there were no commitments
under letters of credit. The credit risk involved in issuing
letters of credit is essentially the same as that involved in
extending loan facilities to customers. Collateral varies but
may include accounts receivable, inventory, equipment,
marketable securities and property. Since most of the letters
of credit are expected to expire without being drawn upon, they
do not necessarily represent future cash requirements.
The Company makes commercial, real estate and consumer
loans to individuals and businesses located in and around
Pinellas County, Florida. The Company does not have a
significant concentration of credit risk with any individual
borrower. However, a substantial portion of the Company's loan
portfolio is collateralized by real estate located in and around
Pinellas County, Florida.
NOTE 15 - REGULATORY MATTERS
The Company and the Bank are subject to various regulatory
capital requirements administered by federal banking agencies.
Failure to meet minimum capital requirements can initiate certain
mandatory and possibly additional discretionary actions by regulators
that, if undertaken, could have a direct material effect on the
Company's financial statements. Under capital adequacy guidelines and
the regulatory framework for prompt corrective action, the Company and
the Bank must meet specific capital guidelines that involve
quantitative measures of the Company's assets, liabilities and certain
off-balance-sheet items as calculated under
End page F-18
- --------------------------------------------------------------------------
regulatory accounting practices. The capital amounts and
classification are also subject to qualitative judgments by
the regulators about components, risk weighting and other
factors.
Qualitative measures established by regulation to ensure
capital adequacy require the Company and the Bank to maintain
minimum amounts and ratios (set forth in the table below) of
total and Tier 1 capital (as defined in the regulations) to
risk-weighted assets (as defined), and of Tier 1 capital to
average assets (as defined). Management believes, as of
December 31, 1998, that the Company and the Bank meet all
capital adequacy requirements to which they are subject.
As of December 31, 1998, the Bank was categorized as Well
Capitalized. To be categorized as Adequately Capitalized or
Well Capitalized, the Bank must maintain minimum total risk
based, Tier 1 risk-based and Tier 1 leverage ratios as set forth
in the table below. There are no conditions or events since
that notification that management believes have changed the
Company's capital category. The actual capital amounts and
rations are also presented in the table below:
Minimum Regulatory Capital Guidelines for Banks
-----------------------------------------------
(Dollars in Adequately Well
thousands) Actual Capitalized Capitalized
------------- ------------- -------------
Amount Ratio Amount Ratio Amount Ratio
As of
12/31/1998:
Total capital-
risk-based
(to risk-
weighted assets):
Bank $2,045 22.2% $735 : 8% $920 : 10%
Consolidated 2,103 22.9% 735 : 8% N/A N/A
Tier 1 capital-
risk-based
(to risk-
weighted assets):
Bank $1,930 21.0% $368 : 4% $552 : 6%
Consolidated 1,980 21.5% 368 : 4% N/A N/A
Tier 1 capital-leverage
(to average assets):
Bank $1,930 9.4% $818 : 4% $1,023 : 5%
Consolidated 1,980 9.7% 818 : 4% N/A N/A
End page F-19
- --------------------------------------------------------------------------
As of 12/31/1997:
Total capital-
risk-based
(to risk-
weighted assets):
Bank $1,987 23.6% $672 : 8% $840 : 10%
Consolidated 2,065 25.5% 673 : 8% N/A N/A
Tier 1 capital-
risk-based
(to risk-
weighted assets):
Bank $1,882 22.4% $336 : 4% $504 : 6%
Consolidated 1,960 23.3% 336 : 4% N/A N/A
Tier 1 capital-leverage
(to average assets):
Bank $1,882 9.8% $764 : 4% $955 : 5%
Consolidated 1,960 10.3% 764 : 4% N/A N/A
Note 16 - Dividends
The primary source of funds available to the Company to pay
shareholder dividends and other expenses is from the Bank. Bank
regulatory authorities impose restrictions on the amounts of dividends
that may be declared by the Bank. Further restrictions could result
from a review by regulatory authorities of the Bank's capital
adequacy. During 1998 and 1997, the Company declared and paid
dividends in the amount of $.20 per share of common stock.
NOTE 17 - SUBSEQUENT EVENTS
Subsequent to December 31, 1998, and prior to the date of this
report, the Company declared a $.20 dividend for each share of the
Company's common stock, payable to those shareholders of record as of
April 14, 1999.
Note 18 - Parent Company Financial Information
This information should be read in conjunction with the
other notes to the consolidated financial statements.
End page F-20
- --------------------------------------------------------------------------
Parent Company Balance Sheets
-----------------------------
December 31,
Assets: 1998 1997
- ------ ---- ----
Cash $ 51,358 $ 78,048
Investment in Bank 1,917,772 1,891,819
Other assets 25,000 3,923
---------- ----------
Total Assets $ 1,994,130 $ 1,973,790
========== ==========
Liabilities and Shareholders' Equity:
- ------------------------------------
Taxes payable $ - - $ 265
Accounts payable - - 3,000
---------- ----------
Total Liabilities $ - - $ 3,265
---------- ----------
Common stock $ 15,500 $ 15,500
Paid-in-capital 1,534,500 1,534,500
Retained earnings 437,315 410,173
Unrealized gain on securities 6,815 10,352
---------- ----------
Total Shareholders' equity $ 1,994,130 $ 1,970,525
---------- ----------
Total Liabilities and
Shareholders' equity $ 1,994,130 $ 1,973,790
========== ===========
PARENT COMPANY STATEMENTS OF INCOME
-----------------------------------
December 31,
1998 1997
---- ----
Interest income $ 1,497 $ 1,204
Cash dividends from Bank 25,000 35,000
Other income 3,445 - -
Miscellaneous expense (1,291) (165)
--------- ---------
Income before income tax, and
Equity in undistributed
earnings of the Bank $ 28,651 $ 36,039
Income tax expense - - 624
--------- ---------
Income before equity in
undistributed earnings
of the Bank $ 28,651 $ 35,415
Equity in undistributed
earnings of the Bank 29,491 47,655
--------- ---------
Net income $ 58,142 $ 83,070
========= =========
End page F-21
- --------------------------------------------------------------------------
PARENT COMPANY STATEMENTS OF CASH FLOWS
---------------------------------------
Years Ended December 31,
Cash flows
from operating activities: 1998 1997
------------------------- ---- ----
Net income $ 58,142 $ 83,070
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Equity in undistributed
earnings of the Bank (29,491) (47,655)
(Increase) in other assets (21,076) (3,000)
(Decrease) in payables (3,265) (3,243)
--------- ---------
Net cash provided by
operating activities $ 4,310 $ 29,172
-------- ---------
Cash flows from
investing activities: $ - - $ - -
-------------------- -------- ---------
Cash flows from
financing activities:
--------------------
Dividends paid $ (31,000) $ (31,000)
-------- ---------
Net cash used by
financing activities $ (31,000) $ (31,000)
-------- ---------
Net (decrease) in cash
and cash equivalents $ (26,690) $ (1,828)
Cash and cash equivalents,
beginning of the year 78,048 79,876
-------- ---------
Cash and cash equivalents,
end of year $ 51,358 $ 78,048
======== =========
End page F-22
- --------------------------------------------------------------------------
TARPON FINANCIAL CORPORATION
TARPON SPRINGS, FLORIDA
Consolidated Balance Sheet (Unaudited)
As of September 30, 1999
ASSETS
------
Cash and due from banks $ 1,380,483
Federal funds sold 6,325,000
----------
Total cash and cash equivalents $ 7,705,483
Securities available for sale 340,500
Loans, net 11,778,864
Land, building, furniture and equipment 706,241
Other assets 223,440
----------
Total Assets $20,754,528
==========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Liabilities:
- -----------
Deposits
Non-interest bearing deposits $ 3,643,216
Interest bearing deposits 15,014,985
----------
Total deposits $18,658,201
Other liabilities 218,232
----------
Total Liabilities $18,876,433
----------
Commitments and Contingencies
Shareholders' Equity:
- --------------------
Common stock, par value $.10; 500,000
shares authorized; 155,000 shares
issued and outstanding $ 15,500
Paid-in-capital 1,534,500
Retained earnings 328,095
----------
Total Shareholders' Equity $ 1,878,095
----------
Total Liabilities and Shareholders' Equity $20,754,528
==========
See notes to consolidated financial statements
End page F-23
- --------------------------------------------------------------------------
TARPON FINANCIAL CORPORATION
TARPON SPRINGS, FLORIDA
Consolidated Statements of Income (Unaudited)
For the nine-month period ended
September 30,
1999 1998
---- ----
Interest income:
- ---------------
Interest and fees on loans $ 697,749 $ 759,753
Interest on investment securities 45,942 115,590
Interest on federal funds sold 268,654 157,295
--------- ---------
Total interest income $1,012,345 $1,032,638
Interest expense:
- ----------------
Interest on deposits 449,350 436,027
--------- ---------
Net interest income $ 562,995 $ 596,611
Provision for possible loan losses - - - -
--------- ---------
Net interest income after
provision for possible loan losses $ 562,995 $ 596,611
--------- ---------
Other income:
- ------------
Service fees on deposit accounts $ 172,070 $ 182,515
Miscellaneous, other 27,920 25,601
--------- ---------
Total other income $ 199,990 $ 208,116
--------- ---------
Other expenses:
- --------------
Salaries $ 348,528 $ 360,417
Employee benefits 72,310 75,890
Occupancy and maintenance 103,917 100,792
Depreciation 10,944 4,500
Data processing expense 45,570 49,581
Professional fees 37,669 29,839
Law suit settlement 140,000 - -
Other operating expenses 108,668 101,819
--------- ----------
Total other expense $ 867,606 $ 722,838
--------- ---------
Income (loss) before income tax $ (104,621) $ 81,889
Income Tax (benefit) (26,401) 21,041
--------- ---------
Provision for income tax 78,599 21.041
--------- ---------
Net Income/(loss) $ (78,220) $ 60,848
--------- --------
Other comprehensive income, net of tax:
Unrealized holding gains (losses)
on securities available for sale $ (6,815) $ 1,800
--------- ---------
Comprehensive income/(loss) $ (85,035) $ 62,648
========= =========
Basic income/(loss) per share $ (.50) $ .39
========= =========
See notes to consolidated financial statements
End page F-24
- --------------------------------------------------------------------------
TARPON FINANCIAL CORPORATION
TARPON SPRINGS, FLORIDA
Consolidated Statements of Cash Flows (Unaudited)
for the nine-month period ended
September 30,
1999 1998
---- ----
Net cash provided from (used by)
operating activities $ (129,424) $ 100,047
---------- ----------
Cash flows from investing activities:
Purchase of securities AFS $ - - $ - -
Maturities and paydowns 1,000,000 792,004
(Increase) in loans, net (1,410,997) (1,140,929)
Purchase of property and equipment (472,216) (528)
---------- ----------
Net cash used in
investing activities $ (883,213) $ (349,453)
---------- ----------
Cash flows from financing activities:
(Decrease) in customer deposits $(1,279,051) $ 1,543,239
Payment of cash dividends (31,000) (31,000)
---------- ----------
Net cash provided from
(used by) financing activities $(1,310,051) $ 1,512,239
---------- ----------
Net (decrease) in
cash and cash equivalents $(2,322,688) $ 1,262,833
Cash and cash equivalents,
beginning of period 10,028,171 3,777,335
---------- ----------
Cash and cash equivalents,
end of period $ 7,705,483 $ 5,040,168
========== ==========
Refer to notes to the consolidated financial statements
End page F-25
- --------------------------------------------------------------------------
TARPON FINANCIAL CORPORATION
TARPON SPRINGS, FLORIDA
Notes to Consolidated Financial Statements (Unaudited)
September 30, 1999
Note 1 - Basis of Presentation
The accompanying financial statements have been
prepared in accordance with generally accepted accounting
principles for interim financial information. Accordingly,
they do not include all the information and footnotes
required by generally accepted accounting principles for
complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation
have been included. Operating results for the nine-month
period ended September 30, 1999 are not necessarily
indicative of the results that may be expected for the year
ending December 31, 1999. These statements should be read
in conjunction with the consolidated financial statements
and footnotes thereto as of and for the year ended December
31, 1998, which are included elsewhere in this prospectus.
Note 2 - Recent Accounting Pronouncements
Beginning January 1, 1998, the Company adopted the
provisions of SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information," which is effective
for annual and interim periods beginning after December 15,
1997. This Statement establishes standards for the method
that public entities are to use when reporting information
about operating segments in annual financial statements and
requires that those enterprise reports be issued to
shareholders, beginning with annual financial statements in
1998 and for interim and annual financial statements
thereafter. SFAS 131 also established standards for related
disclosures about products and services, geographic areas
and major customers.
SFAS No. 132, "Employers' Disclosures About Pensions
and Other Postretirement Benefits" revises and standardizes
certain disclosures which were required under SFAS Nos. 87,
88 and 106. Generally, the new Statement uses a separate
but parallel format, eliminates less useful information,
requires additional data deemed useful by analysts, and
allows some aggregation of presentation. This Statement was
adopted by the Company during 1998.
SFAS No. 133, "Accounting for Derivative Instruments
and Hedging Activities" was issued in June, 1998 and is
effective for all calendar-year entities beginning in
January, 2000. This Statement applies to all entities and
requires that all derivatives be recognized as assets or
liabilities in the balance sheet, at fair values. Gains and
losses of derivative instruments not designated as hedges
will be recognized in the income statement. The Company has
not made an assessment of the expected impact that SFAS No.
133 will have on its financial statements.
End page F-26
- ----------------------------------------------------------------------------
============
APPENDIX "A"
============
607.1301 Dissenters' rights; definitions. The following
definitions apply to ss. 607.1302 and 607.1320:
(1) "Corporation" means the issuer of the shares held by a
dissenting shareholder before the corporate action or the
surviving or acquiring corporation by merger or share exchange
of that issuer.
(2) "Fair value," with respect to a dissenter's shares,
means the value of the shares as of the close of business on the
day prior to the shareholders' authorization date, excluding any
appreciation or depreciation in anticipation of the corporate
action unless exclusion would be inequitable.
(3) "Shareholders' authorization date" means the date on
which the shareholders' vote authorizing the proposed action was
taken, the date on which the corporation received written
consents without a meeting from the requisite number of
shareholders in order to authorize the action, or, in the case
of a merger pursuant to s. 607.1104, the day prior to the date
on which a copy of the plan of merger was mailed to each
shareholder of record of the subsidiary corporation.
607.1302 Right of shareholders to dissent.--
(1) Any shareholder of a corporation has the right to
dissent from, and obtain payment of the fair value of his or her
shares in the event of, any of the following corporate actions:
(a) Consummation of a plan of merger to which the
corporation is a party:
1. If the shareholder is entitled to vote on the
merger, or
2. If the corporation is a subsidiary that is
merged with its parent under s. 607.1104, and the shareholders
would have been entitled to vote on action taken, except for
the applicability of s. 607.1104;
(b) Consummation of a sale or exchange of all, or
substantially all, of the property of the corporation, other
than in the usual and regular course of business, if the
shareholder is entitled to vote on the sale or exchange
pursuant
to s. 607.1202, including a sale in dissolution 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 1 year after the date of sale;
(c) As provided in s. 607.0902(11), the approval of
a
control-share acquisition;
(d) Consummation of a plan of share exchange to
which
the corporation is a party as the corporation the shares of
which will be acquired, if the shareholder is entitled to
vote
on the plan;
(e) Any amendment of the articles of incorporation
if
the shareholder is entitled to vote on the amendment and if
such
amendment would adversely affect such shareholder by:
1. Altering or abolishing any preemptive
rights
attached to any of his or her shares;
2. Altering or abolishing the voting rights
pertaining to any of his or her shares, except as such
rights
may be affected by the voting rights of new shares then
being
authorized of any existing or new class or series of shares;
3. Effecting an exchange, cancellation, or
reclassification of any of his or her shares, when such
exchange, cancellation, or reclassification would alter or
abolish the shareholder's voting rights or alter his or her
percentage of equity in the corporation, or effecting a
reduction or cancellation of accrued dividends or other
arrearages in respect to such shares;
4. Reducing the stated redemption price of any
of
the shareholder's redeemable shares, altering or abolishing
any
provision relating to any sinking fund for the redemption or
purchase of any of his or her shares, or making any of his
or
her shares subject to redemption when they are not otherwise
redeemable;
5. Making noncumulative, in whole or in part,
dividends of any of the shareholder's preferred shares which
had
theretofore been cumulative;
6. Reducing the stated dividend preference of
any
of the shareholder's preferred shares; or
7. Reducing any stated preferential amount
payable
on any of the shareholder's preferred shares upon voluntary
or
involuntary liquidation; or
(f) Any corporate action taken, to the extent the
articles of incorporation provide that a voting or nonvoting
shareholder is entitled to dissent and obtain payment for
his or
her shares.
(2) A shareholder dissenting from any amendment
specified in
paragraph (1)(e) has the right to dissent only as to those
of
his or her shares which are adversely affected by the
amendment.
(3) A shareholder may dissent as to less than all the
shares
registered in his or her name. In that event, the
shareholder's
rights shall be determined as if the shares as to which he
or
she has dissented and his or her other shares were
registered in
the names of different shareholders.
(4) Unless the articles of incorporation otherwise
provide,
this section does not apply with respect to a plan of merger
or
share exchange or a proposed sale or exchange of property,
to
the holders of shares of any class or series which, on the
record date fixed to determine the shareholders entitled to
vote
at the meeting of shareholders at which such action is to be
acted upon or to consent to any such action without a
meeting,
were either registered on a national securities exchange or
designated as a national market system security on an
interdealer quotation system by the National Association of
Securities Dealers, Inc., or held of record by not fewer
than
2,000 shareholders.
(5) A shareholder entitled to dissent and obtain payment
for
his or her shares under this section may not challenge the
corporate action creating his or her entitlement unless the
action is unlawful or fraudulent with respect to the
shareholder
or the corporation.
607.1320 Procedure for exercise of dissenters' rights.--
(1) (a) If a proposed corporate action creating
dissenters' rights under s. 607.1302 is submitted to a vote
at a
shareholders' meeting, the meeting notice shall state that
shareholders are or may be entitled to assert dissenters'
rights
and be accompanied by a copy of ss. 607.1301, 607.1302, and
607.1320. A shareholder who wishes to assert dissenters'
rights
shall:
1. Deliver to the corporation before the vote
is
taken written notice of the shareholder's intent to demand
payment for his or her shares if the proposed action is
effectuated, and
2. Not vote his or her shares in favor of the
proposed action. A proxy or vote against the proposed action
does not constitute such a notice of intent to demand
payment.
(b) If proposed corporate action creating
dissenters'
rights under s. 607.1302 is effectuated by written consent
without a meeting, the corporation shall deliver a copy of
ss.
607.1301, 607.1302, and 607.1320 to each shareholder
simultaneously with any request for the shareholder's
written
consent or, if such a request is not made, within 10 days
after
the date the corporation received written consents without a
meeting from the requisite number of shareholders necessary
to
authorize the action.
(2) Within 10 days after the shareholders' authorization
date, the corporation shall give written notice of such
authorization or consent or adoption of the plan of merger,
as
the case may be, to each shareholder who filed a notice of
intent to demand payment for his or her shares pursuant to
paragraph (1)(a) or, in the case of action authorized by
written
consent, to each shareholder, excepting any who voted for,
or
consented in writing to, the proposed action.
(3) Within 20 days after the giving of notice to him or
her,
any shareholder who elects to dissent shall file with the
corporation a notice of such election, stating the
shareholder's
name and address, the number, classes, and series of shares
as
to which he or she dissents, and a demand for payment of the
fair value of his or her shares. Any shareholder failing to
file
such election to dissent within the period set forth shall
be
bound by the terms of the proposed corporate action. Any
shareholder filing an election to dissent shall deposit his
or
her certificates for certificated shares with the
corporation
simultaneously with the filing of the election to dissent.
The
corporation may restrict the transfer of uncertificated
shares
from the date the shareholder's election to dissent is filed
with the corporation.
(4) Upon filing a notice of election to dissent, the
shareholder shall thereafter be entitled only to payment as
provided in this section and shall not be entitled to vote
or to
exercise any other rights of a shareholder. A notice of
election
may be withdrawn in writing by the shareholder at any time
before an offer is made by the corporation, as provided in
subsection (5), to pay for his or her shares. After such
offer,
no such notice of election may be withdrawn unless the
corporation consents thereto. However, the right of such
shareholder to be paid the fair value of his or her shares
shall
cease, and the shareholder shall be reinstated to have all
his
or her rights as a shareholder as of the filing of his or
her
notice of election, including any intervening preemptive
rights
and the right to payment of any intervening dividend or
other
distribution or, if any such rights have expired or any such
dividend or distribution other than in cash has been
completed,
in lieu thereof, at the election of the corporation, the
fair
value thereof in cash as determined by the board as of the
time
of such expiration or completion, but without prejudice
otherwise to any corporate proceedings that may have been
taken
in the interim, if:
(a) Such demand is withdrawn as provided in this
section;
(b) The proposed corporate action is abandoned or
rescinded or the shareholders revoke the authority to effect
such action;
(c) No demand or petition for the determination of
fair
value by a court has been made or filed within the time
provided
in this section; or
(d) A court of competent jurisdiction determines
that
such shareholder is not entitled to the relief provided by
this
section.
(5) Within 10 days after the expiration of the period in
which shareholders may file their notices of election to
dissent, or within 10 days after such corporate action is
effected, whichever is later (but in no case later than 90
days
from the shareholders' authorization date), the corporation
shall make a written offer to each dissenting shareholder
who
has made demand as provided in this section to pay an amount
the
corporation estimates to be the fair value for such shares.
If
the corporate action has not been consummated before the
expiration of the 90-day period after the shareholders'
authorization date, the offer may be made conditional upon
the
consummation of such action. Such notice and offer shall be
accompanied by:
(a) A balance sheet of the corporation, the shares
of
which the dissenting shareholder holds, as of the latest
available date and not more than 12 months prior to the
making
of such offer; and
(b) A profit and loss statement of such corporation
for
the 12-month period ended on the date of such balance sheet
or,
if the corporation was not in existence throughout such 12-
month
period, for the portion thereof during which it was in
existence.
(6) If within 30 days after the making of such offer any
shareholder accepts the same, payment for his or her shares
shall be made within 90 days after the making of such offer
or
the consummation of the proposed action, whichever is later.
Upon payment of the agreed value, the dissenting shareholder
shall cease to have any interest in such shares.
(7) If the corporation fails to make such offer within
the
period specified therefor in subsection (5) or if it makes
the
offer and any dissenting shareholder or shareholders fail to
accept the same within the period of 30 days thereafter,
then
the corporation, within 30 days after receipt of written
demand
from any dissenting shareholder given within 60 days after
the
date on which such corporate action was effected, shall, or
at
its election at any time within such period of 60 days may,
file
an action in any court of competent jurisdiction in the
county
in this state where the registered office of the corporation
is
located requesting that the fair value of such shares be
determined. The court shall also determine whether each
dissenting shareholder, as to whom the corporation requests
the
court to make such determination, is entitled to receive
payment
for his or her shares. If the corporation fails to institute
the
proceeding as herein provided, any dissenting shareholder
may do
so in the name of the corporation. All dissenting
shareholders
(whether or not residents of this state), other than
shareholders who have agreed with the corporation as to the
value of their shares, shall be made parties to the
proceeding
as an action against their shares. The corporation shall
serve a
copy of the initial pleading in such proceeding upon each
dissenting shareholder who is a resident of this state in
the
manner provided by law for the service of a summons and
complaint and upon each nonresident dissenting shareholder
either by registered or certified mail and publication or in
such other manner as is permitted by law. The jurisdiction
of
the court is plenary and exclusive. All shareholders who are
proper parties to the proceeding are entitled to judgment
against the corporation for the amount of the fair value of
their shares. The court may, if it so elects, appoint one or
more persons as appraisers to receive evidence and recommend
a
decision on the question of fair value. The appraisers shall
have such power and authority as is specified in the order
of
their appointment or an amendment thereof. The corporation
shall
pay each dissenting shareholder the amount found to be due
him
or her within 10 days after final determination of the
proceedings. Upon payment of the judgment, the dissenting
shareholder shall cease to have any interest in such shares.
(8) The judgment may, at the discretion of the court,
include a fair rate of interest, to be determined by the
court.
(9) The costs and expenses of any such proceeding shall
be
determined by the court and shall be assessed against the
corporation, but all or any part of such costs and expenses
may
be apportioned and assessed as the court deems equitable
against
any or all of the dissenting shareholders who are parties to
the
proceeding, to whom the corporation has made an offer to pay
for
the shares, if the court finds that the action of such
shareholders in failing to accept such offer was arbitrary,
vexatious, or not in good faith. Such expenses shall include
reasonable compensation for, and reasonable expenses of, the
appraisers, but shall exclude the fees and expenses of
counsel
for, and experts employed by, any party. If the fair value
of
the shares, as determined, materially exceeds the amount
which
the corporation offered to pay therefor or if no offer was
made,
the court in its discretion may award to any shareholder who
is
a party to the proceeding such sum as the court determines
to be
reasonable compensation to any attorney or expert employed
by
the shareholder in the proceeding.
(10) Shares acquired by a corporation pursuant to
payment of
the agreed value thereof or pursuant to payment of the
judgment
entered therefor, as provided in this section, may be held
and
disposed of by such corporation as authorized but unissued
shares of the corporation, except that, in the case of a
merger,
they may be held and disposed of as the plan of merger
otherwise
provides. The shares of the surviving corporation into which
the
shares of such dissenting shareholders would have been
converted
had they assented to the merger shall have the status of
authorized but unissued shares of the surviving corporation.
============
APPENDIX "B"
============
[LETTERHEAD OF ALLEN C. EWING & CO.]
December 2, 1999
Board of Directors
Tarpon Financial Corporation
710 East Tarpon Avenue
Tarpon Springs, Florida 34689
Gentlemen:
You have requested our opinion as to the fairness, from a
financial point of view, to the shareholders of Tarpon
Financial
Corporation ("Company"), the holding company for First
National
Bank ("Bank") of Tarpon Springs, Florida, of the
consideration
to be paid to the shareholders of the Company by Community
National Bancorporation ("Community") of Ashburn, Georgia,
as
provided by the Agreement and Plan of Merger ("Merger
Agreement") entered into by the parties on October 8, 1999.
Pursuant to the Merger Agreement, Community will acquire all
of
the outstanding shares of the Company by offering cash and
Community shares for the shares of the Company. The Company
will be merged with and into a subsidiary of Community and
the
Company will cease to exist.
In arriving at our opinion, we have relied upon the accuracy
and
completeness of the information provided to us by the
Company
which we have used in the accompanying analysis. We have
not
conducted an independent verification of such information or
performed an independent appraisal of the Company's assets
and
liabilities.
Based upon the accompanying analysis and our knowledge of
and
experience in the valuation of Florida banks and their
securities, it is our opinion that the consideration to be
paid
by Community for the common shares of the Company is fair,
from
a financial point of view, to the shareholders of the
Company.
The opinion of Allen C. Ewing & Co. ("Ewing") is directed to
the
Board of Directors and does not constitute a recommendation
to
any shareholder as to how such shareholder should vote at
the
shareholders' meeting held in connection with the proposed
transaction. Ewing has not been requested to opine as to,
and
the opinion does not address, the Board's underlying
business
decision to support and recommend the acquisition to the
shareholders.
We hereby consent to the filing of this opinion as an
exhibit to the
Registration Statement filed by Community in connection with
the merger and
to the reference to this firm in the related Proxy
Statement/Prospectus. In
giving this 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.
Very truly yours,
ALLEN C. EWING & CO.
By: /S/ Benjamin C. Bishop, Jr.
-----------------------------
Benjamin C. Bishop, Jr.
President
==========
APPENDIX "C"
==========
AGREEMENT AND PLAN OF MERGER
OF
COMMUNITY NATIONAL BANCORPORATION
AND
TARPON FINANCIAL CORPORATION
ARTICLE I
THE MERGER
Section 1.1 Merger.....................................2
Section 1.2 Effect of Merger...........................2
Section 1.3 Directors and Officers.....................3
ARTICLE II
CONVERSION OF SHARES
Section 2.1 Manner of Conversion.......................3
Section 2.2 Effectuating Conversion....................4
Section 2.3 Laws of Escheat............................6
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF TARPON
Section 3.1 Corporate Organization.....................6
Section 3.2 Capitalization.............................7
Section 3.3 Financial Statements; Filings..............8
Section 3.4 Loan Portfolio.............................9
Section 3.5 Certain Loans and Related Matters.........10
Section 3.6 Authority; No Violation...................10
Section 3.7 Consents and Approvals....................11
Section 3.8 Broker' s Fees............................11
Section 3.9 Absence of Certain Changes or Events......11
Section 3.10 Legal Proceedings.........................11
Section 3.11 Taxes and Tax Returns.....................12
Section 3.12 Employee Benefit Plans....................13
Section 3.13 Title and Related Matters.................14
Section 3.14 Real Estate...............................14
Section 3.15 Environmental Matters.....................15
Section 3.16 Commitments and Contracts.................16
Section 3.17 Regulatory Matters........................16
Section 3.18 State Takeover Laws.......................16
Section 3.19 Insurance.................................16
Section 3.20 Labor.....................................17
Section 3.21 Compliance with Laws......................18
Section 3.22 Transactions with Management..............18
Section 3.23 The S-4/Proxy.............................19
Section 3.24 Deposit Insurance.........................19
Section 3.25 Untrue Statements and Omissions...........19
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF COMMUNITY
Section 4.1 Organization and Related Matters of
Community.................................19
Section 4.2 Capitalization............................20
Section 4.3 Authorization.............................20
Section 4.4 Financial Statements......................20
Section 4.5 Absence of Certain Changes or Events......21
Section 4.6 Legal Proceedings.........................21
Section 4.7 Insurance.................................21
Section 4.8 Consents and Approvals....................22
Section 4.9 Regulatory Matters........................22
Section 4.10 Proxy Materials...........................22
Section 4.11 No Broker's or Finder's Fees..............22
Section 4.12 Community Shares to be Delivered..........22
Section 4.13 Untrue Statements and Omissions...........22
ARTICLE V
COVENANTS AND AGREEMENTS
Section 5.1 Conduct of the Business of Tarpon.........23
Section 5.2 Current Information.......................24
Section 5.3 Access to Properties; Personnel
and Records...............................25
Section 5.4 Approval of Tarpon Shareholders...........26
Section 5.5 No Other Bids.............................26
Section 5.6 Deadlines.................................26
Section 5.7 Maintenance of Properties.................26
Section 5.8 Environmental Audits......................26
Section 5.9 Title Insurance...........................26
Section 5.10 Surveys...................................27
Section 5.11 Compliance Matters........................27
Section 5.12 Exemption Under Anti-Takeover Statutes....27
Section 5.13 Building Inspection.......................27
ARTICLE VI
ADDITIONAL COVENANTS AND AGREEMENTS
Section 6.1 Best Efforts; Cooperation.................27
Section 6.2 Regulatory Matters........................28
Section 6.3 Other Matters.............................28
Section 6.4 Indemnification...........................29
Section 6.5 Current Information.......................29
Section 6.6 Consideration.............................29
ARTICLE VII
MUTUAL CONDITIONS TO CLOSING
Section 7.1 Shareholder Approval......................29
Section 7.2 Regulatory Approvals......................29
Section 7.3 Litigation................................29
ARTICLE VIII
CONDITIONS TO THE OBLIGATIONS OF TARPON
Section 8.1 Representations and Warranties............30
Section 8.2 Performance of Obligations and
Settlement of Litigation..................30
Section 8.3 Certificate Representing Satisfaction of
Conditions................................30
Section 8.4 Absence of Adverse Facts..................30
Section 8.5 Opinion of Counsel........................31
Section 8.6 Consents Under Agreements.................31
Section 8.7 Material Condition........................31
Section 8.8 Matters Relating to Employment
Agreements................................31
Section 8.9 Resignation of Officers and
Directors.................................31
Section 8.10 Outstanding Shares of Tarpon..............31
Section 8.11 Dissenters................................32
ARTICLE IX
CONDITIONS TO OBLIGATIONS OF COMMUNITY
Section 9.1 Representations and Warranties............32
Section 9.2 Performance of Obligations................32
Section 9.3 Certificate Representing Satisfaction of
Conditions................................32
Section 9.4 Absence of Adverse Facts..................32
Section 9.5 Consents Under Agreements.................32
ARTICLE X
TERMINATION, WAIVER AND AMENDMENT
Section 10.1 Termination...............................33
Section 10.2 Effect of Termination.....................34
Section 10.3 Effect of Wrongful Termination............34
Section 10.4 Amendments................................34
Section 10.5 Waivers...................................34
Section 10.6 Non-Survival of Representations and
Warranties................................34
Section 10.7 Effect of Breach of Warranties............35
ARTICLE XI
MISCELLANEOUS
Section 11.1 Entire Agreement..........................35
Section 11.2 Notices...................................35
Section 11.3 Severability............36
Section 11.4 Costs and Expenses............36
Section 11.5 Captions............37
Section 11.6 Counterparts............37
Section 11.7 Governing Law............37
Section 11.8 Persons Bound; No Assignment............37
Section 11.9 Exhibits and Schedules..................37
Section 11.10 Waiver..................................37
Section 11.11 Construction of Terms...................37
AGREEMENT AND PLAN OF MERGER
OF
COMMUNITY NATIONAL BANCORPORATION
AND
TARPON FINANCIAL CORPORATION
This AGREEMENT AND PLAN OF MERGER, dated as of the
eighth
day of October 1999 (this "Agreement"), is by and between
Community National Bancorporation, a Georgia corporation and
a
bank holding company ("Community") and Tarpon Financial
Corporation, a Florida corporation and a bank holding
company
("Tarpon").
WITNESSETH THAT:
WHEREAS, the respective Boards of Directors of
Community
and Tarpon deem it in the best interests of Community and
Tarpon, respectively, and of their respective shareholders,
that
Community acquire all of the issued and outstanding capital
stock of Tarpon in a statutory merger qualifying as a tax-
free
reorganization under Section 368(a)(1)(A) of the Internal
Revenue Code of 1986, as amended (the "Code"), and pursuant
to
this Agreement (the "Merger");
WHEREAS, the Boards of Directors of Community and
Tarpon
have approved this Agreement and the Board of Directors of
Tarpon has directed that this Agreement be submitted to its
shareholders for approval and adoption in accordance with
the
laws of the State of Florida;
WHEREAS, Community will deliver, or cause to be
delivered,
to the shareholders of Tarpon the consideration to be paid
pursuant to the Merger in accordance with the terms of this
Agreement;
NOW, THEREFORE, in consideration of the foregoing
premises
and the mutual covenants, representations, warranties and
agreements herein contained, and for other good and valuable
consideration, the receipt and sufficiency of which are
hereby
acknowledged, the parties agree that, in accordance with the
applicable laws of the states of Florida and Georgia, the
method, terms and conditions of the Merger and the mode of
carrying such Merger into effect are and shall be as
follows:
ARTICLE I
THE MERGER
Section 1.1 Merger. Subject to the terms and conditions
of
this Agreement, Tarpon shall be merged with and into
Community
pursuant to the Florida Business Corporation Act (the
"Florida
Act") and the Georgia Business Corporation Code (the
"Georgia
Code"), and Community shall be the "Surviving Corporation."
Section 1.2 Effect of Merger.
(a) The "Effective Time of the Merger" shall occur
at
the time at which Articles of Merger are filed with both the
Florida and Georgia Secretaries of State and as soon as
practicable (but not more than 10 business days) following
the
later to occur of (i) the effective date (including
expiration
of any applicable waiting period) of the last required
Consent
(as defined below) of any Regulatory Authority (as defined
below) having authority over the transactions contemplated
under
this Agreement and (ii) the date on which the shareholders
of
Tarpon approve the transactions contemplated by this
Agreement.
As used in this Agreement, "Consent" shall mean a consent,
approval or authorization, waiver, clearance, making
effective,
exemption or similar affirmation by any person pursuant to
any
contract, permit, law, regulation or order, and "Regulatory
Authorities" shall mean, collectively, the Federal Trace
Commission (the "FTC"), the United States Department of
Justice
(the "Justice Department"), the Board of Governors of the
Federal Reserve System (the "FRB"), the Office of the
Comptroller of the Currency (the "OCC"), the Federal Deposit
Insurance Corporation (the "FDIC"), any state regulatory
agencies having jurisdiction over the parties, the National
Association of Securities Dealers, Inc. (NASDAQ) and the
Securities and Exchange Commission (the "SEC").
(b) At the Effective Time of the Merger:
(i) The Articles of Incorporation of Community
in
effect immediately prior to the Merger shall become and be
the
Articles of Incorporation of the Surviving Corporation, and
the
Bylaws of Community in effect immediately prior to the
Merger
shall become and be the Bylaws of the Surviving Corporation.
(ii) Tarpon shall be merged with and into
Community
and the separate corporate existence of Tarpon shall cease.
The
Surviving Corporation will be deemed to be the same
corporation
as each of the Community and Tarpon. The Surviving
Corporation
shall have all rights, privileges, immunities and powers and
shall be subject to all the duties and liabilities of a
corporation organized under the laws of the State of Georgia
and
shall thereupon and thereafter possess all of the privileges
and
immunities and franchises, of a private as well as of a
public
nature, of each of the constituent corporations. All
property
(real, personal and mixed) and all debts on whatever
account,
including subscriptions to shares, all choses in action,
rights
to marks and every other interest of or belonging to or due
to
each of the constituent corporations so merged shall be
taken
and deemed to be transferred to and vested in the Surviving
Corporation without further act or deed. The title to any
real
estate, or any interest therein, vested in any of the
constituent corporations shall not revert or be any way
impaired
by reason of the Merger. Except as otherwise provided in
this
Agreement, the Surviving Corporation shall thenceforth be
responsible and liable for all the liabilities and
obligations
of each of the constituent corporations so merged and any
claim
existing or action or proceeding pending by or against
either of
the constituent corporations may be prosecuted as if the
Merger
had not taken place or the Surviving Corporation may be
substituted in the place of either of the constituent
corporations. Neither the rights of creditors nor any liens
upon the property of any constituent corporation shall be
impaired by the Merger.
(c) The closing of the Merger (the "Closing") shall
take place at the principal offices of Tarpon at 10:00 a.m.
local time on the day that the Effective Time of the Merger
occurs, or such other date and time and place as the parties
hereto may agree (the "Closing Date"). subject to the
provisions
of this Agreement, at the Closing there shall be delivered
to
each of the parties hereto the opinions, certificates and
other
documents and instruments required to be so delivered
pursuant
to this Agreement.
Section 1.3 Directors and Officers. From and after the
Effective Time of the Merger, the directors of Community
immediately prior to the Effective Time of the Merger shall
become and be the directors of the Surviving Corporation
from
and after the Effective Time of the Merger, and the officers
of
Community immediately prior to the Effective Time of the
Merger
shall become and be the officers of the Surviving
Corporation.
ARTICLE II
CONVERSION OF SHARES
Section 2.1 Manner of Conversion. Subject to the
provisions
hereof, as of the Effective Time of the Merger and by virtue
of
the Merger and without any action on the part of any holder
of
any shares of Common Stock of Tarpon, par value $0.10 per
share
("Tarpon Shares," or, singly, a "Tarpon Share"):
(a) All Tarpon Shares which are held by Tarpon as
treasury stock, if any, shall be cancelled and retired and
no
consideration shall be paid or delivered in exchange
therefor.
(b) Subject to the terms and conditions of this
Agreement, and except with regard to Dissenting Tarpon
Shares
(as hereinafter defined), each Tarpon Share outstanding
immediately prior to the Effective Time of the Merger shall
be
cancelled and converted into the right to receive at the
election of the holder of such share: (i) $24.00 in cash or
(ii)
1.60 shares of Community Common Stock, no par value
("Community
Shares") (singly or in combination hereinafter referred to
as
the "Consideration"); provided, that except with respect to
Dissenting Tarpon Shares, in no event shall the total
Consideration received by any holder of Tarpon Shares for
his or
her Tarpon Shares consist of Community Shares to the extent
of
less than sixty percent (60%) of such Consideration. By way
of
example, subject to the terms and provisions of this
Agreement,
a shareholder of Tarpon owning 1,000 Tarpon Shares would
receive Consideration as follows:
(i) 1,600 (1.6 X 1,000) Community Shares and
no
cash, if he/she elects to receive only Community Shares and
no
cash,
(ii) 1,280 (1.6 X .8 X 1,000) Community Shares
and
$4,800 in cash, if he/she elects to receive 80% of the
Consideration in Community Shares and 20% in cash; and
(iii) 960 (1.6 X .6 X 1,000) Community Shares
and
$9,600 in cash, if he/she elects to receive the minimum 60%
of
the Consideration in Community Shares and 40% in cash.
All outstanding certificates representing Tarpon Shares
shall thereafter represent solely the right to receive the
Consideration.
(c) Each outstanding Tarpon Share, the holder of
which
has demanded and perfected his demand for payment of the
"fair
or appraised" value of such share in accordance with
Sections
607.1301 through 607.1320 of the Florida Code (the "Dissent
Provisions"), to the extent applicable, and has not
effectively
withdrawn or lost such holder's right to such appraisal (the
"Dissenting Tarpon Shares"), shall not be converted into or
represent a right to receive the Consideration payable in
the
Merger but the holder thereof shall be entitled only to such
rights as are granted by the Dissent Provisions. Tarpon
shall
give Community prompt notice upon receipt by Tarpon of any
written objection to the Merger and any written demands for
payment of the fair or appraised value of Tarpon Shares, and
of
withdrawals of such demands, and any other instruments
provided
to Tarpon pursuant to the Dissent Provisions (any
shareholder
duly making such demand being hereinafter called a
"Dissenting
Shareholder"). Each Dissenting Shareholder who becomes
entitled,
pursuant to the Dissent Provisions, to payment of fair value
for
any Tarpon Shares held by such Dissenting Shareholder shall
receive payment therefor from Tarpon (but only after the
amount
thereof shall have been agreed upon or at the times and in
the
amounts required by the Dissent Provisions) and all of such
Dissenting Shareholder's Tarpon Shares shall be cancelled.
Tarpon shall not, except with the prior written consent of
Community, voluntarily make any payment with respect to, or
settle or offer to settle, any demand for payment by any
Dissenting Shareholder. If any Dissenting Shareholder shall
have
failed to perfect or shall have effectively withdrawn or
lost
such right to demand payment of fair or appraised value,
Tarpon
Shares held by such Dissenting Shareholder shall thereupon
be
deemed to have been converted into the right to receive
Consideration consisting of 40% in cash and 60% in Community
Shares (the "Standard Consideration"), to be paid as
provided in
this Agreement.
Section 2.2 Effectuating Conversion.
(a) Community or such institution as Community may
designate shall serve as the exchange agent (the "Exchange
Agent"). The Exchange Agent may employ sub-agents in
connection
with performing its duties. The Letter of Transmittal (as
hereinafter defined) will (i) provide for the election by
each
shareholder of Tarpon to receive a greater proportion of
his/her
Consideration in the form of Community Shares than 60% (ii)
will
contain instructions with respect to the surrender of
certificates formerly representing Tarpon Shares and the
receipt
of the Consideration contemplated by this Agreement and
(iii)
require each holder of Tarpon Shares to transfer good and
marketable title to such certificates formerly representing
Tarpon Shares to Community, free and clear of all liens,
claims
and encumbrances. Within ten (10) business days after the
Effective Time of the Merger, the Exchange Agent shall send
or
cause to be sent to each former holder of record of Tarpon
Shares transmittal materials (the "Letter of Transmittal")
for
use in exchanging their certificates formerly representing
Tarpon Shares for the Consideration provided for in this
Agreement. As promptly as practicable after receipt of
properly
completed Letters of Transmittal and stock certificates
evidencing Tarpon Shares held by the former holders of
Tarpon
shares, the Exchange Agent shall disburse the appropriate
Consideration on behalf of Community. Amounts that would
have
been payable to Dissenting Shareholders for Tarpon Shares
but
for the fact of their dissent in accordance with the
provisions
of Section 2.1(c) hereof, shall be handled in accordance
with
and in a manner consistent with the Dissent Provisions.
(b) At the Effective Time of the Merger, the stock
transfer books of Tarpon shall be closed as to holders of
Tarpon
Shares immediately prior to the Effective Time of the Merger
and
no transfer of Tarpon Shares by any such holder shall
thereafter
be made or recognized and each outstanding certificate
formerly
representing Tarpon shares shall, without any action on the
part
of any holder thereof, no longer represent Tarpon Shares.
(c) In the event that any holder of Tarpon Shares
is
unable to deliver any certificate which represents any of
such
holder's Tarpon Shares, Community, in the absence of actual
notice that any Tarpon Shares theretofor represented by any
such
certificate have been acquired by a bona fide purchaser,
may, in
its discretion, deliver to such holder the Standard
Consideration contemplated by this Agreement to which such
holder is entitled in accordance with the provisions of this
Agreement upon the presentation of all of the following:
(i) An affidavit or other evidence to the
reasonable satisfaction of Community that any such
certificate
has been lost, wrongly taken or destroyed;
(ii) Such security and indemnity as may be
reasonably requested by Community to indemnify and hold
Community harmless; and
(iii) Evidence to the satisfaction of Community
that
such holder is the owner of the Tarpon Shares theretofor
represented by each certificate claimed by such holder to be
lost, wrongfully taken or destroyed and that such holder is
the
person who would be entitled to present each such
certificate
pursuant to his Agreement.
(d) In the event that the delivery of any
Consideration
is made to a person other than the person in whose name any
certificate representing Tarpon Shares surrendered is
registered, such certificate so surrendered shall be
properly
endorsed (or accompanied by an appropriate instrument of
transfer), with the signature(s) appropriately guaranteed,
and
otherwise in proper form for transfer, and the person
requesting
such delivery shall pay any transfer or other taxes required
by
reason of the delivery to a person other than the registered
holder of such certificate surrendered or established to the
satisfaction of Community that such tax has been paid or is
not
applicable.
(e) Until surrendered in accordance with the
provisions
of this Section 2.2, each certificate representing Tarpon
shares
shall represent for all purposes the right to receive the
Consideration contemplated by this Agreement and shall not
represent the right to receive any other consideration,
including, but not limited to, dividends of Tarpon or
interest
with respect to such Consideration.
Section 2.3 Laws of Escheat. If any of the Consideration
due
to be paid or delivered to the holders of Tarpon Shares is
not
paid or delivered within the time period specified by any
applicable laws concerning abandoned property, escheat or
similar laws, and if such failure to pay or deliver such
consideration occurs or arises out of the fact that such
property is not claimed by the proper owner thereof,
Community
or the Exchange Agent shall be entitled to dispose of any
such
consideration or other payments in accordance with
applicable
laws concerning abandoned property, escheat or similar laws.
Any
other provision of this Agreement notwithstanding, none of
Tarpon, Community, the Exchange Agent nor any other person
acting on their behalf shall be liable to a holder of Tarpon
Shares for any amount paid or property delivered in good
faith
to a public official pursuant to and in accordance with any
applicable abandoned property, escheat or similar law.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF TARPON
Tarpon hereby represents and warrants to Community as
follows as of the date hereof and as of all times up to and
including the Effective Time of the Merger (except as
otherwise
provided):
Section 3.1 Corporate Organization.
(a) Tarpon is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Florida. Tarpon has the corporate power and authority to
own or
lease all of its properties and assets and to carry on its
business as such business is now being conducted, and Tarpon
is
duly licensed or qualified to do business where the nature
(if
the business conducted by it or the character or location of
the
properties and assets owned or leased by it make such
qualification necessary except where the failure to be so
licensed or qualified would not have a material adverse
effect
on the business, assets, operations, financial condition or
results of operations (such business, assets, operations,
financial condition or results of operations hereinafter
collectively referred to as the "Condition") of Tarpon on a
consolidated basis. Tarpon is a bank holding company under
the
Bank Holding Company Act of 1956, as amended, and has one
wholly-owned bank (or any other) subsidiary. True and
correct
copies of the Articles or Certificate of Incorporation and
the
Bylaws of Tarpon, each as amended to the date hereof, have
been
delivered to Community.
(b) First National Bank, Tarpon Springs, Florida,
the
sole wholly-owned subsidiary of Tarpon ("FN-Bank"), is a
bank
organized, validly existing and in good standing as a
national
bank under the laws of the United States. FN-Bank has the
corporate power and authority to own or lease all of its
properties and assets and to carry on its business as such
business is now being conducted, and FN-Bank is duly
licensed or
qualified to do business in each jurisdiction in which the
nature of the business conducted by it or the character or
location of the properties and assets owned or leased by it
makes such licensing or qualification necessary, except
where
the failure to be so licensed or qualified would not have a
material adverse effect on the Condition of the Bank. True
and
correct copies of the Articles of Incorporation and Bylaws
of
FN-Bank, as amended to the date hereof, have been delivered
to
Community.
(c) Each of Tarpon and FN-Bank has in effect all
federal, state, local and foreign governmental, regulatory
and
other authorizations, permits and licenses necessary for
each of
them to own or lease its properties and assets and to carry
on
its business as now conducted, the absence of which, either
individually or in the aggregate, would have a material
adverse
effect on the Condition of Tarpon on a consolidated basis.
(d) Except for FN-Bank, Tarpon does not own any
capital
stock of any subsidiary, and FN-Bank does not own any
capital
stock of any subsidiary; Tarpon and FN-Bank do not have any
interest in any partnership or joint venture. For purposes
of
this Agreement, a "subsidiary" means any corporation or
other
entity of which the party referred to beneficially owns,
controls, or has the power to vote, directly or indirectly,
more
than 5% of the outstanding equity securities.
(e) The minute books of Tarpon and FN-Bank contain
complete and accurate records in all material respects of
all
meetings and other corporate actions held or taken by their
respective shareholders and Boards of Directors (including
all
committees thereof).
Section 3.2 Capitalization.
(a) The authorized capital stock of Tarpon consists
of
500,000 shares of common stock, par value $0.10 per share
(herein before and hereinafter referred to as "Tarpon
Shares"),
155,000 shares of which as of the date hereof are issued and
outstanding (none of which is held in the treasury of
Tarpon).
All of the issued and outstanding Tarpon Shares have been
duly
authorized and validly issued and all such shares are fully
paid
and nonassessable. As of the date hereof, there are no
outstanding options, warrants, commitments, or other rights
or
instruments to purchase or acquire any shares of capital
stock
of Tarpon, or any securities or rights convertible into or
exchangeable for shares of capital stock of Tarpon.
(b) The authorized capital stock of FN-Bank
consists of
155,000 shares of common stock, par value $5 per share,
155,000
shares of which as of the date hereof are issued and
outstanding
(none of which are held in the treasury of FN-Bank) (the "FN-
Bank Shares"). All of the issued and outstanding FN-Bank
Shares
have been duly authorized and validly issued and all such
shares
are fully paid and nonassessable. As of the date hereof,
there
are no outstanding options, warrants, commitments or other
rights or instruments to purchase or acquire any shares of
capital stock of FN-Bank, or any securities or rights
convertible into or exchangeable for shares of capital stock
of
FN-Bank.
(c) Except as may be limited or required by
applicable
laws relating to banks, all of the issued and outstanding
shares
of capital stock of FN-Bank:
(i) are owned by Tarpon; and
(ii) are so owned free and clear of all liens
and
encumbrances and adverse claims thereto.
Section 3.3 Financial Statements; Filings.
(a) FN-Bank has previously delivered to Community
copies of the financial statements of FN-Bank as of and for
the
years ended December 31, 1996, 1997 and 1998 and the
financial
statements of FN-Bank as of and for the period ended June
30,
1999 and FN-Bank shall deliver to Community, as soon as
practicable following the preparation of additional
financial
statements for each subsequent calendar quarter (or other
reporting period) or year of FN-Bank, the financial
statements
of FN-Bank as of and for such subsequent calendar quarter
(or
other reporting period) or year (such financial statements,
unless otherwise indicated, being hereinafter referred to
collectively as the "Financial Statements of FN-Bank").
(b) FN-Bank has previously delivered to Community
copies of the Call Reports of FN-Bank as of and for the
years
ended December 31, 1996, 1997 and 1998 and the Call Reports
of
FN-Bank as of and for the period ended June 30, 1999, and FN-
Bank shall deliver to Community, as soon as practicable
following the preparation of additional Call Reports for
each
subsequent calendar quarter (or other reporting period) or
year
of FN-Bank, the Call Reports of FN-Bank as of and for each
such
subsequent calendar quarter (or other reporting period) or
year
(such Call Reports, unless otherwise indicated, being
hereinafter referred to collectively as the "Call Reports of
FN-
Bank").
(c) Tarpon has previously delivered to Community
copies
of the consolidated financial statements of Tarpon as of and
for
the years ended December 31, 1996, 1997 and 1998 and the
consolidated financial statements of Tarpon as of and for
the
period ended June 30, 1999, and Tarpon shall deliver- to
Community, as soon as practicable following the preparation
of
additional consolidated financial statements for each
subsequent
calendar quarter (or other reporting period) or year of
Tarpon,
the consolidated financial statements of Tarpon as of and
for
such subsequent calendar quarter (or other reporting period)
or
year (such financial statements, unless otherwise indicated,
being hereinafter referred to collectively as the "Financial
Statements of Tarpon").
(d) Each of the Financial Statements of Tarpon,
each of
the Financial Statements of FN-Bank, and each of the Call
Reports of FN-Bank (including the related notes, where
applicable) have been or will be prepared in all material
respects in accordance with generally accepted accounting
principles or regulatory accounting principles, whichever is
applicable, which principles have been or will be
consistently
applied during the periods involved, except as otherwise
noted
therein, and the books and records of Tarpon and FN-Bank
have
been, are being, and will be maintained in all material
respects
in accordance with applicable legal and accounting
requirements
and reflect only actual transactions. Each of the Financial
Statements of Tarpon, each of the Financial Statements of FN-
Bank, and each of the Call Reports of FN-Bank (including the
related notes, where applicable) fairly present or will
fairly
present the financial position of Tarpon on a consolidated
basis
and the financial position of FN-Bank (as the case may be)
as of
the respective dates thereof and fairly present or will
fairly
present the results of operations of Tarpon on a
consolidated
basis and the results of operations of FN-Bank (as the case
may
be) for the respective periods therein set forth.
(e) To the extent not prohibited by law, Tarpon has
heretofore delivered or made available, or caused to be
delivered or made available, to Community all reports and
filings made or required to be made by Tarpon, FN-Bank or
any of
their respective subsidiaries with the Regulatory
Authorities,
and will from time to time hereafter furnish, or cause FN-
Bank
to furnish to Community, upon filing or furnishing the same
to
the Regulatory Authorities, all such reports and filings
made
after the date hereof with the Regulatory Authorities. As
of
the respective dates of such reports and filings, all such
reports and filings did not and shall not contain any untrue
statement of a material fact or omit to state a material
fact
required to be stated therein or necessary to make the
statements therein, in light of the circumstances under
which
they were made, not misleading.
(f) Since December 31, 1998, none of Tarpon or FN-
Bank
has incurred any obligation or liability (contingent or
otherwise) that has or might reasonably be expected to have,
individually or in the aggregate, a material adverse effect
on
the Condition of Tarpon on a consolidated basis, except
obligations and liabilities (i) which are accrued or
reserved
against in the Financial Statements of Tarpon, the Financial
Statements of FN-Bank or the Call Reports of FN-Bank, or
reflected in the notes thereto, or (ii) which were incurred
after December 31, 1998, in the ordinary course of business
consistent with past practices.
Section 3.4 Loan Portfolio. Except as set forth in
Disclosure Schedule 3.4, (i) all evidences of indebtedness
reflected as assets in the Financial Statements of Tarpon,
the
Financial Statements of FN-Bank and the Call Reports of FN-
Bank
as of and for the year ended December 31, 1998, and the
period
ended June 30, 1999, were as of such dates in all respects
the
binding obligations of the respective obligors named therein
in
accordance with their respective terms, (ii) the allowances
for
possible loan losses shown on the Financial Statements of
Tarpon, the Financial Statements of FN-Bank and the Call
Reports
of FN-Bank as of and for the year ended December 31, 1998,
and
the period ended June 30, 1999, were, and the allowance for
possible loan losses to be shown on the Financial Statements
of
Tarpon, the Financial Statements of FN-Bank and the Call
Reports
of FN-Bank as of any date subsequent to the execution of
this
Agreement will be, as of such dates, adequate to provide for
possible losses, net of recoveries relating to loans
previously
charged off, in respect of loans outstanding (including
accrued
interest receivable) of Tarpon and FN-Bank and other
extensions
of credit (including letters of credit or commitments to
make
loans or extend credit), and (iii) each such allowance
described
in (ii) above has been established in accordance with the
accounting principles described in Section 3.3(d).
Section 3.5 Certain Loans and Related Matters. Except as
set
forth in Disclosure Schedule 3.5, neither Tarpon nor FN-Bank
is
a party to any written or oral: (i) loan agreement, note or
borrowing arrangement, other than credit card loans and
other
loans the unpaid balance of which does not exceed $5,000 per
loan, under the terms of which the obligor is sixty (60)
days
delinquent in payment of principal or interest or in default
of
any other provision as of the date hereof; (ii) loan
agreement,
note or borrowing arrangement which has been classified or,
in
the exercise of reasonable diligence by Tarpon or FN-Bank,
should have been classified as "substandard," "doubtful,"
"loss," "other loans especially mentioned," "other assets
especially mentioned" or any comparable classifications by
such
persons; (iii) loan agreement, note or borrowing
arrangement,
including any loan guaranty, with any director or executive
officer of Tarpon or FN-Bank or any ten percent (10%)
shareholder of Tarpon, or any person, corporation or
enterprise
controlling, controlled by or under common control with any
of
the foregoing; or (iv) loan agreement, note or borrowing
arrangement in violation of any law, regulation or rule
applicable to Tarpon or FN-Bank including, but not limited
to,
those promulgated, interpreted or enforced by any of the
Regulatory Authorities and which violation could have a
material
adverse effect on the Condition of Tarpon on a consolidated
basis. As of the date of any Financial Statement of Tarpon,
any
Financial Statement of FN-Bank and any Call Report of FN-
Bank
subsequent to the execution of this Agreement, including the
date of the Financial Statements of Tarpon, the Financial
Statements of FN-Bank, and the Call Reports of FN-Bank that
immediately precede the Effective Time of the Merger, there
shall not have been any material increase in the loan
agreements, notes or borrowing arrangements described in (i)
through (iv) above and Disclosure Schedule 3.5.
Section 3.6 Authority; No Violation.
(a) Tarpon has full corporate power and authority
to
execute and deliver this Agreement and, subject to the
approval
of the shareholders of Tarpon and to the receipt of the
Consents
of the Regulatory Authorities, to consummate the
transactions
contemplated hereby. The Board of Directors of Tarpon has
duly
and validly approved this Agreement and the transactions
contemplated hereby, has authorized the execution and
delivery
of this Agreement has directed that this Agreement and the
transactions contemplated hereby be submitted to Tarpon's
shareholders for approval at a meeting of such shareholders
and,
except for the adoption of such Agreement by its
shareholders,
no other corporate proceedings on the part of Tarpon are
necessary to consummate the transactions so contemplated.
This
Agreement, when duly and validly executed by Tarpon and
delivered by Tarpon, will constitute a valid and binding
obligation of Tarpon, and will be enforceable against Tarpon
in
accordance with its terms, except as such enforceability may
be
limited by applicable bankruptcy, insolvency,
reorganization,
moratorium or similar laws affecting the enforcement of
creditors rights generally and except that the availability
of
the equitable remedy of specific performance or injunctive
relief is subject to the discretion of the court before
which
any proceeding may be brought.
(b) Neither the execution and delivery of this
Agreement by Tarpon nor the consummation by Tarpon of the
transactions contemplated hereby, nor compliance by Tarpon
with
any of the terms or provisions hereof, will (i) violate any
provision of the Articles or Certificate of Incorporation or
Bylaws of Tarpon or the Articles of Incorporation or Bylaws
of
FN-Bank, (ii) assuming that the Consents of the Regulatory
Authorities and approvals referred to herein are duly
obtained,
violate any statute, code, ordinance, rule, regulation
judgment,
order, writ, decree or injunction applicable to Tarpon or FN-
Bank or any of their respective properties or assets, or
(iii)
violate, conflict with, result in a breach of any provisions
of,
constitute a default (or an event which, with notice or
lapse of
time, or both, would constitute a default) under, result in
the
termination of, accelerate the performance required by or
result
in the creation of any lien, security interest, charge or
other
encumbrance upon any of the respective properties or assets
of
Tarpon or FN-Bank under, any of the terms, conditions or
provisions of any material note, bond, mortgage, indenture,
deed
of trust, license, permit, lease, agreement or other
instrument
or obligation to which Tarpon or FN-Bank is a party, or by
which
any of them or any of their respective properties or assets
may
be bound or affected.
Section 3.7 Consents and Approvals. Except for (i) the
Consents of the FRB, the FDIC, and the OCC; (ii) approval of
this Agreement by the shareholders of Tarpon; (iii) the
Registration Statement on SEC Form S-4/Proxy Statement, to
be
filed by Community in order to register the Community Shares
to
be issued as part of the Consideration and to be used as the
proxy statement to solicit approval of this Agreement by the
shareholders of Tarpon ("S-4/Proxy"), becoming effective
with
the SEC; and (iv) filing of Articles of Merger with the
States
of Florida and Georgia, no Consents of any person are
necessary
in connection with the execution and delivery by Tarpon of
this
Agreement, and the consummation by Tarpon of the Merger and
the
other transactions contemplated hereby.
Section 3.8 Broker' s Fees. Neither Tarpon nor FN-Bank,
nor
any of their respective officers or directors, has employed
any
broker or finder or incurred any liability for any broker' s
fees, commissions or finder' s fees in connection with any
of
the transactions contemplated by this Agreement.
Section 3.9 Absence of Certain Changes or Events. Except
as
set forth in Disclosure Schedule 3.9, since December 31,
1998,
there has not been (i) any declaration, payment or setting
aside
of any dividend or distribution (whether in cash, stock or
property) in respect of the Tarpon Shares or (ii) any change
or
any event involving a prospective change in the Condition of
Tarpon on a consolidated basis which has had, or is
reasonably
likely to have, a material adverse effect on the Condition
of
Tarpon on a consolidated basis or on Tarpon or FN-Bank
generally, including, without limitation any change in the
administration or supervisory standing or rating of Tarpon
or
FN-Bank with any Regulatory Authority, and no fact or
condition
exists as of the date hereof which might reasonably be
expected
to cause any such event or change in the future.
Section 3.10 Legal Proceedings. Except as set forth in
Disclosure Schedule 3.10, neither Tarpon nor FN-Bank is a
party
to any, and there are no pending or, to the knowledge of
Tarpon
or FN-Bank, threatened, judicial, administrative, arbitral
or
other proceedings, claims, actions, causes of action or
governmental investigations against Tarpon or FN-Bank
challenging the validity of the transactions contemplated by
this Agreement and, to the knowledge of Tarpon or FN-Bank as
of
the date hereof, there is no material proceeding, claim,
action
or governmental investigation against Tarpon or FN-Bank; no
judgment, decree, injunction, rule or order of any court,
governmental department, commission, agency, instrumentality
or
arbitrator is outstanding against Tarpon or FN-Bank which
has a
material adverse effect on the Condition of Tarpon on a
consolidated basis; there is no default by Tarpon or FN-Bank
under any material contract or agreement to which Tarpon or
FN-
Bank is a party; and neither Tarpon nor FN-Bank is a party
to
any agreement, order or memorandum in writing by or with any
Regulatory Authority restricting the operations of Tarpon or
FN-
Bank and neither Tarpon nor FN-Bank has been advised by any
Regulatory Authority that any such Regulatory Authority is
contemplating issuing or requesting the issuance of any such
order or memorandum in the future.
Section 3.11 Taxes and Tax Returns.
(a) Tarpon has previously delivered or made
available
to Community copies of the federal income tax returns of
Tarpon
and, if consolidated returns do not exist for all periods,
of
FN-Bank, for the years 1996, 1997 and 1998 and all schedules
and
exhibits thereto, and will provide Community with a copy of
its
federal income tax return for any subsequent period with all
schedules and exhibits thereto, when such return is filed,
and,
to the knowledge of Tarpon or FN-Bank, such returns have not
been examined by the Internal Revenue Service. Tarpon and
FN-
Bank have duly filed in correct form all federal, state and
local information returns and tax returns required to be
filed
by either of them on or prior to the date hereof, and Tarpon
and
FN-Bank have duly paid or made adequate provisions for the
payment of all taxes and other governmental charges which
have
been incurred or are due or claimed to be due from either of
them by any federal, state or local taxing authorities
(including, without limitation, those due in respect of the
properties, income, business, capital stock, deposits,
franchises, licenses, sales and payrolls of Tarpon and FN-
Bank)
other than taxes and other charges which (i)(A) are not yet
delinquent or (B) are being contested in good faith or (ii)
have
not been finally determined. The amounts set forth as
liabilities for taxes on the Financial Statements of Tarpon,
the
Financial Statements of FN-Bank and the Call Reports of FN-
Bank
are sufficient, in the aggregate, for the payment of all
unpaid
federal, state and local taxes (including any interest or
penalties thereon), whether or not disputed, accrued or
applicable, for the periods then ended, and have been
computed
in accordance with generally accepted accounting principles.
Neither Tarpon nor FN-Bank is responsible for the taxes of
any
other person other than Tarpon and FN-Bank, under Treasury
Regulation 1.1502-6 or any similar provision of federal,
state
or foreign law.
(b) (i) Proper and accurate amounts have been
withheld
by Tarpon and FN-Bank from their employees and others for
all
prior periods in compliance in all material respects with
the
tax withholding provisions of all applicable federal, state
and
local laws and regulations, and proper due diligence steps
have
been taken in connection with back-up withholding, (ii)
federal,
state and local returns have been filed by Tarpon and FN-
Bank
for all periods for which returns were due with respect to
income tax withholding, Social Security and unemployment
taxes
and (iii) the amounts shown on such returns to be due and
payable have been paid in full or adequate provision
therefor
has been included by either Tarpon or FN-Bank in the
Financial
Statements of Tarpon or the Financial Statements of FN-Bank,
as
the case may be.
Section 3.12 Employee Benefit Plans.
(a) Neither Tarpon or FN-Bank has or maintains any
"employee benefit plan," as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended
("ERISA"), except as described in Disclosure Schedule
3.12(a).
(b) Neither Tarpon or FN-Bank (or any pension plan
maintained by either of them) has incurred any liability to
the
Pension Benefit Guaranty Corporation ("PBGC") or the
Internal
Revenue Service with respect to any pension plan qualified
under
Section 401 of the Code, except liabilities to the PBGC
pursuant
to Section 4007 of ERISA, all which have been fully paid.
No
reportable event under Section 4043(b) of ERISA (including
events waived by PBGC regulation) has occurred with respect
to
any such pension plan.
(c) Neither Tarpon or FN-Bank has incurred any
material
liability under Section 4201 of ERISA for a complete or
partial
withdrawal from, or agreed to participate in, any multi-
employer
plan as such term is defined in Section 3(37) of ERISA.
(d) All "employee benefit plans," as defined in
Section
3(3) of ERISA, that are maintained by Tarpon or FN-Bank
comply,
in all material respects with ERISA. Neither Tarpon nor FN-
Bank
has any material liability under any such plan that is not
reflected in the Financial Statements of Tarpon or the Call
Reports of FN-Bank.
(e) No prohibited transaction (which shall mean any
transaction prohibited by Section 406 of ERISA and not
exempt
under Section 408 of ERISA) has occurred with respect to any
employee benefit plan maintained by Tarpon or FN-Bank or any
of
their respective subsidiaries (i) which would result in the
imposition, directly or indirectly, of a material excise tax
under Section 4975 of the Code or a material civil penalty
under
Section 502(i) of ERISA, or (ii) the correction of which
would
have a material adverse effect on the Condition of Tarpon or
FN-
Bank; and, to the best knowledge of Tarpon or FN-Bank no
actions
have occurred which could result in the imposition of a
penalty
under any section or provision of ERISA.
(f) No employee benefit plan that is a defined
benefit
pension plan has any "unfunded current liability," as that
term
is defined in Section 302(d)(8)(A) of ERISA, and the present
fair market value of the assets of any such plan exceeds the
plan' s "benefit liabilities," as that term is defined in
Section 4001(a)(16) of ERISA, when determined under
actuarial
factors that would apply if the plan terminated in
accordance
with all applicable legal requirements.
(g) Neither the execution and delivery of this
Agreement nor the consummation of the transactions
contemplated
hereby will (i) result in any material payment (including,
without limitation, severance, unemployment compensation,
golden
parachute or otherwise) becoming due to any director or any
officer or employee of Tarpon or FN-Bank under any benefit
plan
or otherwise, (ii) materially increase any benefits
otherwise
payable under any benefit plan or (iii) result in any
acceleration of the time of payment or vesting of any such
benefits to any material extent.
Section 3.13 Title and Related Matters.
(a) Except as set forth in Disclosure Schedule
3.13(a),
Tarpon and FN-Bank have good title, and as to owned real
property, have good and marketable title in fee simple
absolute,
to all assets and properties, real or personal, tangible or
intangible, reflected as owned by or carried under the name
of
either of them on the Financial Statements of Tarpon, the
Financial Statements of FN-Bank, or the Call Reports of FN-
Bank
or acquired subsequent thereto (except to the extent that
such
assets and properties have been disposed of for fair value
in
the ordinary course of business since June 30, 1999), free
and
clear of all liens, encumbrances, mortgages, security
interests,
restrictions, pledges or claims, except for (i) those liens,
encumbrances, mortgages, security interests, restrictions,
pledges or claims reflected in the Financial Statements of
Tarpon, the Financial Statements of FN-Bank, and the Call
Reports of FN-Bank or incurred in the ordinary course of
business after June 30, 1999, (ii) statutory liens for
amounts
not yet delinquent or which are being contested in good
faith,
and (iii) liens, encumbrances, mortgages, security
interests,
pledges, claims and title imperfections that are not in the
aggregate material to the Condition of Tarpon on a
consolidated
basis.
(b) All agreements pursuant to which Tarpon or FN-
Bank
leases, subleases or licenses material real or material
personal
properties from others are valid, binding and enforceable in
accordance with their respective terms, and there is not,
under
any of such leases or licenses, any existing default or
event of
default, or any event which with notice or lapse of time, or
both, would constitute a default or force majeure, or
provide
the basis for any other claim of excusable delay or
nonperformance, except for defaults which individually or in
the
aggregate would not have a material adverse effect on the
Condition of Tarpon on a consolidated basis.
(c) Except as set forth on Disclosure Schedule
3.13(c),
other than real estate owned, acquired by foreclosure or
voluntary deed in lieu of foreclosure (i) all of the
buildings,
structures and fixtures owned, leased or subleased by Tarpon
or
FN-Bank are in good operating condition and repair, subject
only
to ordinary wear and tear and/or minor defects which do not
interfere with the continued use thereof in the conduct of
nor-
mal operations, and (ii) all of the material personal
properties
owned, leased or subleased by Tarpon or FN-Bank are in good
operating condition and repair, subject only to ordinary
wear
and tear and/or minor defects which do not interfere with
the
continued use thereof in the conduct of normal operations.
Section 3.14 Real Estate.
(a) Disclosure Schedule 3.14(a) identifies and sets
forth a complete legal description for each parcel of real
estate or interest therein owned by Tarpon or FN-Bank or in
which Tarpon or FN-Bank has any ownership or leasehold
interest.
(b) Disclosure Schedule 3.14(b) lists or otherwise
describes each and every written lease or sublease under
which
Tarpon or FN-Bank is the lessee of any real property and
which
relates in any manner to the operation of the businesses of
Tarpon or FN-Bank. All rentals due under such leases have
been
paid and there exists no material default under the terms of
any
lease and no event has occurred which, upon the passage of
time
or giving of notice, or both, would result in any event of
default or prevent Tarpon or FN-Bank from exercising and
obtaining the benefits of any options or other rights
contained
therein, except for defaults which individually or in the
aggregate would not have a material adverse effect on the
Condition of Tarpon on a consolidated basis. Except as set
forth in Disclosure Schedule 3.14(b), Tarpon and FN-Bank
have
all right, title and interest as a lessee under the terms of
each lease or sublease, free and clear of all liens, claims
or
encumbrances (other than the rights of the lessor), and all
such
leases are valid and in full force and effect. Tarpon and
FN-
Bank have the right under each such lease and sublease to
occupy, use, possess, and control all property leased or
subleased by Tarpon or FN-Bank and, as of the Effective Time
of
the Merger, shall have the right to transfer each lease or
sublease pursuant to this Agreement.
(c) To the best of their respective knowledge,
neither
Tarpon nor FN-Bank has violated, or is currently in
violation
of, any law, regulation or ordinance relating to the
ownership
or use of the real estate and real estate interests
described in
Disclosure Schedules 3.14(a) and 3.14(b) including, but not
limited to any law, regulation or ordinance relating to
zoning,
building, occupancy, environmental or comparable matter
which
individually or in the aggregate would have a material
adverse
effect on the Condition of Tarpon on a consolidated basis.
(d) As to each parcel of real property owned or
used by
Tarpon or FN-Bank, neither Tarpon nor FN-Bank has received
notice of any pending or, to the knowledge of Tarpon or FN-
Bank
threatened condemnation proceedings, litigation proceedings
or
mechanics or materialmen's liens.
Section 3.15 Environmental Matters.
(a) To the best of its respective knowledge, each
of
Tarpon, FN-Bank, the Participation Facilities (as defined
below), and the Loan Properties (as defined below) are, and
have
been in compliance with all applicable laws, rules,
regulations,
standards and requirements of the United States
Environmental
Protection Agency and all state and local agencies with
jurisdiction over pollution or protection of the
environment,
except for violations which, individually or in the
aggregate,
will not have a material adverse effect on the Condition of
Tarpon on a consolidated basis.
(b) There is no litigation pending or, to the
knowledge
of Tarpon or FN-Bank, threatened before any court,
governmental
agency or board or other forum in which Tarpon or FN-Bank or
any
Participation Facility has been or, with respect to
threatened
litigation, may be, named as defendant (i) for alleged
noncompliance (including by any predecessor), with any
Environmental Law (as defined below) or (ii) relating to the
release into the environment of any Hazardous Material (as
defined below) or oil, occurring on a site owned, leased or
operated by Tarpon or FN-Bank or any Participation Facility.
(c) There is no litigation pending or, to the
knowledge
of Tarpon or FN-Bank, threatened before any court,
governmental
agency or board or other forum in which any Loan Property
(or
Tarpon or FN-Bank in respect of such Loan Property) has been
or,
with respect to threatened litigation, may be, named as a
defendant or potentially responsible party (i) for alleged
noncompliance (including by any predecessor) with any
Environmental Law or (ii) relating to the release into the
environment of any Hazardous Material or oil, occurring on
or
involving a Loan Property, except for such litigation
pending,
or threatened that will not individually or in the
aggregate,
have a material adverse effect on the Condition of Tarpon on
a
consolidated basis.
(d) To the knowledge of Tarpon or FN-Bank, there is
no
reasonable basis for any litigation of a type described in
Sections 3.15(b) or 3.15(c) of this Agreement, except as
will
not have, individually or in the aggregate, a material
adverse
effect on the Condition of Tarpon on a consolidated basis.
(e) During the period of (i) ownership or operation
by
Tarpon or FN-Bank of -any of their respective current
properties, (ii) participation by Tarpon or FN-Bank in the
management of any Participation Facility, or (iii) holding
by
Tarpon or FN-Bank of a security interest in any Loan
Property
(except as shown on Disclosure Schedule 3.15(e)(iii)), there
have been no releases of Hazardous Material or oil in, on,
under
or affecting such properties, except where such releases
have
not and will not, individually or in the aggregate, have a
material adverse effect on the Condition of Tarpon on a
consolidated basis.
(f) Prior to the period of (i) ownership or
operation
by Tarpon or FN-Bank of any of their respective current
properties, (ii) participation by Tarpon or FN-Bank in the
management of any Participation Facility, or (iii) holding
by
Tarpon or FN-Bank of a security interest in any Loan
Property,
to the knowledge of Tarpon or FN-Bank, there were no
releases of
Hazardous Material or oil in, on, under or affecting any
such
property, Participation Facility or Loan Property, except
where
such releases have not and will not, individually or in the
aggregate, have a material adverse effect on the Condition
of
Tarpon on a consolidated basis.
(g) "Environmental Law" means any federal, state,
local
or foreign law, statute, ordinance, rule, regulation, code,
license, permit, authorization, approval, consent order,
judgment, decree, injunction or agreement with any
regulatory
agency relating to (i) the protection, preservation or
restoration of the environment (including, without
limitation,
air, water vapor, surface water, groundwater, drinking water
supply, surface soil, subsurface soil, plant and animal life
or
any other natural resource), and/or (ii) the use, storage,
recycling, treatment, generation, transportation,
processing,
handling, labeling, production, release or disposal of any
substance presently listed, defined, designated or
classified as
hazardous, toxic, radioactive or dangerous, or other-wise
regulated, whether by type or by substance as a component;
"Loan
Property" means any property owned by Tarpon or FN-Bank, or
in
which Tarpon or FN-Bank 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; "Hazardous
Material" means any pollutant, contaminant, or hazardous
substance within the meaning of the Comprehensive
Environmental
Response, Compensation, and Liability Act, 42 U.S.C. 9601
et
seq., or any similar federal, state or local law; and
"Participation Facility" means any facility in which Tarpon
or
FN-Bank participate in the management and, where required by
the
context, includes the owner or operator of such facility,
but
only with respect to such facility.
Section 3.16 Commitments and Contracts. Except as set
forth
in Disclosure Schedule 3.16, neither Tarpon nor FN-Bank is a
party or subject to any of the following (whether written or
oral, express or implied):
(a) Any employment contract or understanding
(including
any understandings or obligations with respect to severance
or
termination pay liabilities or fringe benefits) with any
present
or former officer, director, employee, including in any such
person' s capacity as a consultant (other than those which
either are terminable at will without any further amount
being
payable thereunder or as a result of such termination by
Tarpon
or FN-Bank);
(b) Any labor contract or agreement with any labor
union;
(c) Any contract covenants which limit the ability
of
Tarpon or FN-Bank to compete in any line of business or
which
involve any restriction of the geographical area in which
Tarpon
or FN-Bank may carry on its business (other than as may be
required by law or applicable regulatory authorities);
(d) Any lease (other than real estate leases
described
on Disclosure Schedule 3.14(b)) or other agreements or
contracts
with annual payments aggregating $5,000 or more; or
(e) Any other contract or agreement which would be
required to be disclosed in reports filed by Tarpon with the
OCC
or the FRB and which has not been so disclosed.
Section 3.17 Regulatory Matters. Neither Tarpon nor FN-
Bank
has agreed to take any action or has any knowledge of any
fact
or has agreed to any circumstance that would materially
impede
or delay receipt of any Consents of any Regulatory
Authorities
referred to in this Agreement including, matters relating to
the
Home Mortgage Disclosure Act, the Community Reinvestment Act
and
protests thereunder.
Section 3.18 State Takeover Laws. This Agreement and the
transactions contemplated hereby are not subject to or
restricted by any applicable state anti-takeover statute.
Section 3.19 Insurance. Tarpon and FN-Bank are presently
insured, and during each of the past three calendar years
have
been insured, for reasonable amounts against such risks as
companies or institutions engaged in a similar business
would,
in accordance with good business practice, customarily be
insured. To the knowledge of Tarpon and FN-Bank the
policies of
fire, theft, liability and other insurance maintained with
respect to the assets or businesses of Tarpon and FN-Bank
provide adequate coverage against loss, and the fidelity
bonds
in effect as to which Tarpon or FN-Bank is named an insured
are
sufficient for their purpose. Such policies of insurance
are
listed and described in Disclosure Schedule 3.19.
Section 3.20 Labor. No work stoppage involving Tarpon or
FN-
Bank is pending as of the date hereof or, to the knowledge
of
Tarpon or FN-Bank, threatened. Neither Tarpon nor FN-Bank
is
involved in, or, to the knowledge of Tarpon or FN-Bank,
threatened with or affected by, any proceeding asserting
that
Tarpon or FN-Bank has committed an unfair labor practice or
any
labor dispute, arbitration, lawsuit or administrative
proceeding
which might reasonably be expected to have a material
adverse
effect on the Condition of Tarpon on a consolidated basis.
No
union represents or claims to represent any employees of
Tarpon
or FN-Bank, and, to the knowledge of Tarpon or FN-Bank, no
labor
union is attempting to organize employees of Tarpon or FN-
Bank.
Section 3.21 Compliance with Laws. Each of Tarpon and FN-
Bank
has conducted its business in accordance with all applicable
federal, foreign, state and local laws, regulations and
orders,
and each is in compliance with such laws, regulations and
orders, except for such violations or non-compliance, which
when
taken together as a whole, will not have a material adverse
effect on the Condition of Tarpon on a consolidated basis.
Except as disclosed in Disclosure Schedule 3.21, neither
Tarpon
nor FN-Bank:
(a) Is, to the best of their respective knowledge,
in
violation of any laws, orders or permits applicable to its
business or the employees or agents or representatives
conducting its business, except for violations that
individually
or in the aggregate do not have and will not have a material
adverse effect on the Condition of Tarpon on a consolidated
basis; and
(b) Has received a notification or communication
from
any agency or department of federal, state or local
government
or the Regulatory Authorities or the staff thereof (i)
asserting
that Tarpon or FN-Bank is not in compliance with any laws or
orders which such governmental authority or Regulatory
Authority
enforces, where such noncompliance is not reasonably likely
to
have a material adverse effect on the Condition of Tarpon on
a
consolidated basis, (ii) threatening to revoke any permit,
the
revocation of which is not reasonably likely to have a
material
adverse effect on the Condition of Tarpon on a consolidated
basis, (iii) requiring Tarpon or FN-Bank to enter into any
cease
and desist order, formal agreement, commitment or memorandum
of
understanding, or to adopt any resolutions or similar
undertakings, or (iv) directing, restricting or limiting, or
purporting to direct, restrict or limit in any manner, the
operations of Tarpon or FN-Bank, including, without
limitation,
any restrictions on the payment of dividends.
Section 3.22 Transactions with Management. Except for (a)
deposits, all of which are on terms and conditions
comparable to
those made available to other customers of FN-Bank at the
time
such deposits were entered into, (b) the agreements listed
on
Disclosure Schedule 3.16, and (c) the items described on
Disclosure Schedule 3.22, there are no contracts with or
commitments to present or former stockholders, directors,
officers or employees involving the expenditure of more than
$1,000 as to any one individual, including, with respect to
any
business directly or indirectly controlled by any such
person,
or $5,000 for all such contracts for commitments in the
aggregate for all such individuals.
Section 3.23 The S-4/Proxy. None of the information
relating
to Tarpon or FN-Bank to be included in the S-4/Proxy, which
is
to be filed with the SEC and, upon effectiveness, to be
mailed
to the shareholders of Tarpon in connection with the
solicitation of their approval of this Agreement shall be
false
or misleading with respect to any material fact, or omit to
state any material fact, necessary in order to make a
statement
therein not false or misleading.
Section 3.24 Deposit Insurance. The deposit accounts of
FN-
Bank are insured by the Bank Insurance Fund in accordance
with
the provisions of the Federal Deposit Insurance Act, as
amended
(the "Act"); FN-Bank has paid all regular premiums and
special
assessments and filed all reports required under the Act.
Section 3.25 Untrue Statements and Omissions. No
representation or warranty contained in Article III of this
Agreement or in the Disclosure Schedules of Tarpon contains
any
untrue statement of a material fact or omits to state a
material
fact necessary to make the statements therein, in light of
the
circumstances under which they were made, not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF COMMUNITY
Community hereby represents and warrants to Tarpon as
follows as of the date hereof and also on the Effective Time
of
the Merger (except as otherwise provided):
Section 4.1 Organization and Related Matters of
Community.
(a) Community is a corporation duly organized,
validly
existing and in good standing under the laws of the State of
Georgia. Community has the corporate power and authority to
own
or lease all of its properties and assets and to carry on
its
business as now conducted, or as proposed to be conducted
pursuant to this Agreement, and Community is licensed or
qualified to do business in each jurisdiction in which the
nature of the business conducted by Community, or the
character
or location of the properties and assets owned or leased by
Community makes such licensing or qualification necessary,
except where the failure to be so licensed or qualified (or
steps necessary to cure such failure) would not have a
material
adverse effect on the Condition of Community on a
consolidated
basis. Community is a bank holding company under the Bank
Holding Company Act of 1956, as amended, and has one wholly-
owned bank (or any other) subsidiary.
(b) Community has in effect all federal, state,
local
and foreign govern-mental, regulatory and other
authorizations,
permits and licenses necessary for it to own or lease its
properties and assets and to carry on its business as now
conducted, the absence of which, either individually or in
the
aggregate, would have a material adverse effect on the
Condition
of Community on a consolidated basis.
(c) The minute books of Community contain complete
and
accurate records in all material respects of all meetings
and
other corporate actions held or taken by the shareholders
and
Board of Directors of Community.
Section 4.2 Capitalization. As of the date hereof, the
authorized capital stock of Community consisted of
10,000,000
shares of no par value common stock, 1,518,871 of which are
issued and outstanding. All issued and outstanding shares
of
common stock of Community have been duly authorized and
validly
issued, and all such shares are fully paid and
nonassessable.
Section 4.3 Authorization. The execution, delivery, and
performance of this Agreement, and the consummation of the
transactions contemplated hereby and in any related
agreements,
have been or, as of the Effective Time of the Merger, will
have
been duly authorized by the Board of Directors of Community,
and
no other corporate proceedings on the part of Community are
or
will be necessary to authorize this Agreement and the
transactions contemplated hereby. This Agreement is the
valid
and binding obligation of Community enforceable against
Community in accordance with its terms, except 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. Neither the
execution, delivery or performance of this Agreement nor the
consummation of the transactions contemplated hereby will
(i)
violate any provision of the Amended and Restated Articles
of
Incorporation or Bylaws of Community or, (ii) to Community'
s
knowledge and assuming that any necessary Consents are duly
obtained, (A) violate, conflict with, result in a breach of
any
provisions of, constitute a default (or an event which, with
notice or lapse of time, or both, would constitute a
default)
under, result in the termination of, accelerate the
performance
required by or result in the creation of any lien, security
Interest charge or other encumbrance upon any of the
properties
or assets of Community under, any of the terms, conditions
or
provisions of any note, bond, mortgage, indenture, deed of
trust, license, permit, lease, agreement or other instrument
or
obligation to which Community is a party, or by which
Community
or any of its respective properties or assets may be bound
or
affected, (B) violate any statute, code, ordinance, rule,
regulation, judgment, order, writ, decree or injunction
applicable to Community or any of its material properties or
assets, except for (X) such conflicts, breaches or defaults
as
are set forth in Disclosure Schedule 4.3; and (Y) with
respect
to (A) and (B) above, such as individually or in the
aggregate
will not have a material adverse effect on the Condition of
Community on a consolidated basis.
Section 4.4 Financial Statements.
(a) Community has made available to Tarpon copies
of
the Consolidated financial statements of Community as of and
for
the years ended December 31, 1997 and 1998, and Community
will
make available to Tarpon, as soon as practicable following
the
preparation of additional consolidated financial statements
for
each subsequent calendar quarter or year of Community, the
consolidated financial statements of Community as of and for
such subsequent calendar quarter or year (such consolidated
financial statements, unless otherwise indicated, being
hereinafter referred to collectively as the "Financial
Statements of Community").
(b) Each of the Financial Statements of Community
(including the related notes) have been or will be prepared
in
all material respects in accordance with generally accepted
accounting principles, which principles have been or will be
consistently applied during the periods involved, except as
otherwise noted therein, and the books and records of
Community
have been, are being, and will be maintained in all material
respects in accordance with applicable legal and accounting
requirements and reflect only the actual transactions. Each
of
the Financial Statements of Community (including the related
notes) fairly presents or will fairly present the
consolidated
financial position of Community as of the respective dates
thereof and fairly presents or will fairly present the
results
of operations of Community for the respective periods
therein
set forth.
(c) Since December 31, 1998, Community has not
incurred
any obligation or liability (contingent or otherwise) that
has
or might reasonably be expected to have, individually or in
the
aggregate, a material adverse effect on the Condition of
Community on a consolidated basis, except obligations and
liabilities (i) which are accrued or reserved against in the
Financial Statements of Community or reflected in the notes
thereto, and (ii) which were incurred after December 31,
1998 in
the ordinary course of business consistent with past
practices.
Since December 31, 1998, and except for the matters
described in
(i) and (ii) above, Community has not incurred or paid any
obligation or liability which would be material to the
Condition
of Community on a consolidated basis.
Section 4.5 Absence of Certain Changes or Events. Since
December 31, 1998, there has not been any material adverse
change in the Condition of Community on a consolidated
basis,
and to the knowledge of Community, no fact or condition
exists
which might reasonably be expected to cause such a material
adverse change in the future.
Section 4.6 Legal Proceedings. Except as set forth on
Disclosure Schedule 4.6 hereto, Community is not a party to
any,
and there are no pending, or, to the knowledge of Community,
threatened, legal, administrative, arbitrary or other
proceedings, claims, actions, causes of action or
governmental
investigations of any nature against Community challenging
the
validity or propriety of the transactions contemplated by
this
Agreement or which would be required to be reported by
Community
pursuant to Item 103 of Regulation S-B promulgated by the
SEC.
Section 4.7 Insurance. Community has in effect insurance
coverage with insurers which, in respect of amounts,
premiums,
types and risks insured, constitutes reasonably adequate
coverage against all risks customarily insured against by
institutions comparable in size and operation to Community.
Section 4.8 Consents and Approvals. Except for (i) the
Consents of the FRB and the OCC; (ii) approval of this
Agreement
by the shareholders of Tarpon; (iii) the effectiveness of
the S-
4/Proxy; and (iv) filing of Articles of Merger with the
States
of Florida and Georgia, no consents or approvals by, or
filings
or registrations with, any third party or any public body,
agency or authority are necessary in connection with the
execution and delivery by Community of this Agreement, and
the
consummation of the Merger and the other transactions
contemplated hereby.
Section 4.9 Regulatory Matters. Community has not agreed
to
take any action, has no knowledge of any fact and has not
agreed
to any circumstance that would materially impede or delay
receipt of any Consent from any Regulatory Authority
referred to
in the Agreement.
Section 4.10 Proxy Materials. None of the information
relating
solely to Community or any of its subsidiaries to be
included or
incorporated by reference in the Proxy Statement which is to
be
mailed to the shareholders of Tarpon in connection with the
solicitation of their approval of this Agreement will, at
the
time such Proxy Statement is mailed or at the time of the
meeting of shareholders of Tarpon to which such Proxy
Statement
relates, be false or misleading with respect to any material
fact, or omit to state any material fact necessary in order
to
make a statement therein not false or misleading.
Section 4.11 No Broker' s or Finder' s Fees. Neither
Community
nor any of its affiliates or employers has employed any
broker
or finder or incurred any liability for any broker' s fees,
commissions or finder' s fees in connection with this
Agreement
or the consummation of any of the transactions contemplated
herein.
Section 4.12 Community Shares to be Delivered. All of the
Community Shares, when issued and delivered to the holders
of
the Tarpon Shares pursuant to this Agreement, will be duly
authorized, validly issued, fully paid and nonassessable and
free and clear of any liens or other encumbrances or
restrictions on resale, except, as regards restrictions on
resale, with respect to Community Shares which would be held
by
holders of Tarpon Shares who become, pursuant to or
subsequent
to the Merger, "affiliates" of Community for purposes of
Rule
144(a)(1) under the Securities Act of 1933.
Section 4.13 Untrue Statements and Omissions. No
representation or warranty contained in Article IV of this
Agreement or in the Disclosure Schedules of Community
contains
any untrue statement of a material fact or omits to state a
material fact necessary to make the statements therein, in
light
of the circumstances under which they were made, not
misleading.
ARTICLE V
COVENANTS AND AGREEMENTS
Section 5.1 Conduct of the Business of Tarpon.
(a) During the period from the date of this
Agreement
to the Effective Time of the Merger, Tarpon shall, and shall
cause FN-Bank to, (i) conduct its business in the usual,
regular
and ordinary course consistent with past practice and
prudent
banking principles, (ii) use its best efforts to maintain
and
preserve intact its business organization, employees,
goodwill
with customers and advantageous business relationships and
retain the services of its officers and key employees, and
(iii)
except as required by law or regulation, take no action
which
would adversely affect or delay the ability of Tarpon or
Community to obtain any Consent from any Regulatory
Authorities
or other approvals required for the consummation of the
transactions contemplated hereby or to perform its covenants
and
agreements under this Agreement.
(b) During the period from the date of this
Agreement
to the Effective Time of the Merger, except as required by
law
or regulation, Tarpon shall not, and it shall not permit FN-
Bank
or any of their respective subsidiaries, without the prior
written consent of Community, to:
(i) change, delete or add any provision of or
to
the Articles of Incorporation or Bylaws of Tarpon or FN-
Bank;
(ii) change the number of shares of the
authorized,
issued or outstanding capital stock of Tarpon, including any
issuance, purchase, redemption, split, combination or
reclassification thereof, or issue or grant any option,
warrant,
call, commitment, subscription, right or agreement to
purchase
relating to the authorized or issued capital stock of
Tarpon,
declare, set aside or pay any dividend or other distribution
with respect to the outstanding capital stock of Tarpon;
(iii) incur any material liabilities or material
obligations (other than deposit liabilities and short-term
borrowings in the ordinary course of business), whether
directly
or by way of guaranty, including any obligation for borrowed
money, or whether evidenced by any note, bond, debenture, or
similar instrument, except (A) in the ordinary course of
business consistent with past practice and (B) with respect
to
reasonable expenses incurred in seeking to perform this
Agreement and consummate the transactions contemplated
hereby;
(iv) except for the purchase of the FN-Bank
building, make any capital expenditures individually in
excess
of $10,000, or in the aggregate in excess of $25,000 other
than
expenditures necessary to maintain existing assets in good
repair;
(v) except for parcels described on Disclosure
Schedule 5.1(b)(v), sell, transfer, convey or otherwise
dispose
of any real property (including "other real estate owned")
or
interest therein having a book value in excess of or in
exchange
for consideration in excess of $10,000;
(vi) incur or permit overdrafts on deposit
accounts
held at FN-Bank in excess of $5,000 for any single item or
$10,000 in the aggregate at any time outstanding without the
consent of Community or its representatives;
(vii) pay any bonuses to any executive officer;
enter into any new, or amend in any respect any existing,
employment, consulting, noncompetition or independent
contractor
agreement with any person; alter the terms of any existing
incentive bonus or commission plan; adopt any new or amend
in
any material respect any existing employee benefit plan,
except
as may be required by law; grant any increase in
compensation to
its employees as a class or to its officers; grant any
increases
in fees or other increases in compensation or in other
benefits
to any of its directors; or effect any change in any respect
in
retirement benefits to any class of employees or officers,
except as required by, law;
(viii) enter into or extend any agreement, lease
or
license relating to real property, personal property, data
processing or bankcard functions relating to Tarpon or FN-
Bank
that involves an annualized payment of $5,000 or more or
aggregate payments over the term of such lease of $25,000 or
more; or
(ix) acquire twenty percent (20%) or more of
the
assets or equity securities of any person or acquire direct
or
indirect control of any person, other than in connection
with
(A) foreclosures in the ordinary course of business, or (B)
acquisitions of control by FN-Bank acting in a fiduciary
capacity.
Section 5.2 Current Information. During the period from
the
date of this Agreement to the Effective Time of the Merger
or
the time of termination or abandonment of this Agreement,
Tarpon
will cause one or more of its designated representatives to
confer on a regular and frequent basis with representatives
of
Community and to report the general status of the ongoing
operations of Tarpon. Tarpon will promptly notify Community
of
any material change in the normal course of business or the
operations or the properties of Tarpon, FN-Bank or any of
their
respective subsidiaries, any governmental complaints,
investigations or hearings (or communications indicating
that
the same may be contemplated) affecting Tarpon, FN-Bank or
their
respective subsidiaries, the institution or the threat of
material litigation, claims, threats or causes of action
involving Tarpon, FN-Bank or any of their respective
subsidiaries, and will keep Community fully informed of such
events. Tarpon will furnish to Community, promptly after
the
preparation and/or receipt by Tarpon thereof, copies of its
unaudited periodic financial statements and call reports for
the
applicable periods then ended, and such financial statements
and
call reports shall, upon delivery to Community, be treated,
for
purposes of Section 3.3 hereof, as among the Financial
Statements of Tarpon, the Financial Statements of FN-Bank
and
the Call Reports of FN-Bank.
Section 5.3 Access to Properties; Personnel and Records.
(a) So long as this Agreement shall remain in
effect,
Tarpon and FN-Bank shall permit Community and its agents
full
access, during normal business hours, to the properties of
Tarpon and FN-Bank and shall disclose and make available
(together with the right to copy) to Community and to its
internal auditors, loan review officers, attorneys,
accountants
and other representatives, all books, papers and records
relating to the assets, stock, properties, operations,
obligations and liabilities of Tarpon or FN-Bank, including
all
books of account (including the general ledger), tax
records,
minute books of directors' and shareholders' meetings,
organizational documents, bylaws, contracts and agreements,
filings with any regulatory agency, examination reports,
correspondence with regulatory or taxing authorities,
documents
relating to assets, titles, abstracts, appraisals,
consultant's
reports, plans affecting employees, securities transfer
records
and stockholder lists, and any other assets, business
activities
or prospects in which Community may have a reasonable
interest,
and Tarpon and FN-Bank shall use their reasonable best
efforts
to provide Community and its representatives access to the
work
papers of Tarpon' s and FN-Bank' s accountants. Tarpon and
FN-
Bank shall not be required to provide access to or to
disclose
information where such access or disclosure would violate or
prejudice the rights of any customer, would contravene any
law,
rule, regulation, order or judgment or would violate any
confidentiality agreement; provided that Tarpon and FN-Bank
shall cooperate with Community in seeking to obtain consents
from appropriate parties under whose rights or authority
access
is otherwise restricted. the foregoing rights granted to
Community shall not, whether or not and regardless of the
extent
to which the same are exercised, affect the representations
and
warranties made in this Agreement by Tarpon or FN-Bank.
(b) All information furnished by the parties hereto
pursuant to this Agreement shall be treated as the sole
property
of the party providing such information until the
consummation
of the Merger contemplated hereby and, if such transaction
shall
not occur, the party receiving the information shall return
to
the party which furnished such information, all documents or
other materials containing, reflecting or referring to such
information, shall use its best efforts to keep confidential
all
such information, and shall not directly or indirectly use
such
information for any competitive or other commercial
purposes. No
obligation to keep such information confidential shall
continue
for two (2) years from the date the proposed transactions
are
abandoned but shall not apply to (i) any information which
(A)
the party receiving the information was already in
possession of
prior to disclosure thereof by the party furnishing the
information, (B) was then available to the public, or (C)
became
available to the public through no fault of the party
receiving
the information; or (ii) disclosures pursuant to a legal
requirement or in accordance with an order of a court of
competent jurisdiction or regulatory agency; provided that
the
party which is the subject of any such legal requirement or
order shall use its best efforts to give the other party at
least ten (10) business days prior notice thereof. Each
party
hereto acknowledges and agrees that a breach of any of their
respective obligations under this Section 5.3 would cause
the
other irreparable harm for which there is no adequate remedy
at
law, and that, accordingly, each is entitled to injunctive
and
other equitable relief for the enforcement thereof in
addition
to damages or any other relief available at law.
Section 5.4 Approval of Tarpon Shareholders. Tarpon will
take all steps necessary under applicable laws to call, give
notice of, convene and hold a meeting of its shareholders at
such time as may be mutually agreed to by the parties for
the
purpose of approving this Agreement and the transactions
contemplated hereby and for such other purposes consistent
with
the complete performance of this Agreement as may be
necessary
or desirable. The Board of Directors of Tarpon will
recommend
to its shareholders the approval of this Agreement and the
transactions contemplated hereby and Tarpon will use its
best
efforts to obtain the necessary approvals by its
shareholders of
this Agreement and the transactions contemplated hereby.
Section 5.5 No Other Bids. During the term of this
Agreement, Tarpon, acting through any director or officer or
other agent shall not now, nor shall it authorize or
knowingly
permit any officer, director or employee of, or any
investment
banker, attorney, accountant or other representative
retained by
Tarpon or FN-Bank, to solicit or encourage, including by way
of
furnishing information, any inquiries or the making of any
proposal which may reasonably be expected to lead to any
takeover proposal with respect to Tarpon or FN-Bank. Tarpon
shall promptly advise Community orally and in writing of any
such inquiries or proposals received by Tarpon or FN-Bank
after
the date hereof. As used in this Section 5.5, "takeover
proposal" shall mean any proposal for a merger or other
business
combination involving Tarpon or FN-Bank or for the
acquisition
of a significant equity interest in Tarpon or FN-Bank or for
the
acquisition of a significant portion of the assets of Tarpon
or
FN-Bank.
Section 5.6 Deadlines. Tarpon shall notify Community in
writing of any deadline to exercise an extension or
termination
of any material lease, agreement or license (including
specifically real property leases and data processing
agreements) to which Tarpon or FN-Bank is a party, at least
ten
(10) days prior to such deadline.
Section 5.7 Maintenance of Properties. Tarpon and FN-
Bank
will maintain their respective properties and assets in
satisfactory condition and repair for the purposes for which
they are intended, ordinary wear and tear excepted.
Section 5.8 Environmental Audits. At the election of
Community, Tarpon will, at Community's expense, with respect
to
each parcel of real property that Tarpon or FN-Bank owns,
leases
or subleases, procure and deliver to Community, at least
thirty
(30) days prior to the Effective Time of the Merger, an
environmental audit (including reports on asbestos, radon
and
lead-based paint), which audit shall be reasonably
acceptable to
and shall be conducted by a firm reasonably acceptable to
Community.
Section 5.9 Title Insurance. At the election of
Community,
Tarpon will, at Community's expense, with respect to each
parcel
of real property that Tarpon or FN-Bank owns, leases or
subleases, procure and deliver to Community, at least thirty
(30) days prior to the Effective Time of the Merger, owner's
title insurance issued in such amounts and by such insurance
company reasonably acceptable to Community, which policy
shall
be free of all material exceptions to Community' s
reasonable
satisfaction.
Section 5.10 Surveys. At the election of Community, with
respect to each parcel of real property as to which a title
insurance policy is to be procured pursuant to Section 5.9,
Tarpon, at Community' s expense, will procure and deliver to
Community at least thirty (30) days prior to the Effective
Time
of the Merger, a survey of such real property, which survey
shall be reasonably acceptable to and shall be prepared by a
licensed surveyor reasonably acceptable to Community,
disclosing
the locations of all improvements, easements, sidewalks,
roadways, utility lines and other matters customarily shown
on
such surveys and showing access affirmatively to public
streets
and roads and providing the legal description of the
property in
a form suitable for recording and insuring the title thereof
(the "Survey"). The Survey shall not disclose any survey
defect
or encroachment from or onto such real property that has not
been cured or insured over prior to the Effective Time of
the
Merger.
Section 5.11 Compliance Matters. Prior to the Effective
Time
of the Merger, Tarpon shall take, or cause to be taken, all
steps reasonably requested by Community to cure any
deficiencies
actually discovered by Community in prudent loan or credit
file
documentation or regulatory compliance by Tarpon, FN-Bank or
any
of their respective subsidiaries, including compliance with
Regulation Z of the FRB).
Section 5.12 Exemptions Under Anti-takeover Statutes.
Prior
to the Effective Time of the Merger, Tarpon will use its
best
efforts to take all steps required to exempt the
transactions
contemplated by this Agreement from any applicable state
anti-
takeover law.
Section 5.13 Building Inspection. At the election of
Community, with respect to each parcel of real property as
to
which a title insurance policy is to be procured pursuant to
Section 5.9, Tarpon, at Community' s expense, will procure
and
deliver to Community at least thirty (30) days prior to the
Effective Time of the Merger, an inspection of improvements
on
such real property by a qualified commercial building
inspector,
reasonably acceptable to Community, addressing, among other
things, the structural integrity of such improvements,
compliance with current applicable building codes, the
weather
tightness of the improvements, the operating condition of
HVAC
and other systems and other related matters.
ARTICLE VI
ADDITIONAL COVENANTS AND AGREEMENTS
Section 6.1 Best Efforts; Cooperation. Subject to the
terms
and conditions herein provided, each of the parties
hereto
agrees to use its best efforts promptly 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 and
regulations, or otherwise, including attempting to obtain
all
necessary Consents, to consummate and make effective, as
soon as
practicable, the transactions contemplated by this
Agreement.
Section 6.2 Regulatory Matters.
(a) Following the execution and delivery of this
Agreement, Community and, to the extent required, Tarpon
shall
cause to be prepared and filed all required applications and
filings with the Regulatory Authorities that are necessary
or
contemplated for the obtaining of the Consents of the
Regulatory
Authorities or consummation of the Merger. Such
applications
and filings shall be in such form as may be prescribed by
the
respective government agencies and shall contain such
information as they may require. The parties hereto will
cooperate with each other and use their best efforts to
prepare
and execute all necessary documentation, to effect all
necessary
or contemplated filings and to obtain all necessary or
contemplated permits, consents, approvals, rulings and
authorizations of government agencies and third parties
which
are necessary or contemplated to consummate the transactions
contemplated by this Agreement including, without
limitation,
those required or contemplated from the Regulatory
Authorities,
and the shareholders of Tarpon. Each of the parties, upon
prior
written request shall have the right to review and approve,
which approval shall not be unreasonably withheld, any
filing
made with, or written material submitted to, any government
agencies in connection with the transactions contemplated by
this Agreement.
(b) Each party hereto will furnish the other party
with
all information concerning itself, its subsidiaries,
directors,
trustees, officers, shareholders and depositors, as
applicable,
and such other matters as may be necessary or advisable in
connection with any statement or application made by or on
behalf of any such party to any governmental body in
connection
with the transactions, applications or filings contemplated
by
this Agreement. Upon request, the parties hereto will
promptly
furnish each other with copies of written communications
received by them or their respective subsidiaries from, or
delivered by any of the foregoing to, any governmental body
in
respect of the transactions contemplated hereby.
Section 6.3 Other Matters.
(a) The parties acknowledge that nothing in this
Agreement shall be construed as constituting an employment
agreement between Community and any officer or employee of
Tarpon or FN-Bank or an obligation on the part of Community
to
employ any such officers or employees.
(b) The parties agree that appropriate steps shall
be
taken to terminate all employee benefit plans of Tarpon and
FN-
Bank as of the Effective Time of the Merger, or as promptly
as
practicable thereafter, except for the health plan currently
in
effect for employees of FN-Bank, which shall continue to be
in
effect after the Effective Time of the Merger. Following
the
termination of all such plans, Community agrees that the
officers and employees of Tarpon after the Effective Time of
the
Merger shall be eligible to participate in Community' s
employee
benefit plans, including welfare and fringe benefit plans on
the
same basis as and subject to the same conditions as are
applicable to any newly-hired employee of Community, but
effective at the earliest applicable entry date set forth in
such plans..
Section 6.4 Indemnification. Tarpon agrees to indemnify,
defend and hold harmless Community and its subsidiaries, and
each of their respective present and former officers,
directors,
employees and agents, from and against all losses, expenses,
claims, damages or liabilities to which any of them may
become
subject under applicable laws (including, but not limited
to,
the Securities Act of 1933 or the Securities Exchange Act of
1934), and will reimburse each of them for any legal,
accounting
or other expenses reasonably incurred in connection with
investigating or defending any such actions, whether or not
resulting in liability, insofar as such losses, expenses,
claims, damages or liabilities arise out of or are based
upon
any untrue statement or alleged untrue statement of material
fact contained in the S-4/Proxy made by Tarpon or FN-Bank,
or
any application for any other approval of the transactions
contemplated by this Agreement filed with any Regulatory
Authority, or arise out of or are based upon the omission to
state therein a material fact necessary to make the
statements
therein, in light of the circumstances under which they were
made, not misleading.
Section 6.5 Current Information. During the period from
the
date of this Agreement to the Effective Time of the Merger
or
the time of termination or abandonment hereunder, Community
will
cause one or more of its designated representatives to
confer on
a regular and frequent basis with Tarpon and to report with
respect to the general status and the ongoing operations of
Community.
Section 6.6 Consideration. Community shall pay, issue
and
deliver the Consideration as and when the same shall be
required
to be issued and paid pursuant to this Agreement.
ARTICLE VII
MUTUAL CONDITIONS TO CLOSING
The obligations of Community and Tarpon to consummate
the
transactions provided for herein shall be subject to the
satisfaction of the following conditions, unless waived as
hereinafter provided for:
Section 7.1 Shareholder Approval. The Merger shall have
been
approved by the requisite vote of the shareholders of
Tarpon.
Section 7.2 Regulatory Approvals. All necessary Consents
of
the Regulatory Authorities (including effectiveness of the S-
4/Proxy with the SEC) shall have been obtained and all
notice
and waiting periods required by law to pass after receipt of
such Consents shall have passed, and all conditions to
consummation of the Merger set forth in such Consents shall
have
been satisfied.
Section 7.3 Litigation. There shall be no actual or
threatened causes of action, investigations or proceedings
(i)
challenging the validity or legality of this Agreement or
the
consummation of the transactions contemplated by this
Agreement,
or (ii) seeking damages in connection with the transactions
contemplated by this Agreement, or (iii) seeking to restrain
or
invalidate the transactions contemplated by this Agreement,
which, in the case of (i) through (iii), and in the
reasonable
judgment of either Tarpon or Community, based upon advice of
counsel, would have a material adverse effect with respect
to
the interests of Tarpon or Community, as the case may be;
provided that the foregoing shall not be deemed to include
any
proceeding brought solely under the Dissent Provisions.
ARTICLE VIII
CONDITIONS TO THE OBLIGATIONS OF COMMUNITY
The obligations of Community to consummate the Merger
are
subject to the fulfillment of each of the following
conditions,
unless waived as hereinafter provided for:
Section 8.1 Representations and Warranties. The
representations and warranties of Tarpon and FN-Bank set
forth
in this Agreement and in any certificate or document
delivered
pursuant hereto shall be true and correct in all material
respects as of the date of this Agreement and as of all
times up
to and including the Effective Time of the Merger (as though
made on and as of the Effective Time of the Merger except to
the
extent such representations and warranties are by their
express
provisions made as of a specified date and except for
changes
therein contemplated by this Agreement).
Section 8.2 Performance of Obligations and Settlement of
Litigation. Tarpon shall have performed all covenants,
obligations and agreements required to be performed by it
under
this Agreement prior to the Effective Time of the Merger.
Tarpon
shall have settled the litigation known as Aris Kazouris vs.
Denise Kazouris and First National Bank, in the Sixth
Circuit
Court in and for Pinellas County, Florida, Case No. 95-6831-
CI-
21, for an amount (net of insurance proceeds) not to exceed
$165,000.
Section 8.3 Certificate Representing Satisfaction of
Conditions. Tarpon shall have delivered to Community a
certificate dated as of the Closing Date as to the
satisfaction
of the matters described in Sections 8.1 and 8.2 hereof, and
such certificate shall be deemed to constitute additional
representations, warranties, covenants, and agreements of
Tarpon
under Article III of this Agreement.
Section 8.4 Absence of Adverse Facts. There shall have
been
no determination by Community that any fact, event or
condition
exists or has occurred, which pertains to Tarpon or FN-Bank,
whether actual or threatened, that, in the reasonable
judgment
of Community, (a) would have a material adverse effect on
the
Condition of Tarpon on a consolidated basis or the
consummation
of the transactions contemplated by this Agreement, or (b)
would
be of such material significance with respect to the
business or
economic benefits expected to be obtained by Community
pursuant
to this Agreement as to render inadvisable the consummation
of
the transactions pursuant to this Agreement.
Section 8.5 Opinion of Counsel. Community shall have
received an opinion of counsel from Goza & Hall, P.A., or
other
counsel to Tarpon acceptable to Community, in substantially
the
form set forth in Exhibit 8.5 hereof.
Section 8.6 Consents Under Agreements. Tarpon shall have
obtained the consent or approval of each person (other than
the
Consents of the Regulatory Authorities) whose consent or
approval shall be required in order to permit the continued
ownership and exercise of rights with respect to any
obligation,
right or interest of Tarpon (or FN-Bank) under any loan or
credit agreement, note, mortgage, indenture, lease, license,
or
other agreement or instrument, except those for which
failure to
obtain such consents and approvals would not in the opinion
of
Community, individually or in the aggregate, have a material
adverse effect on Tarpon or upon the consummation of the
transactions contemplated by this Agreement.
Section 8.7 Material Condition. There shall not be any
action taken, or any statute, rule, regulation or order
enacted,
entered, enforced or deemed applicable to the Merger by any
Regulatory Authority which, in connection with the grant of
any
Consent by any Regulatory Authority, imposes, in the
reasonable
judgment of Community, any material adverse requirement upon
Community or its subsidiaries, including, without
limitation,
any requirement that Community sell or dispose of any
significant amount of the assets of Tarpon or any subsidiary
of
Community, provided that, except for any such requirement
relating to the above-described sale or disposition of any
significant assets of Tarpon or any subsidiary of Community,
no
such term or condition imposed by any Regulatory Authority
in
connection with the grant of any Consent by any Regulatory
Authority shall be deemed to be a material adverse
requirement
unless it materially differs from terms and conditions
customarily imposed by any such authority in connection with
the
acquisition of banks and bank holding companies using
consideration similar to the Consideration under
circumstances
similar to those herein.
Section 8.8 Matters Relating to Employment and Consulting
Agreements. All employment agreements between Tarpon, FN-
Bank
and any executive or employee thereof shall be terminated in
their entirety as of the Effective Time of the Merger, and
at
the election of Community, replacement employment
agreements,
which are satisfactory to Community and such employees,
between
each of such executives or employees and Community or Tarpon
shall have been executed and delivered. Effective as of the
Effective Time of the Merger, Community shall enter into a
consulting agreement with Mary Z. Smitzes, having a term of
five
(5) years and providing for (i) annual compensation of
$50,000,
(ii) payment of premiums under life insurance policies owned
by
her in effect as of December 31, 1998 and (iii) coverage for
medical insurance on terms identical to those in effect as
of
December 31, 1998.
Section 8.9 Resignation of Officers and Directors.
Community
shall have received the resignation of all officers and
directors of Tarpon who are not designated by Community to
act
as officers or directors of Tarpon.
Section 8.10 Dissenters. The holders of not more than
five
percent (5%) of the outstanding Tarpon Shares shall have
elected
to exercise their right to dissent from the Merger and
demand
payment in cash for the fair or appraised value of their
shares.
Section 8.11 Certification of Claims. Tarpon shall have
delivered a certificate to Community that Tarpon is not
aware of
any pending or threatened claim under the fidelity bond
coverage
of FN-Bank or Tarpon or any claim for indemnification from
Tarpon or FN-Bank by an officer, director, employee or agent
of
Tarpon or FN-Bank.
ARTICLE IX
CONDITIONS TO OBLIGATIONS OF TARPON
The obligation of Tarpon to consummate the Merger as
contemplated herein is subject to each of the following
conditions, unless waived as hereinafter provided for:
Section 9.1 Representations and Warranties. The
representations and warranties of Community contained in
this
Agreement or in any certificate or document delivered
pursuant
to the provisions hereof will be true and correct as of the
Effective Time of the Merger (as though made on and as of
the
Effective Time of the Merger).
Section 9.2 Performance of Obligations. Community and
shall
have performed all covenants, obligations and agreements
required to be performed by them and under this Agreement
prior
to the Effective Time of the Merger.
Section 9.3 Certificate Representing Satisfaction of
Conditions. Community shall have delivered to Tarpon a
certificate dated as of the Effective Time of the Merger as
to
the satisfaction of the matters described in Sections 9.1
and
9.2 hereof, and such certificate shall be deemed to
constitute
additional representations, warranties, covenants, and
agreements of Community under Article IV of this Agreement.
Section 9.4 Absence of Adverse Facts. There shall have
been
no determination by Tarpon that any fact, event or condition
exists or has occurred that in the judgment of Tarpon, (a)
would
have a material adverse effect on the Condition of Community
on
a consolidated basis or the consummation of the transactions
contemplated by this Agreement or (b) would render the
Merger or
the other transactions contemplated by this Agreement
impractical because of any state of war, national emergency,
banking moratorium, or a general suspension of trading on
NASDAQ.
Section 9.5 Fairness Opinion. Tarpon shall have obtained
an
opinion from an investment banking firm approved by
Community
that the Merger is fair to the holders of the Tarpon Shares.
Section 9.6 Consents Under Agreements. Community shall
have
obtained the consent or approval of each person (other than
the
Consents of Regulatory Authorities) whose consent or
approval
shall be required in connection with the transactions
contemplated hereby under any loan or credit agreement,
note,
mortgage, indenture, lease, license or other agreement or
instrument, except those for which failure to obtain such
consents and approvals would not, in the judgment of Tarpon,
individually or in the aggregate, have a material adverse
effect
upon the consummation of the transactions contemplated
hereby.
ARTICLE X
TERMINATION, WAIVER AND AMENDMENT
Section 10.1 Termination. This Agreement may be
terminated
and the Merger abandoned at any time prior to the Effective
Time
of the Merger:
(a) by the mutual consent in writing of Community
and
Tarpon; or
(b) by Community or Tarpon if the Merger shall not
have
occurred on or prior to March 31, 2000, provided that the
failure to consummate the Merger on or before such date is
not
caused by any breach of any of the representations,
warranties,
covenants or other agreements contained herein by the party
electing to terminate pursuant to this Section 10.1(b);
(c) by Community or Tarpon (provided that the
terminating party is not then in breach of any
representation,
warranty, covenant or other agreement contained herein) in
the
event that any of the conditions precedent to the
obligations of
the nonterminating party to consummate the Merger cannot be
satisfied or fulfilled;
(d) by Community if (i) Community shall have
determined
that any fact event or condition exists that, in the
reasonable judgment of Community, (A) is materially at
variance
with any warranty or representation of Tarpon or FN-Bank set
forth in the Agreement or is a material breach of any
covenant
or agreement of Tarpon or FN-Bank contained in the
Agreement,
(B) pertains to Tarpon or FN-Bank, whether actual or
threatened,
and which has a material adverse effect upon the Condition
of
Tarpon on a consolidated basis or upon the consummation of
the
transactions contemplated by the Agreement, or (C) pertains
to
Tarpon, FN-Bank or any of their respective subsidiaries and
would be of such material significance with respect to the
business or economic benefits expected to be obtained by
Community under this Agreement so as to render inadvisable
consummation of the transactions contemplated by the
Agreement;
or (ii) there shall be any litigation or threat of
litigation
(A) challenging the validity or legality of this Agreement
or
the consummation of the transactions contemplated by this
Agreement (other than proceedings brought solely under the
Dissent Provisions), (B) seeking damages in connection with
the
consummation of the transactions contemplated by this
Agreement
(other than proceedings brought solely under the Dissent
Provisions) or (C) seeking to restrain or invalidate the
consummation of the transactions contemplated by this
Agreement;
(e) by Tarpon if (i) Tarpon shall have determined
that
any fact, event or condition exists that, in the judgment of
Tarpon, (A) is materially at variance with any warranty or
representation of Community contained in the Agreement or is
a
material breach of any covenant or agreement of Community
contained in the Agreement, (B) has a material adverse
effect
upon the consummation of the transactions contemplated by
the
Agreement, or (ii) there shall be any litigation or threat
of
litigation (A) challenging the validity or legality of this
Agreement or the consummation of the transactions
contemplated
by this Agreement, (B) seeking damages in connection with
the
consummation of the transactions contemplated by this
Agreement
or (C) seeking to restrain or invalidate the consummation of
transactions contemplated by this Agreement.
Section 10.2 Effect of Termination. In the event of the
termination and abandonment of this Agreement, it shall
terminate and become void, without liability on behalf of
any
party, and have no effect, except as otherwise provided
herein.
Section 10.3 Effect of Wrongful Termination.
Notwithstanding
the foregoing provisions of Section 10.2, if the Merger
fails to
be consummated because of the wrongful termination of this
Agreement or a willful, knowing or grossly negligent breach
by
Community, on the one hand, or Tarpon or FN-Bank, on the
other
hand, of any representation, warranty, covenant,
undertaking,
term or restriction contained herein, the other party shall
have
all rights and remedies afforded by law.
Section 10.4 Amendments. To the extent permitted by law,
this
Agreement may be amended by a subsequent writing signed by
both
Community and Tarpon.
Section 10.5 Waivers. Subject to Section 11.10 hereof,
prior
to or at the Effective Time of the Merger, Community, on the
one
hand, and Tarpon or FN-Bank, on the other hand, shall have
the
right to waive any default in the performance of any term of
this Agreement by the other, to waive or extend the time for
the
compliance or fulfillment by the other of any and all of the
other' s obligations under this Agreement and to waive any
or
all of the conditions to its obligations under this
Agreement,
except any condition, which, if not satisfied, would result
in
the violation of any law or any applicable governmental
regulation.
Section 10.6 Non-Survival of Representations and
Warranties.
The representations, warranties, covenants and agreements in
this Agreement or in any instrument delivered by Community
or
Tarpon shall be in full force and effect until June 30,
2001;
provided, however, that any representation or warranty in
any
agreement, contract, report, opinion, undertaking or other
document or instrument delivered hereunder in whole or in
part
by any person other than Community, Tarpon or FN-Bank (or
directors and officers thereof in their capacities as such)
shall not so terminate and shall not be so extinguished; and
provided further, that no representation or warranty of
Community, Tarpon or FN-Bank contained herein shall be
deemed to
be terminated or extinguished so as to deprive Community, on
the
one hand, and Tarpon or FN-Bank, on the other hand, of any
defense at law or in equity which any of them otherwise
would
have to any claim against them by any person, including,
without
limitation, any shareholder or former shareholder of either
party. No representation or warranty in this Agreement
shall be
affected or deemed waived by reason of the fact that
Community,
Tarpon or FN-Bank and/or its representatives knew or should
have
known that any such representation or warranty was, is,
might be
or might have been inaccurate in any respect.
Notwithstanding
the foregoing, it is agreed and understood that Tarpon's
obligations under Section 6.4 hereof shall not be deemed
terminated as of June 30, 2001, as long as the existence of
the
fact or of the omission of fact has been asserted by
Community
prior to such date. It is agreed and understood that
Tarpon's
obligations under Sections 6.4 and this 10.6 hereof shall
not be
deemed terminated as of June 30, 2001, as long as the
existence
of the fact or omission of fact has been asserted by
Community
prior to such date.
Section 10.7 Effect of Breach of Warranties. Neither a
breach
of the representations and warranties of Tarpon set forth in
Article III hereof, on the one hand, nor a breach of the
representations of Community in Article IV, on the other
hand,
shall give rise to any action for monetary damages by the
other
party but instead the sole and exclusive remedy for such a
breach shall be a refusal to consummate the transactions by
reason of failure to meet the conditions set forth in
Articles
VII, VIII and IX as the case may be, or termination of the
Agreement as provided in Section 10.1; provided that this
section shall not apply to any willful, knowing or grossly
negligent breach of a representation or warranty.
ARTICLE XI
MISCELLANEOUS
Section 11.1 Entire Agreement. This Agreement and the
documents referred to herein contain the entire agreement
among
Community and Tarpon with respect to the transactions
contemplated hereunder and this Agreement supersedes all
prior
arrangements or understandings with respect thereto, whether
written or oral, including that letter of intent between the
parties dated April 19, 1999, as amended. The terms and
conditions of this Agreement shall inure to the benefit of
and
be binding upon the parties hereto and their respective
successors. Nothing in this Agreement, expressed or
implied, is
intended to confer upon any person, firm, corporation or
entity,
other than the parties hereto and their respective
successors,
any rights, remedies, obligations or liabilities under or by
reason of this Agreement.
Section 11.2 Notices. All notices or other communications
which are required or permitted hereunder shall be in
writing
and sufficient if delivered personally or sent by first
class or
registered or certified mail, postage prepaid, telegram or
telex
or other facsimile transmission addressed as follows:
If to Tarpon:
Mary Z. Smitzes
Tarpon Financial Corporation
710 E. Tarpon Avenue
Tarpon Springs, Florida 34689
with a copy to:
Donald Hall, Esq.
Goza & Hall, P.A.
28050 U. S. 19 North, Suite 402
Clearwater, Florida 33761
Facsimile: (727) 796-8908
If to Community:
T. Brinson Brock, Sr.
Community National Bancorporation
561 East Washington Avenue
Box 2619
Ashburn, Georgia 31714-2619
Facsimile: (912) 567-3514
with a copy to:
Daniel D. Dinur, Esq.
Dinur & Associates, P.C.
One Lakeside Common
990 Hammond Drive, Suite 760
Atlanta, GA 30328
Facsimile: (404) 395-3171
All such notices or other communications shall be
deemed to
have been delivered (i) upon receipt when delivery is made
by
hand (including overnight courier service), (ii) on the
third
(3rd) business day after deposit in the United States mail
when
delivery is made by first class, registered or certified
mail,
and (iii) upon transmission when made by facsimile
transmission
if evidenced by a sender transmission completed
confirmation.
Section 11.3 Severability. If any term, provision,
covenant
or restriction contained in this Agreement is held by a
court of
competent jurisdiction or other competent authority to be
invalid, void or unenforceable or against public or
regulatory
policy, the remainder of the terms, provisions, covenants
and
restrictions contained in this Agreement shall remain in
full
force and effect and in no way shall be affected, impaired
or
invalidated, if, but only if, pursuant to such remaining
terms,
provisions, covenants and restrictions the Merger may be
consummated in substantially the same manner as set forth in
this Agreement as of the later of the date this Agreement
was
executed or last amended.
Section 11.4 Costs and Expenses. Expenses incurred by
Tarpon
on the one hand and Community on the other hand, in
connection
with or related to the authorization, preparation and
execution
of this Agreement, the solicitation of shareholder approval
and
all other matters related to the closing of the transactions
contemplated hereby, including all fees and expenses of
agents,
representatives, counsel and accountants employed by either
such
party or its affiliates, shall be borne solely and entirely
by
the party which has incurred same. It is agreed and
understood
that all such expenses in excess of $40,000 shall reduce the
total Consideration by two times such excess.
Section 11.5 Captions. The captions as to contents of
particular articles, sections or paragraphs contained in
this
Agreement and the table of contents hereto are inserted only
for
convenience and are in no way to be construed as part of
this
Agreement or as a limitation on the scope of the particular
articles, sections or paragraphs to which they refer.
Section 11.6 Counterparts. This Agreement may be executed
in
any number of counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and
the
same document with the same force and effect as though all
parties had executed the same document.
Section 11.7 Governing Law. This Agreement is made and
shall
be governed by and construed in accordance with the laws of
the
State of Florida (without giving effect to its conflicts of
laws
principles).
Section 11.8 Persons Bound, No Assignment. This Agreement
shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors,
distributees,
and assigns, but notwithstanding the foregoing, this
Agreement
may not be assigned by any party hereto unless the prior
written
consent of the other parties is first obtained.
Section 11.9 Exhibits and Schedules. Each of the exhibits
and
schedules attached hereto is an integral part of this
Agreement
and shall be applicable as if set forth in full at the point
in
the Agreement where reference to it is made.
Section 11.10 Waiver. The waiver by any party of the
performance of any agreement, covenant, condition or
warranty
contained herein shall not invalidate this Agreement, nor
shall
it be considered a waiver of any other agreement, covenant,
condition or warranty contained in this Agreement. A waiver
by
any party of the time for performing any act shall not be
deemed
a waiver of the time for performing any other act or an act
required to be performed at a later time. The exercise of
any
remedy provided by law, equity or otherwise and the
provisions
in this Agreement for any remedy shall not exclude any other
remedy unless it is expressly excluded. The waiver of any
provision of this Agreement must be signed by the party or
parties against whom enforcement of the waiver is sought.
This
Agreement and any exhibit, memorandum or schedule hereto or
delivered in connection herewith may be amended only by a
writing signed on behalf of each party hereto.
Section 11.11 Construction of Terms. Whenever used in this
Agreement, the singular number shall include the plural and
the
plural the singular. Pronouns of one gender shall include
all
genders. Accounting terms used and not other-wise defined
in
this Agreement have the meanings determined by, and all
calculations with respect to accounting or financial matters
unless otherwise provided for herein, shall be computed in
accordance with generally accepted accounting principles,
consistently applied. References herein to articles,
sections,
paragraphs, subparagraphs or the like shall refer to the
corresponding articles, sections, paragraphs, subparagraphs
or
the like of this Agreement. The words "hereof," "herein,"
and
terms of similar import shall refer to this entire
Agreement.
Unless the context clearly requires otherwise, the use of
the
terms "including," "included," "such as," or terms of
similar
meaning, shall not be construed to imply the exclusion of
any
other particular elements.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed and delivered, and their respective
seals hereunto affixed, by their officers thereunto duly
authorized, and have caused this Agreement to be dated as of
the
date and year first above written.
TARPON FINANCIAL CORPORATION
By: /S/ Mary Z. Smitzes
_____________________________
Name: Mary Z. Smitzes
Chief Executive Officer
ATTEST
/S/ Mary Jane S. Lindsay
___________________________
Name: Mary Jane S. Lindsay
Secretary
COMMUNITY NATIONAL
BANCORPORATION
By: /S/ T. Brinson Brock, Sr.
____________________________
T. Brinson Brock, Sr.,
President and Chief
Executive Officer
ATTEST
/S/ Ava Lovett
Name: Ava Lovett
Secretary
TABLE OF DISCLOSURE SCHEDULES
3.4 Loan Portfolio
3.5 Certain Loans and Related Matters
3.9 Certain Changes or Events
3.10 Legal Proceedings
3.12(a) Employee Benefit Plans
3.13(a) Title and Related Matters
3.13(c) Operating Condition and Repair
3.14(a) Legal Description of Real Estate
3.14(b) Leases and Subleases
3.15(e)(iii) Releases of Hazardous Material
3.16 Commitments and Contracts
3.19 Policies of Insurance
3.21 Compliance with Laws
3.22 Transactions with Management
4.3 Conflicts, Breaches or Defaults
4.6 Legal Proceedings
5.1(b)(v) Certain Parcels of Real Property
Disclosure Schedule 3.4
Loan Portfolio
None
Disclosure Schedule 3.13(c)
Operating Condition and Repair
None
Disclosure Schedule 3.14(b)
Leases and Subleases
None
Disclosure Schedule 3.15(e)(iii)
Releases of Hazardous Material
None
Disclosure Schedule 3.5
to Agreement and Plan of Merger
of Community National Bancorporation
and Tarpon Financial Corporation
NEITHER TARPON NOR FN-BANK IS A PARTY TO:
(i) Written or oral loan agreements, notes or borrowing
arrangements, other than credit card loans and other loans
the
unpaid balance of which does not exceed $5,000.00 per loan,
under the terms of which the obligor is sixty (60) days
delinquent in payment of principal or interest or in default
of
any other provision as of the date hereof:
1. Antoinette Kalafatis/Loan #1017429/001
2. Suncoast Shopper/Loan #1017348/001
3. Brothers, Inc./Loan #1017205/004
(ii) Loan Agreement, note or borrowing arrangement
classified
or should have been classified as "substandard", "doubtful",
"loss", "other loans especially mentioned", "other assets
especially mentioned", or any comparable classification:
See Attached List
(iii) Loan Agreement, note or borrowing arrangement,
including
any loan guarantee, with any director or executive officer
of
Tarpon or FN-Bank or any ten percent (10%) shareholder of
Tarpon, or any person, corporation or enterprise
controlling,
controlled by or under common control with any of the
foregoing:
See Attached List.
(iv) Loan Arrangement, note or borrowing arrangement in
violation of any law, regulation or rule applicable to
Tarpon or
FN-Bank:
No.
(Schedule 3.5(ii))
SPECIAL MENTION
---------------
As of 6/30/99
Customer Loan No. Status Balance
D. W. Taylor* 1017462/001 81 days pd
1,626.43
D. W. Taylor* 1017282/001 74 days pd
385.97
D. Taylor, et al* 1017072/001 16 days pd
49,012.16
P. Saroukos* 1004521/0503 37 days pd
27,031.79
Suncoast Shopper* 1017348/001 105 days pd
2,614.20
Don Taylor* 1006916/0838 37 days pd
9,575.97
Don Taylor* 1017316/001 13 days pd
21,623.33
J/G Lehr* 1014404/2057 55 days pd
59,682.78
Brothers, Inc.* 1017205/004 Post Maturity
2,036.17
P. Lehr* 1014391/2056 55 days pd
44,091.01
Wm. J./Linda White 1017220/001 Bank Attny
10,352.44
*Secured Loan
(Schedule 3.5(iii))
DIRECTOR/EXECUTIVE LOANS
LOAN BALANCES AS OF 6/30/99
Mary Jane Smitzes Lindsay
Director, Vice President
Loan No. Balance Type Loan Past Due
1017259/001 2,652.15 601(s) No
1017259/003 3,065.65 601(s) No
1017525/001 4,223.38 601(s) No
1017532/001 17,675.68 601(s) No
1017555/001 1,511.17 602 No
Barbara E. richards
Interim President & CEO & Director
1017325/001 33,658.95 503 No
1017535/001 65,125.73 601(s) No
1017481/001 4,691.30 601(s) No
Raymond C. Stinson
Vice President & Director
1014815/001 93,020.05 503 No
1017353/001 22,104.82 601(s) No
1017515/001 12,159.27 601(s) No
1017471/001 1,247.79 601(s) No
Type Loan 503 - Residential ARM
601 - Consumer, Installment secured(s)
602 - Consumer, Term
Disclosure Schedule 3.9
Certain Changes or Events
Any changes caused by a computer program that will not
correctly
process date data from, into and between the twentieth and
twenty-first centuries, including leap year calculations,
and
any program that contains any disabling codes that would
disable
the program or impair in any way its operation based on the
elapsing of a period or time or that would permit the access
of
the program to cause such disablement or impairment.
Disclosure Schedule 3.10
Legal Proceedings
Claim of Bank Atlantic for reimbursement of two checks
totaling
$13,000 by reason for alleged stop-payment of checks for
accountholder, ICC Business Credit, Inc.
Disclosure Schedule 3.12(a)
Employee Benefit Plans
1. Group health disability and life insurance coverage with
Florida Bankers Insurance Trust, Orlando, Florida, paid
for
each employee by FN-Bank.
2. Dental insurance coverage by Cigna.
[Description of benefits previously supplied.)
Disclosure Schedule 3.13(a)
Title and Related Matters
None.
Disclosure Schedule 3.14(a)
Legal Description of Real property
1. FN-Bank Building. West 50 feet of Lot 1, and Lot 2, less
the
West 100 feet and less the North 160 feet of the East 50
feet of
the West 150 feet, Block 36, Official map of Tarpon Springs,
according to the plat thereof, recorded in Plat Book 4, page
78,
Public Records of Pinellas County, Florida, and further LESS
AND
EXCEPT the area containing the buildings and improvements
situate thereon which are more specifically described as
follows:
(a) Horizontal Boundaries. The upper and lower
horizontal boundaries of the Building Parcel
shall
be the following boundaries extended to an
intersection with the perimeter boundaries:
(1) The upper horizontal boundary shall be the
horizontal plane between the top of the
finished roof of the Building Parcel and
drive-in teller facilities.
(2) The lower horizontal boundary shall be the
horizontal plane between the bottom of the
foundation of the Building Parcel and
drive-in
teller facilities.
(b) Perimeter Boundaries. The perimeter boundaries
of
the Building Parcel shall be the finished
surface
of the exterior of the Building Parcel extended
to
the intersection with each other and with the
upper
and lower horizontal boundaries.
3. Parcel of Land Adjacent to FN-Bank Building Property.
----------------------------------------------------
PARECL 1: That portion of the West 100 feet of Lot 2, in
Block
36 of TOWN OF TARPON SPRINGS lying South of the right of way
of
Tampa and Gulf Coast Railroad, according to the Plat thereof
as
recorded in Plat Book 4, pages 78 and 79, of the public
Records
of Pinellas County, Florida.
PARCEL 2: That part of the abandoned right of way of Tampa
and
Gulf Coast Railroad, bysecting the West 100 feet of Lot 2 in
Block 36 of the TOWN OF TARPON SPRINGS, according to the Map
or
Plat thereof as recorded in Plat Book 4, pages 78 and 79, of
the
Public Records of Pinellas County, Florida.
Disclosure Schedule 3.16
Commitments and Contracts
Any employee contract or undertaking, labor contract, lease
with
payments aggregating $5,000.00 or more, or any other
contract or
agreement which would be required to be disclosed in reports
filed by Tarpon with the OCC or the FRB, and which has not
been
so disclosed:
1. Consulting Agreement between Mary Z. Smitzes and FN-Bank
dated April 28, 1999.
2. Data processing servicing agreement between FN-Bank and
M &
I Data Service with an effective date of October 4, 1994
and
expiration date of October 3, 1999 which was
subsequently
renewed for one (1) year through October 3, 2000.
Disclosure Schedule 3.19
Policies of Insurance
Previously supplied.
Disclosure Schedule 3.21
to Agreement and Plan of Merger
of Community National Bancorporaion
and Tarpon Financial Corporation
Violations:
1. Any possible violations caused by a computer program that
will not correctly process date data from, into and between
the
20th and 21st centuries, including leap year calculations
and
any program that contains any disabling codes that would
disable
the program or impair in any way its operation based on the
elapsing of a period of time or that would permit the access
of
the program to cause such disablement or impairment.
Disclosure Schedule 3.22
to Agreement and Plan of Merger
of Community National Bancorporaion
and Tarpon Financial Corporation
Contracts with or commitments to present or former
stockholders,
directors, officers or employees involving the expenditure
of
more than $1,000.00 as to any one individual, including,
with
respect to any business directly or indirectly controlled by
any
such person, or $5,000.00 for all such contracts for
commitments
in the aggregate for all such individuals:
1. consulting Agreement between Mary Z. Smitzes and FN-Bank
dated April 28, 1999.
Disclosure Schedule 4.3
Conflicts, Breaches or Defaults
None
Disclosure Schedule 4.6
Legal Proceedings
None
Disclosure Schedule 5.1(b)(v)
Certain Parcels of Real Property
None
==========
APPENDIX "D"
==========
[LETTERHEAD OF FRANCIS & CO., CPAS APPEARS HERE]
4400 Roswell Road
Bldg. 142, Suite 301
Marietta, GA 30062
TEL: 770/650-1180
FAX: 770/650-8299
December 3, 1999
Community National Bancorporation
561 East Washington Avenue - Box 619
Ashburn, Georgia 31714-2619
Tarpon Financial Corporation
710 East Tarpon Avenue
Tarpon Springs, Florida
Re: Federal Income Tax Consequences of merger of Tarpon
Financial Corporation with and into Community National
Bancorporation
Ladies and Gentlemen:
You have requested our opinion in connection with the
material facts
of the federal income tax consequences of the proposed
merger of
Tarpon Financial Corporation ("Tarpon") with and into
Community
National Bancorporation ("Community"), The merger will be
effected pursuant to the Agreement and Plan of Merger by and
between Community and Tarpon, dated as of October 8, 1999
(the
"Merger Agreement").
We understand that our opinion will be referred to in
the
Proxy Statement/Prospectus that forms part of the
Registration
Statement on Form S-4 filed with the Securities and Exchange
Commission in connection with the merger (the "Proxy
Statement/Prospectus").
INFORMATION RELIED ON
---------------------
In rendering this opinion, we have examined (i) the
Internal Revenue Code of 1986, as amended (the "Code"), and
Treasury Regulations promulgated thereunder, (ii) the
legislative history of applicable sections of the Code, and
(iii) appropriate Internal Revenue Service (the "IRS") and
judicial authorities. In addition, we have relied upon
certain
information made known to us as more fully described below.
All
capitalized terms used herein without definition shall have
the
respective meanings specified in the Merger Agreement or the
Proxy Statement/Prospectus and, unless otherwise specified,
all
section references herein are to the Code.
In rendering the opinions expressed herein, we have
examined such documents as we have deemed appropriate,
including:
(1) the Merger Agreement;
(2) the Registration Statement and Proxy
Statement/Prospectus filed with the Securities and Exchange
Commission in connection with the merger;
(3) certificates and representations of officers of
Community and Tarpon; and
(4) such additional documents as we have considered
relevant.
In our examination of such documents, we have assumed,
without making any independent investigation and with your
consent, that all documents submitted to us as photocopies
faithfully reproduce the originals thereof, that such
originals
are authentic, that all such documents have been or will be
duly
executed to the extent required and that all statements set
forth in such documents are accurate. We have further
assumed
that any representations or statements made "to the best
knowledge of" or similarly qualified, are true and correct
without such qualification. We have not and will not attempt
to
verify the accuracy of the assumptions or the
representations.
Our opinion represents our best judgment as to the
likely
outcome of the issues discussed if presented in a court of
law.
Our opinion is not binding on the IRS or a court. Thus, no
assurance can be given that the IRS or a court would agree
with
our opinion.
Based solely on the information submitted and the
representations and assumptions received, we are of the
opinion
that:
(1) The merger will constitute a reorganization within
the
meaning of Section 368(a)(1)(A) of the Code. Community and
Tarpon will each be a "party to a reorganization" within the
meaning of Section 368(b) of the Code;
(2) A Tarpon shareholder who receives only Community
common stock in exchange for his Tarpon common stock in the
merger will not recognize gain or loss with respect to the
exchange, except with respect to any fractional share of
Community common stock for which cash is received;
(3) A Tarpon shareholder who receives a combination of
Community common stock and cash in exchange for his Tarpon
common stock in the merger will recognize gain equal to the
lesser of (i) the fair market value of the Community common
stock plus the amount of cash received, less his basis in
the
Tarpon common stock surrendered; or (ii) the amount of cash
received. A Tarpon shareholder will not recognize a loss
with
respect to Tarpon common stock for which a combination of
Community common stock and cash is received in the merger;
(4) The tax basis of the Community common stock
received
in the merger by a Tarpon shareholder (including any
fractional
share interest) will be the same as the tax basis of the
Tarpon
common stock exchanged for such Community common stock,
decreased by the amount of cash received in the exchange for
such Tarpon common stock and increased by the amount of gain
recognized by the Tarpon shareholder upon such exchange;
(5) The holding period of the Community common stock
received by a Tarpon shareholder in the merger will include
the
period during which the Tarpon shareholder held the Tarpon
common stock provided that the Tarpon common stock is held
as a
capital asset on the date of the merger.
The opinions expressed herein are based upon existing
statutory, regulatory, and judicial authority, any of which
may
be changed at any time with retroactive effect, and upon
matters
of fact existing as of the date hereof and on the date of
the
merger. We undertake no obligation to advise you of any such
change that may occur in the future. In addition, our
opinions
are based solely on the documents that we have examined, the
additional information that we have obtained, and the
customary
and appropriate certificates containing representations
received
from the parties which confirm certain material facts that
we
have assumed. Our opinions cannot be relied upon if any of
the
facts contained in such documents, or if such additional
information, is or later becomes, inaccurate, or if any of
the
material facts we have assumed are or later become,
inaccurate.
Our opinions do not address the tax consequences to Tarpon
shareholders who hold their Tarpon common stock other than
as a
capital asset, foreign shareholders, tax exempt
organizations
and persons who acquired their Tarpon common stock as
compensation. Finally, our opinions are limited to the
federal
income tax matters specifically covered thereby, and we have
not
been asked to address, nor have we addressed, any other tax
consequences of the merger, whether federal, state, local or
foreign.
We hereby consent to the filing of this opinion as an
exhibit to the Registration Statement and to the reference
to
this firm in the related 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, or the rules and regulations of the
Securities and Exchange Commission thereunder.
This opinion is being provided solely for the use of
Community, Tarpon and the shareholders of Tarpon. No other
person or party shall be entitled to rely on this opinion.
Sincerely,
/s/ FRANCIS & CO, CPAS
FRANCIS & CO., CPAS
============
APPENDIX "E"
============
Secretary of State DOCKET NUMBER : K91410184
Corporations Division CONTROL NUMBER: J916538
315 West Tower EFFECTIVE DATE: 05/21/1999
#2 Martin Luther King Jr., Dr. REFERENCE : 0045
Atlanta, Georgia 30334-1530 PRINT DATE : 05/21/1999
FORM NUMBER : 115
CHARLES V. O'BOYLE, JR.
DINUR & ASSOCIATES, P.C.
990 HAMMOND DR., STE. 760
ATLANTA, GA 30328
CERTIFICATE OF RESTATED ARTICLES OF INCORPORATION
I, Cathy Cox, the Secretary of State and the
Corporations Commissioner of the State of
Georgia, do hereby certify under the seal of my
office that the articles of incorporation of
COMMUNITY NATIONAL BANCORPORATION
A DOMESTIC PROFIT CORPORATION
have been duly restated and amended by the
filing of articles of restatement in the Office
of the Secretary of State and by the paying of
fees as provided by Title 14 of the Official
Code of Georgia Annotated. Attached hereto is a
true and correct copy of said articles of
restatement.
WITNESS my hand and official seal in the City of
Atlanta and the State of Georgia on the date set
forth above.
[SEAL OF STATE OF GEORGIA] /S/ Cathy Cox
Cathy Cox
Secretary of State
______________________________________________________________
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
COMMUNITY NATIONAL BANCORPORATION
The undersigned corporation, Community National
Bancorporation, a Georgia corporation (the "Corporation"),
for
the purposes of amending and restating its Articles of
Incorporation, executes the following Amended and Restated
Articles of Incorporation, which were adopted by majority
vote
of the Corporation's shareholders on May 12, 1999, in
accordance
with Section 14-2-1003 of the Georgia Business Corporation
Code
(the "Code"):
ARTICLE I - NAME.
----------------
The name of the Corporation is Community National
Bancorporation.
ARTICLE II - NATURE OF BUSINESS.
-------------------------------
The Corporation may engage in any activity or business
permitted under the laws of the United States and of the
State
of Georgia.
ARTICLE III - CAPITAL STOCK.
---------------------------
A. AUTHORIZED SHARES. The Corporation shall have
authority to issue 60,000,000 shares of all classes of
capital
stock, consisting of 50,000,000 shares of no par value
common
stock (the "Common Stock") and 10,000,000 shares of no par
value
preferred stock (the "Preferred Stock"). The shares may be
issued from time to time as the Corporation's Board of
Directors
may authorize without further approval of the shareholders
except as otherwise provided herein or to the extent that
any
applicable statute, rule or regulation requires such
approval.
B. COMMON STOCK. Except as applicable statute or
Preferred Stock Designations (as defined below) may provide,
the
holders of the Common Stock shall exclusively possess all
voting
power. Each holder of shares of Common Stock shall be
entitled
to one vote for each share held of record by such holder as
to
each matter submitted to shareholders for approval.
C. PREFERRED STOCK. The shares of Preferred Stock
may be
issued from time to time in one or more series as the
Corporation's Board of Directors may establish. The Board
of
Directors is hereby expressly authorized to fix and
determine by
resolution(s) the number of shares of each series of
Preferred
Stock and the designation thereof, any voting and other
powers,
preferences and relative participating, optional or special
rights, including the number of votes, if any, per share and
such qualifications, limitations or restrictions on any such
powers, preferences and rights as shall be stated in the
resolutions providing for the issue of the series (a
"Preferred
Stock Designation") and as may be permitted by the Code.
The
number of authorized shares of Preferred Stock may be
increased
or decreased (but not below the number of shares of such
class
or series then outstanding) by the affirmative vote of
holders
of a majority of the voting power of the then outstanding
shares
of capital stock, voting together as a single class, without
a
separate vote of the holders of the Preferred Stock, or any
series thereof, unless the vote of such holders is required
pursuant to any Preferred Stock Designation.
ARTICLE IV - TERM AND COMMENCEMENT OF EXISTENCE.
-----------------------------------------------
The Corporation shall exist perpetually. The
commencement
date of the Corporation's corporate existence is the filing
date
of the Corporation's Articles of Incorporation.
ARTICLE V - DIRECTORS.
---------------------
A. The Corporation shall be under the direction of
the
Board of Directors. The Board of Directors shall consist of
not
fewer than seven (7) or more than twenty-one (21) directors.
The number of directors within this range shall be fixed
from
time to time by the Board of Directors pursuant to a
resolution
adopted by a majority of the directors then in office. The
Board of Directors shall be divided into three classes, to
be
known as Class I, Class II, and Class III, with each class
to be
as nearly equal in number as possible. Except in the case
of
earlier death, resignation or removal, each director shall
serve
for a term ending on the date of the third annual meeting of
shareholders of the Corporation (the "Annual Meeting")
following
the Annual Meeting at which such director was elected;
provided,
however, that each initial director in Class I shall serve
for a
term ending on the date of the first Annual Meeting
following
his or her election, each initial director in Class II shall
serve for a term ending on the date of the second Annual
Meeting
following his or her election, and each initial director in
Class III shall serve for a term ending on the date of the
third
Annual Meeting following his or her election.
Notwithstanding
the expiration of a director's term, each director shall
serve
until his or her successor, if there is to be any, is
elected
and qualified or until his or her earlier death, resignation
or
removal.
B. Any director may be removed from office at any
time,
but only for cause, by the affirmative vote of holders of
two-
thirds of the then outstanding shares of capital stock of
the
Corporation entitled to be cast, voting together as a single
class, at a meeting of shareholders called for that purpose,
unless the removal has been approved by a resolution adopted
by
at least two-thirds of the directors then in office, in
which
event the removal shall be approved by vote of the holders
of a
majority of the voting power of the then outstanding shares
of
capital stock of the Corporation entitled to be cast, voting
together as a single class, at a meeting of the shareholders
called for that purpose. For purposes of this paragraph,
"cause" shall mean any act or omission for which a director
may
be personally liable to the Corporation or its shareholders
pursuant to Article VI hereof, as well as any other act or
omission that relates to personal dishonesty, incompetence
or
intentional failure to perform stated duties.
C. Any vacancy occurring in the Board of Directors,
including any vacancy created by reason of an increase in
the
number of directorships, may be filled by the vote of a
majority
of directors then in office, though less than a quorum. Any
director so chosen shall hold office until such director's
successor shall have been elected and qualified. Any
director
chosen by the Board of Directors to fill a vacancy created,
other than by reason of an increase in the number of
directorships, shall serve for the unexpired term of the
director whose vacancy is being filled. Any director chosen
by
the Board of Directors to fill a vacancy created by reason
of an
increase in the number of directorships shall serve for a
term
to expire at the next election of directors by the
shareholders.
ARTICLE VI - DIRECTOR'S LIABILITY.
---------------------------------
A director of the Corporation shall not be personally
liable
to the Corporation or its shareholders for monetary damages
for
breach of his duty of care or other duty as a director by
reason
of any act or omission, except for liability (i) for any
appropriation, in violation of his duties, of any business
opportunity of the Corporation; (ii) for acts or omissions
which
involve intentional misconduct or a knowing violation of
law;
(iii) for the types of liability set forth in Section 14-2-
851(d) of the Code; or (iv) for any transaction from which
the
director derived an improper personal benefit. If the Code
is
amended to authorize corporate action further limiting the
personal liability of directors, then the liability of a
director of the Corporation shall be limited to the fullest
extent permitted by the Code, as so amended. Any repeal or
modification of this Article by the shareholders of the
Corporation shall not adversely affect any right or
protection
of a director of Corporation existing at the time of such
repeal
or modification.
ARTICLE VII - INCORPORATION, REGISTERED OFFICE AND
REGISTERED AGENT.
--------------------------------------------------
The name of the registered agent and the street address
of
the registered office of the corporation, and the name and
address of each incorporator of this corporation is as
follows:
Registered Agent: Registered Office:
- ---------------- -----------------
T. Brinson Brock, Sr. 561 East Washington Avenue
Ashburn, Georgia 31714-2619
Incorporator:
- ------------
Daniel D. Dinur, Esq. Dinur & Associates, P.C.
One Lakeside Commons
990 Hammond Drive
Suite 760
Atlanta, Florida 30328
ARTICLE VIII - SHAREHOLDER MEETINGS.
-----------------------------------
A. Special meetings of shareholders may be called
at any
time by the Chairman of the Board or the President, by a
majority of the directors then in office or by the written
request of the holders of at least 25% of the then
outstanding
shares of capital stock of the Corporation entitled to be
cast,
voting together as a single class.
B. The shareholders of the Corporation shall not be
entitled to take any action by written consent in lieu of
taking
such action at an annual or special meeting of shareholders
called for that purpose.
C. Advance notice of shareholder nominations for
election
of directors and of business to be brought by shareholders
before any meeting of the shareholders of the Corporation
shall
be given in the manner provided in the Bylaws of the
Corporation.
ARTICLE IX - CERTAIN BUSINESS TRANSACTIONS.
------------------------------------------
A. The affirmative vote of holders of at least two-
thirds
of the outstanding shares of capital stock entitled to be
cast
at a meeting called to vote on any transaction submitted to
the
shareholders pursuant to this Article, voting together as a
single class, shall be required for the approval or
authorization of: (i) any merger or consolidation of the
Corporation or any of its subsidiaries with or into any
other
corporation, partnership, person or other entity; or (ii)
any
sale, lease, exchange, transfer or disposition of all or
substantially all of the assets of the Corporation or any of
its
subsidiaries to or with any other corporation, partnership,
person or other entity; or (iii) adoption of any plan or
proposal for the liquidation or dissolution of the
Corporation;
provided, however, that such two-thirds voting requirement
shall
not be applicable if the Board of Directors of the
Corporation
shall have approved any such action or transaction described
in
clauses (i), (ii) or (iii) by resolution adopted by at least
two-thirds of the directors then in office, in which case
the
affirmative vote of holders of a majority of the outstanding
shares of capital stock entitled to be cast, voting together
as
a single class, shall be required to approve such action or
transaction.
B. The fact that any action or transaction complies
with
the provisions of this Article shall not be construed to
impose
any fiduciary duty, obligation or responsibility on the
Board of
Directors or any member thereof to approve such action or
transaction, recommendation, adoption or approval to the
shareholders of the Corporation, nor shall any such
compliance
limit, prohibit or otherwise restrict in any manner the
Board of
Directors, or any member thereof, with respect to
evaluations
of, or actions or responses taken with respect to, such
action
or transaction.
ARTICLE X - BYLAWS.
------------------
In furtherance and not in limitation of the power
conferred
by statute, the Board of Directors is expressly authorized
to
make, alter, amend and repeal the bylaws of the Corporation
by
vote of at least two-thirds of the directors then in office,
subject to the powers of the holders of the capital stock of
the
Corporation to alter, amend or repeal the bylaws; provided,
however, that, with respect to the powers of the holders of
capital stock to alter, amend and repeal the bylaws of the
Corporation, notwithstanding any other provisions of these
Articles of Incorporation or any provision of law which
might
otherwise permit a lesser vote or no vote, but in addition
to
any affirmative vote of holders of any particular class or
series of the capital stock of the Corporation required by
law,
or these Articles of Incorporation, the affirmative vote of
holders of at least two-thirds of the voting power of the
then
outstanding shares of capital stock entitled to be cast,
voting
together as a single class, shall be required to alter,
amend or
repeal any provision of bylaws.
ARTICLE XI - AMENDMENT OF ARTICLES OF INCORPORATION.
---------------------------------------------------
The Corporation reserves the right to amend, alter or
repeal
any provision contained in these Articles of Incorporation
in
the manner now or hereafter prescribed by statute, and all
rights conferred on shareholders herein are granted subject
to
this reservation. Notwithstanding the preceding sentence,
the
provisions set forth in this Article and Articles III, V,
VIII,
IX and X hereof may not be altered, amended or repealed in
any
respect, and no other provision(s) may be adopted that would
impair in any respect the operation or effect of any such
provisions, except by the affirmative vote of holders of at
least two-thirds of the voting power of the then outstanding
shares of capital stock, voting together as a single class;
provided, however, that such two-thirds voting requirement
shall
not be applicable if the Board of Directors of the
Corporation
shall approve such action by resolution adopted by at least
two-
thirds of the directors then in office, in which case the
affirmative vote of holders of a majority of the then
outstanding shares of capital stock entitled to be cast at
the
meeting of shareholders called for that purpose, voting
together
as a single class, shall be required to approve such action.
IN WITNESS WHEREOF, the undersigned has executed these
Amended and Restated Articles of Incorporation.
COMMUNITY NATIONAL
BANCORPORATION
By: /S/ T. Brinson Brock, Sr.
------------------------------
T. Brinson Brock, Sr.
Executive Vice President and
Acting Chief Executive
Officer
============
APPENDIX "F"
============
AMENDED AND RESTATED BYLAWS OF
COMMUNITY NATIONAL BANCORPORATION
a Georgia corporation (the "Corporation")
ARTICLE ONE
OFFICES
1.1 REGISTERED OFFICE AND AGENT. The Corporation
will
maintain a registered office and will have a registered
agent
whose business office is identical with such registered
office.
The registered office need not be identical with the
principal
business office of the Corporation.
1.2 OTHER OFFICES. The Corporation may have offices
at
such other place(s), within or without the State of Georgia,
as
the Board of Directors may from time to time determine or
the
business of the Corporation may require.
ARTICLE TWO
SHAREHOLDERS' MEETINGS
2.1 DATE, TIME AND PLACE OF MEETINGS. All meetings
of
the shareholders shall be held on such date, time and place,
within or without the State of Georgia, as the Board of
Directors may set forth from time to time, or if no place is
so
specified, at the principal executive office of the
Corporation.
2.2 ANNUAL MEETINGS. The annual meeting of
shareholders
shall be held on a date and at a time following the end of
the
Corporation's fiscal year as may be determined by the Board
of
Directors, for the purpose of electing directors and
transacting
any and all business that may properly come before the
meeting.
2.3 SPECIAL MEETINGS. Special meetings of the
shareholders for any purpose(s) may be called at any time by
the
Chairman of the Board or the President or by a majority of
the
directors then in office or by written request of the
holders of
at least 25% of the then outstanding shares of capital stock
of
the Corporation entitled to be cast, voting together as a
single
class. Business transacted at any special meeting of
shareholders shall be limited to the purpose(s) stated in
the
notice thereof.
2.4 NOTICE OF MEETINGS. Written notice of each
shareholders' meeting stating the date, time and place of
the
meeting will be delivered either personally or by mail to
each
shareholder of record entitled to vote at such meeting, not
less
than 10 days nor more than 60 days before the date of the
meeting. In the case of an annual meeting, the notice of the
meeting need not state the purpose(s) for which the meeting
is
called. In the case of a special meeting, the notice of
meeting
shall state the purpose(s) for which the meeting is called.
If
mailed, such notice shall be deemed to be delivered when
deposited in the United States mail with first class postage
affixed thereon, prepaid, addressed to each shareholder at
his
address as it appears on the Corporation's record of
shareholders. Attendance of a shareholder at a meeting of
the
shareholders shall constitute a waiver of notice of such
meeting
and of all objections to the place or time of such meeting,
or
the manner in which it has been called or convened, except
when
a shareholder attends a meeting solely for the purpose of
stating, at the beginning of the meeting, any such objection
to
the transaction of any business. Notice need not be given
to
any shareholder who signs a waiver of notice, in person or
by
proxy, either before or after the meeting. If the language
of a
proposed resolution or plan requiring the approval of the
shareholders is included in a written notice of a meeting of
the
shareholders, the shareholders' meeting considering the
resolution or plan may adopt it with such clarifying or
other
amendments as do not enlarge its original purpose without
further notice to shareholders not present in person or by
proxy.
2.5 QUORUM. The presence, in person or by proxy, of
the
holders of a majority of shares then issued and outstanding
and
entitled to vote, shall constitute a quorum for the
transaction
of business at any meeting of shareholders, except as
otherwise
required by statute or the Articles of Incorporation. Where
a
quorum is once present at a meeting, it shall not be broken
by
the subsequent withdrawal of any of those present.
2.6 ADJOURNMENT. In the absence of a quorum or for
any
other reason, the holders of the majority of the shares then
issued and outstanding and entitled to vote at any meeting
of
the shareholders, present in person or represented by proxy,
or
the Chairman of the Board, or the President, shall have the
power to adjourn the meeting from time to time, without
notice
other than announcement at the meeting of the date, time and
place of the adjourned meeting. At such adjourned meeting
in
which a quorum shall be present or represented, any business
may
be transacted which might have been transacted at the
meeting as
originally notified. If after the adjournment a new record
date
is picked for the adjourned meeting, notice of the adjourned
meeting shall be given to each shareholder of record
entitled to
vote at the adjourned meeting.
2.7 VOTE REQUIRED. When a quorum is present at any
meeting, the affirmative vote of the holders of a majority
of
the shares of stock of the Corporation entitled to vote and
present in person or represented by proxy, voting together
as a
single class, shall decide any questions brought before such
meeting, except as otherwise required by statute or the
Articles
of Incorporation.
2.8 VOTING OF SHARES. Except as otherwise required
by
statue or the Articles of Incorporation, each shareholder
shall
be entitled to one vote, in person or represented by proxy,
for
each share of stock having voting power held by such
shareholder
at every meeting of the shareholders. Shareholders may vote
in
person or by written proxy; provided, however, no proxy
shall be
voted or acted on after 11 months from its date, unless the
proxy provides for a longer period. Any proxy to be voted
at a
meeting of shareholders shall be filed with the Secretary of
the
Corporation before or at the time of the meeting. Voting on
matters brought before a shareholders' meeting may, at the
discretion of the person presiding at the meeting, be by
voice
vote or show of hands, unless any qualified voter, prior to
the
voting on such matter, demands vote by ballot, in which
event
the voting shall be by ballot.
2.9 NO ACTION BY WRITTEN CONSENT. Shareholders
shall
not be entitled to take any action by written consent in
lieu of
taking such action at an annual or special meeting of
shareholders.
2.10 SHAREHOLDERS' LIST. A complete list of
shareholders
entitled to vote at any meeting of shareholders, arranged in
alphabetical order showing the address of each such
shareholder
as it appears in the records of the Corporation and the
number
of shares registered in the name of such shareholder, shall
be
prepared by the Secretary of the Corporation at least 10
days
prior to every meeting of shareholders. Such list shall be
open
to the examination of any shareholder, for any purpose
relating
to the meeting, during ordinary business hours for a period
of
at least 10 days prior to the meeting, either at a place
within
the city where the meeting is to be held or, if not so
specified, the place where the meeting is to be held, and a
duplicate list shall be similarly open to examination at the
principal executive office of the Corporation. The list
shall
also be produced and kept at the time and place of the
meeting
during the duration thereof, and may be inspected by any
shareholder who is present.
2.11 INSPECTORS OF ELECTION. In advance of any
meeting
of shareholders, the Board of Directors may appoint any
persons,
other than nominees for office, as inspectors of election to
act
at such meeting or any adjournment thereof. The number of
inspectors shall be either one or three. If such persons
are
not so appointed or fail or refuse to act, the presiding
officer
of such meeting shall make such appointment(s) at the
meeting.
The number of inspectors shall be either one or three. If
there
are three inspectors, the decision, action or certificate of
a
majority of such inspectors shall be effective and shall
represent the decision, action or certificate of all. No
such
inspector need be a shareholder of the Corporation.
Unless otherwise required by statute or the Articles of
Incorporation, the duties of such inspectors shall include:
determining the number of shares outstanding and the voting
power of each share, the number of shares represented at the
meeting, the existence of a quorum, the authenticity,
validity
and effect of proxies; receiving votes or ballots; hearing
and
determining all challenges and questions in any way arising
in
connection with the right to vote; counting and tabulating
all
ballots or votes and determining the results thereof; and
such
acts as may be proper to conduct the election or vote with
fairness to all shareholders. Upon request, the inspectors
shall make a report in writing to the secretary of the
meeting
concerning any challenge, question or other matter as may
have
been determined by them and shall execute and deliver to
such
secretary a certificate of any fact found by them.
2.12 CONDUCT OF MEETINGS.
A. All annual and special meetings or
shareholders
shall be conducted in accordance with such rules and
procedures
as the Board of Directors may determine subject to the
requirements of statute and, as to matters not governed by
such
rules and procedures, as the presiding officer of such
meeting
shall determine. The presiding officer of any annual or
special
meeting of shareholders shall be the President or, in his
absence, such person as designated by the Board of
Directors.
The Secretary, or in his absence, a person designated by the
presiding officer, shall act as secretary of the meeting.
B. At any annual meeting of shareholders, only
such business shall be conducted as shall have been brought
before the meeting (i) as specified in the notice of the
meeting
given by or at the direction of the Board of Directors, (ii)
otherwise properly brought before the meeting by or at the
direction of the Board of Directors, or (iii) otherwise
properly
brought before the meeting by any shareholder of the
Corporation
who is entitled to vote with respect thereto and who
complies
with the notice procedures set forth in this subparagraph
(b).
For business to be properly brought before an annual
meeting by a shareholder, the shareholder must have given
timely
notice thereof in writing to the Secretary of the
Corporation.
To be timely, a shareholder's notice must be delivered or
mailed
to and received at the principal executive office of the
Corporation not less than 60 days or more than 90 days prior
to
the date of the annual meeting; provided, however, that in
the
event that less than 40 days' notice or prior public
disclosure
of the date of the meeting is given or made to shareholders,
notice by a shareholder to be timely must be received not
later
than the close of business on the tenth day following the
day on
which such notice of the date of the annual meeting was
mailed
or such public disclosure was made. A shareholder's notice
to
the Secretary shall set forth as to each matter such
shareholder
proposes to bring before the annual meeting (i) a brief
description of the business desired to be brought before the
annual meeting and the reasons for conducting such business
at
the annual meeting (ii) the name and address, as they appear
on
the books of the Corporation, of the shareholder proposing
such
business, (iii) the class and number of shares of the
Corporation's capital stock that are beneficially owned by
such
shareholder and (iv) any material interest of such
shareholder
in such business. Notwithstanding anything in these Bylaws
to
the contrary, no business shall be brought before or
conducted
at an annual meeting except in accordance with the
provisions of
this subparagraph (b). The presiding officer at the annual
meeting shall, if the facts so warrant, determine and
declare to
the meeting that a matter of business was not properly
brought
before the meeting in accordance with the provisions of this
subparagraph (b) and, if he should so determine, he shall so
declare to the meeting and any such business so determined
to be
not properly brought before the meeting shall not be
transacted.
C. At any special meeting of the shareholders,
only such business shall be conducted as shall have been
brought
before the meeting by or at the direction of the Board of
Directors.
2.13 VOTING OF SHARES BY CERTAIN HOLDERS.
A. If shares or other securities having voting
power stand of record in the names of two or more persons,
whether fiduciaries, members of a partnership, joint
tenants,
tenants in common, tenants by the entirety or otherwise, or
if
two or more persons have the same fiduciary relationship
respecting the same shares, unless the Secretary of the
Corporation is given written notice to the contrary and is
furnished with a copy of the instrument or order appointing
them
or creating the relationship wherein it is so provided,
their
acts with respect to voting shall have the following effect:
(1) if only one votes, his act binds all; (2) if more than
one
vote, the act of the majority so voting binds all; (3) if
more
than one vote, but the vote is evenly split on any
particular
matter, each faction may vote the securities in question
proportionally, or any person voting the shares, or a
beneficiary, if any, may apply to such Court as may have
jurisdiction to appoint an additional person to act with the
persons so voting the shares, which shall then be voted as
determined by the majority of such persons and the person
appointed by the Court. If the instrument so filed shows
that
any such tenancy is held in unequal interests, a majority or
even-split for the purposes hereof shall be a majority or
even-
split in interests. Shares standing in the name of another
corporation may be voted by any officer, agent or proxy as
the
bylaws of such corporation may prescribe, or, in the absence
of
such provision, as the board of directors of such
corporation
may determine. Shares held by an administrator, executor,
guardian or conservator may be voted by him, either in
person or
by proxy, without a transfer of such shares into his name.
Shares standing in the name of a trustee may be voted by
him,
either in person or by proxy, but no trustee shall be
entitled
to vote shares held by him without a transfer of such shares
into his name. Shares standing in the name of a receiver
may be
voted by such receiver, and shares held by or under the
control
of a receiver may be voted by such receiver without the
transfer
thereof into his name if authority so to do is contained in
an
appropriate order of the court or other public authority by
which such receiver was appointed.
B. A shareholder whose shares are pledged
shall be
entitled to vote such shares until the shares have been
transferred into the name of the pledgee, and thereafter the
pledgee shall be entitled to vote the shares so transferred.
ARTICLE THREE
THE BOARD OF DIRECTORS
3.1 GENERAL POWERS. The business and affairs of the
Corporation will be managed by or under the direction of the
Board of Directors. In addition to the powers and authority
expressly conferred upon it by these Bylaws, the Board of
Directors may exercise all such powers of the Corporation
and do
all such lawful acts and things as are not by statute, by
any
legal agreement among shareholders, by the Articles of
Incorporation or by these Bylaws directed or required to be
exercised or done by the shareholders. The Board of
Directors
shall annually elect a Chairman of the Board from among its
members and may elect a Vice Chairman of the Board from
among
its members.
3.2 NUMBER AND TENURE. The Board of Directors shall
consist of not less than seven or more than 21 directors.
The
number of directors within this range shall be determined
from
time to time by resolution adopted by a majority of the
directors then in office. The Board of Directors shall be
divided into three classes to be known as Class I, Class II
and
Class III, with each class to be nearly equal in number as
possible. Except in the case of earlier death, resignation
or
removal, each director shall serve for a term ending on the
date
of the third annual meeting of shareholders following the
annual
meeting at which such director was elected; provided,
however,
that each initial director in Class I shall hold office
until
the first annual meeting of shareholders after his or her
election; each initial director in Class II shall hold
office
until the second annual meeting of shareholders after his or
her
election; and each initial director in Class III shall hold
office until the third annual meeting of shareholders after
his
or her election. Notwithstanding the expiration of a
director's
term, such director shall serve until his or her successor,
if
there is to be any, is elected and qualified or until his or
her
earlier death, resignation or removal. No decrease in the
number of directors shall shorten the term of any incumbent
director. Except as otherwise provided in the Articles of
Incorporation and these Bylaws, directors shall be elected
at
each annual meeting of shareholders, or at a special meeting
of
shareholders called for purposes that include the election
of
directors.
3.3 QUALIFICATION OF DIRECTORS. Directors shall be
natural persons who have attained the age of 21 years but
need
not be residents of the State of Georgia or shareholders of
the
Corporation. A director shall not be permitted to stand
for
election after his seventieth birthday.
3.4 VACANCY. Any vacancy occurring in the Board of
Directors, including any vacancy occurring by reason of an
increase in the number of directors or by the removal of a
director, may be filled by the vote of a majority of the
directors then in office, though less than a quorum. Any
director so chosen shall hold office until such director's
successor shall have been elected and qualified. Any
director
chosen by the Board of Directors to fill a vacancy created,
other than by reason of an increase in the number of
directorships, shall serve for the unexpired term of the
director whose vacancy is being filled. Any director chosen
by
the Board of Directors to fill a vacancy created by reason
of an
increase in the number of directorships shall serve for a
term
to expire at the next election of directors by the
shareholders.
3.5 REMOVAL. At a meeting of shareholders with
respect
to which notice of such purpose has been given, any or all
members of Board of Directors may be removed for cause, and
then
only by the affirmative vote of the holders of 75% of the
then
outstanding shares of stock of the Corporation entitled to
be
cast, voting together as single class. Notwithstanding the
foregoing, if a removal has been approved by a resolution
adopted by at least two-thirds of the directors then in
office,
the removal shall be approved by vote of the holders of a
majority of the voting power of the then outstanding shares
of
capital stock of the Corporation entitled to be cast, voting
together as a single class. For purposes hereof, "cause"
shall
mean any act or omission for which a director may be
personally
liable to the Corporation or its shareholders pursuant to
the
Articles of Incorporation, as well as any other act or
omission
which relates to personal dishonesty, incompetence or
intentional failure to perform stated duties.
3.6 COMPENSATION. The Board of Directors shall have
the
authority to set the compensation of directors and members
of
any committees thereof. The directors and members of any
committees thereof may also be paid for their expenses, if
any,
of attendance at each meeting of the Board or any committee
thereof. No provision of these Bylaws shall be construed to
preclude any director or committee member from serving the
Corporation in any other capacity and receiving compensation
therefor.
3.7 NOMINATIONS OF DIRECTORS.
A. Only persons who are nominated in
accordance
with the procedures set forth in these Bylaws shall be
eligible
for election as Directors. Nominations of persons for
election
to the Board of Directors of the Corporation may be made at
any
meeting of shareholders at which Directors are to be elected
only (i) by or at the direction of the Board of Directors or
(ii) by any shareholder of the Corporation entitled to vote
for
the election of Directors at the meeting who complies with
the
notice procedures set forth in this Section. Each year the
President shall appoint a special committee of three
directors
to recommend to the Board of Directors persons to be the
management nominees for election as directors. Based on
such
recommendations, the Board of Directors shall act as a
nominating committee to select the management nominees for
election as directors. Except in the case of a nominee
substituted as a result of the death or other incapacity of
a
management nominee, the nominating committee shall deliver
the
names of its nominees to the Secretary at least 25 days
prior to
the date of the annual meeting.
B. Nominations, other than those management
nominees made by or at the direction of the Board of
Directors,
shall be made by timely notice in writing to the Secretary
of
the Corporation. To be timely, a shareholder's notice shall
be
delivered or mailed to and received at the principal
executive
offices of the Corporation not less than 30 days prior to
the
date of the meeting; provided, however, that in the event
that
less than 40 days' notice or prior public disclosure of the
date
of the meeting is given or made to shareholders, notice by
the
shareholder to be timely must be so received not later than
the
close of business on the 10th day following the day on which
such notice of the date of the meeting is mailed or such
public
disclosure was made. Such shareholder's notice shall set
forth
(i) as to each person whom the shareholder proposes to
nominate
for election or re- election as a director, all information
relating to such person as required to be disclosed in
solicitation of proxies for election of directors, or as
otherwise required, in each case pursuant to Regulation 14A
under the Securities and Exchange Act of 1934, as amended
(including such person's written consent to being named in a
proxy statement as a nominee and to serving as a director if
elected); and (ii) as to the shareholder giving the notice
(x)
the name and address, as they appear on the books of the
Corporation, of such shareholder and (y) the class and
number of
shares of the Corporation's capital stock that are
beneficially
owned by such shareholder. At the request of the Board of
Directors any person nominated by the Board of Directors for
election as a director shall furnish to the Secretary of the
Corporation that information required to be set forth in a
shareholder's notice of nomination which pertains to the
nominee. No person shall be eligible for election as a
Director
of the Corporation unless nominated in accordance with the
provisions of this Section. The officer presiding at the
meeting shall, if the facts so warrant, determine and
declare to
the meeting that a nomination was not made in accordance
with
the provisions of this Section and, if he should so
determine,
he shall so declare to the meeting and the defective
nomination
shall be discharged.
3.8 DIRECTORS EMERITUS. The Board of Directors
shall
have the authority, at its discretion, to choose persons to
serve as directors emeritus. Such action, if taken, shall be
taken at the regular meeting of the Board of Directors next
following the annual meeting of shareholders. No more than
three persons may serve as directors emeritus at any one
time.
Once elected, a director emeritus shall serve a term of one
year, but he may be re-elected by the Board to serve
additional
terms. A director emeritus shall be allowed to attend all
regular and special meetings of the Board of Directors, and
he
may actively participate in such meetings except that he
shall
not be allowed to vote on any matters voted upon by the
directors, nor shall he be counted for purposes of
determining
if there is a quorum. A director emeritus may also serve in
an
advisory capacity on committees, but again, he shall not be
allowed to vote. A director emeritus may be removed from
office
at any time, with or without cause, by majority vote of the
Board of Directors. A director emeritus shall be entitled
to
reasonable compensation for his services as a director
emeritus
and to reasonable expenses incurred in attending meetings,
all
as determined by the Board of Directors, provided that no
such
compensation shall be paid unless the direct members of the
Board of Directors are likewise being compensated, and
provided
further that such compensation shall be less than that paid
to
the members of the Board of Directors. A director emeritus
shall not have the responsibility imposed upon a director,
nor
shall he be subject to any liability imposed upon a
director, or
otherwise be deemed a director.
ARTICLE FOUR
MEETINGS OF THE BOARD OF DIRECTORS
4.1 ANNUAL AND OTHER REGULAR MEETINGS. The annual
regular meeting of the Board of Directors shall be held at
the
time and place of the regularly scheduled meeting of the
Board
of Directors next following the annual meeting of the
shareholders. Regular meetings of the Board of Directors or
any
committee thereof may be held between annual meetings
without
notice at such time and at such place, within or without the
State of Georgia, as from time to time shall be determined
by
the Board or any committee thereof, as the case may be.
4.2 SPECIAL MEETINGS. Special meetings of Board of
Directors may be called for any purpose(s) by the Chairman
of
the Board or the President or by written request of any two
or
more directors then in office. Special meetings of any
committee of the Board of Directors may be held on the date
set
at the previous meeting of the committee or when called by
its
chairman or by a majority of its members. Any such special
meetings shall be held at such date, time and place, within
or
without the State of Georgia, as shall be communicated in
the
notice of the meeting.
4.3 NOTICE. Notice of any special meeting of the
Board
of Directors or any committee thereof, setting forth the
date,
time and place of the meeting, shall be delivered to each
director or committee member, addressed to him at his
residence
or usual place of business, or by telephone, telegram,
cable,
telecommunication, teletype, facsimile transmission or
personal
delivery not later than the second business day immediately
preceding the date of the meeting. Neither the business to
be
transacted at, nor the purpose of, any regular or special
meeting need be specified in the notice or any waiver of
notice.
Notice of any meeting need not be given to any
director or committee member who shall attend such meeting
in
person (except when the person attends a meeting for the
express
purpose of objecting, at the beginning of the meeting, to
the
transaction of any business because the meeting is not
properly
called or convened) or who shall waive notice thereof,
before or
after such meeting, in a signed writing.
4.4 QUORUM AND ADJOURNMENT. At all meetings of the
Board of Directors or any committee thereof, the presence of
a
majority of the directors or committee members then in
office
shall constitute a quorum for the transaction of business.
In
the absence of a quorum or for any other reason, a majority
of
the directors or committee members present thereat may
adjourn
the meeting from time to time. Notice of any adjourned
meeting
shall be given to each director or committee member who was
not
present at the time of adjournment and, unless the time and
place of the adjourned meeting are announced at the time of
adjournment, to the other directors or committee members.
At
any reconvened meeting following such adjournment at which a
quorum shall be present, any business may be transacted
which
might have transacted at the meeting as originally notified.
4.5 VOTING. At all meetings of the Board of
Directors
or any committee thereof, each director or committee member
present shall have one vote. The act of a majority of the
directors or committee members present at any meeting, in
which
there is a quorum, shall be the act of the Board of
Directors or
any committee thereof, except as otherwise provided by
statute,
the Articles of Incorporation or these Bylaws. On any
question
on which the Board of Directors or any committee thereof
shall
vote, the names of those voting and their votes shall be
entered
into the minutes of the meeting when any member of the Board
of
Directors or any committee member present at the meeting so
requests.
4.6 PRESUMPTION OF ASSENT. Any director or
committee
member present at a meeting of the Board of Directors or any
committee thereof shall be presumed to have assented to any
action taken at the meeting unless his dissent or abstention
is
entered in the minutes of the meeting or unless he files, at
the
meeting or immediately after its adjournment, his written
dissent to the action with the person acting as secretary of
the
meeting. This right to dissent shall not be available to a
director or committee member who voted in favor of the
action.
4.7 MEETING BY MEANS OF CONFERENCE TELEPHONE OR
SIMILAR
TELECOMMUNICATIONS EQUIPMENT. Members of the Board of
Directors
or any committee thereof may participate in a meeting of the
Board or any committee by means of conference telephone or
similar telecommunications equipment, by means of which all
persons participating in the meeting can hear each other.
Participation in the meeting in this matter shall constitute
presence in person at such meeting.
4.8 ACTION BY DIRECTORS WITHOUT A MEETING. Any
action
required or permitted to be taken at any meeting of the
Board of
Directors or any committee thereof may be taken without a
meeting if a written consent, setting forth the action so
taken,
is signed by all the directors or all the committee members,
as
the case may be, and filed with the minutes of the
proceedings
of the Board or the committee. Such consent will have the
same
force and effect as a unanimous vote of the Board of
Directors
or the committee.
4.9 CONDUCT OF MEETINGS. All meetings of the Board
of
Directors or any committee thereof shall be conducted in
accordance with such rules and procedures as the directors
may
determine subject to the requirements of statute and, as to
matters not governed by such rules and procedures, as the
presiding officer of such meeting shall determine. The
presiding officer of any meeting of the Board of Directors
shall
be the Chairman of the Board or, in his absence, the
President,
or, in the absence of both, such person as designated by the
Board of Directors. The Secretary, or in his absence, a
person
designated by the presiding officer, shall act as secretary
of
the meeting.
4.10 RESIGNATION. Any director may resign at any
time by
giving written notice thereof to the Corporation addressed
to
the Chairman of the Board or the President. Unless
otherwise
specified, such resignation shall take effect upon delivery
of
such notice unless some other date is specified in such
notice.
Acceptance of any resignation shall not be necessary to make
it
effective unless the resignation is tendered subject to such
acceptance. A director's absence from more than three
consecutive regular meetings of the Board of Directors,
unless
excused by resolution of the Board of Directors, shall be
deemed
to constitute the resignation of such a director, effective
once
such resignation is accepted by resolution of the Board of
Directors.
ARTICLE FIVE
BOARD COMMITTEES
5.1 COMMITTEES.
A. The Board of Directors may, by the vote of
a
majority of the directors then in office, establish
committees,
including standing or special committees, which shall have
such
duties as are authorized by the Board or by these Bylaws.
Committee members, and the chairman of each committee, shall
be
appointed by the Board of Directors. If an executive
committee
or similar committee is designated by the Board of
Directors,
the President shall serve as a member of that committee.
The
presiding officer of any committee meeting shall be the
chairman
of the committee and the chairman shall designate a person
to
act as secretary of the committee meeting.
B. The Board of Directors may, by the vote of
majority of the directors then in office, remove any member
of
any committee, with or without cause, or fill any vacancies
in
any committee, and dissolve or discontinue any committee.
C. The designation of any committee under this
Article and the delegation of authority thereto shall not
operate to relieve the Board of Directors, or any director,
of
any responsibility imposed by statute.
5.2 MINUTES. Each committee shall keep minutes of
its
actions and proceedings. Any action taken by the Board of
Directors with respect to the actions or proceedings of any
committee shall be entered into the minutes of the Board of
Directors.
ARTICLE SIX
OFFICERS
6.1 OFFICERS. The officers of the Corporation shall
include a President, a Secretary, and a Treasurer. The
Board of
Directors may also designate the Chairman of the Board as an
officer of the Corporation. The Board of Directors may also
designate one or more Vice Presidents as Executive Vice
President or Senior Vice President. The Board of Directors
may
also elect or authorize the appointment of such other
officers
or assistant officers as the business of the Corporation may
require. In addition to the duties and powers enumerated in
this Article, the officers of the Corporation shall perform
such
other duties and exercise such further powers as the Board
of
Directors may authorize or determine from time to time. Any
two
or more of the above offices may be held by the same persons
except as prohibited by statute, but no officers shall
execute,
acknowledge or verify an instrument in more than one
capacity if
the instrument is required by statute or the Articles of
Incorporation to be executed, acknowledged or verified by
two or
more officers. No officer need be a shareholder of the
Corporation.
6.2 COMPENSATION. The salaries of the officers of
the
Corporation shall be fixed by the Board of Directors. No
officer shall be prevented from receiving compensation by
reason
of also being a director of the Corporation.
6.3 ELECTION AND TERM OF OFFICE. The officers of
the
Corporation shall be elected annually by the Board of
Directors
at the first meeting of the Board of Directors held after
each
annual meeting of the shareholders. If the election of
officers
is not held at such meeting, such election shall be held as
soon
as possible thereafter. Each officer of the Corporation
shall
hold office until his successor is elected or until his
earlier
resignation, death or removal, or the termination of his
office.
The election or appointment of an officer, employee or agent
shall not itself create contractual rights. The Board of
Directors may authorize the Corporation to enter into an
employment contract or other arrangement with any officer;
but
no such contract shall impair the rights of the Board of
Directors to remove any officer at any time in accordance
with
this Article.
6.4 REMOVAL. Any officer may be removed from office
at
any time, with or without cause, by the vote of a majority
of
the directors then in office whenever in their judgement,
the
best interest of the Corporation will be served thereby.
Any
such removal shall be without prejudice to the contract
rights,
if any, of the officer so removed.
6.5 VACANCY. Any vacancy in an office resulting
from
any cause may be filled by the Board of Directors in the
manner
prescribed by these Bylaws.
6.6 CHAIRMAN AND VICE CHAIRMAN OF THE BOARD. The
Chairman of the Board shall be elected annually by the Board
of
Directors from among its members. The Chairman shall
preside at
all meetings of the Board and shall perform all of the
duties
and shall have all the powers commonly incident to his
office or
delegated to him by the Board of Directors, or which are or
may
at any time be authorized or required by statute or these
Bylaws. Unless a Vice President has been elected and has as
one
of his duties to act in the President's stead in the event
of
his absence or inability to serve, then the Chairman of the
Board, in the event of the President's absence, inability to
serve or refusal to serve, shall act in the President's
stead
and shall have all the powers of and be subject to all the
restrictions of the President until such time as the
President
resumes his duties, a new President is chosen, or an officer
of
the Corporation is selected by the Board of Directors to
perform
the duties of the President. The Board of Directors also
shall
elect annually a Vice Chairman who, in the absence of the
Chairman, shall preside at all meetings of the Board and
shall
perform all of the duties and have all of the powers of the
Chairman.
6.7 PRESIDENT. The President shall be the Chief
Executive Officer of the Corporation and shall have general
responsibility for the management and supervision of the
business of the Corporation and corporate policy. The
President
shall have administrative authority over the business of the
Corporation, and shall have such further authority and
perform
such other duties as may be delegated to him by the Board of
Directors.
6.8 VICE PRESIDENT. Each Executive Vice President,
each
Senior Vice President and each other Vice President shall
have
such powers and perform such duties as may be delegated to
him
by the Board of Directors or delegated by the President. In
the
absence or disability of the President, those powers, duties
and
functions of the President may be temporarily performed and
exercised by such one of the Executive Vice Presidents,
Senior
Vice Presidents or the other Vice Presidents as shall be
expressly designated by the Board of Directors. When more
than
one Vice President is elected, the Board may specify an
order of
seniority among such Vice Presidents.
6.9 SECRETARY. The Secretary shall attend all
meetings
of the Board of Directors and all meetings of the
shareholders
and record all votes and the minutes of all proceedings in
books
to be kept for that purpose, and shall perform like duties
for
any Board committees when required. The Secretary shall
give,
or cause to be given, any notice required to be given of any
meetings of the shareholders, of the Board of Directors or
any
Board committees when required, and shall perform such other
duties as may be prescribed by the Board of Directors or the
President, under whose supervision the Secretary shall be.
The
Secretary shall cause to be kept such books and records as
the
Board of Directors or the President may require and shall
cause
to be prepared, recorded, transferred, issued, sealed and
cancelled certificates of stock as required by the
transactions
of the Corporation and its shareholders. The Secretary
shall
attend to such other correspondence and shall perform such
other
duties as may be incident to such office or as may be
assigned
to him by the Board of Directors or the President. The
Secretary shall have custody of the seal of the Corporation,
shall have the authority to affix the same to any
instrument,
the execution of which on behalf of the Corporation under
its
seal is duly authorized, and shall attest the same by his
signature whenever required. The Board of Directors may
give
general authority to any other officer to affix the seal of
the
Corporation and to attest the same by his signature.
6.10 TREASURER. The Treasurer shall have charge of
and
be responsible for all funds, securities, receipts and
disbursements of the Corporation, and shall deposit, or
cause to
be deposited, in the name of the Corporation, all monies or
other valuable effects, in such banks, trust companies or
other
depositories as shall from time to time be selected by the
Board
of Directors. He shall render to the President and to the
Board
of Directors, whenever requested, an account of the
financial
condition of the Corporation, and in general, he shall
perform
all such other duties as may be delegated to him by the
Board of
Directors or the President.
6.11 ASSISTANT VICE PRESIDENT, ASSISTANT SECRETARY
AND
ASSIST-ANT TREASURER. The Assistant Vice President,
Assistant
Secretary and Assistant Treasurer, in the absence or
disability
of any Vice President, the Secretary or the Treasurer,
respectively, shall perform the duties and exercise the
powers
of those offices, and, in general, they shall perform such
other
duties as shall be delegated to them by the Board of
Directors
or by the person appointing them. Specifically, the
Assistant
Secretary may affix the seal of the Corporation to all
necessary
documents and attest the signature of any officer of the
Corporation.
6.12 DELEGATION OF AUTHORITY. In the case of the
absence of any officer of the Corporation or for any other
reason that the Board of Directors may deem sufficient, the
Board of Directors may delegate, for the time being, any or
all
of the powers or duties of such officer to any other officer
or
to any director.
ARTICLE SEVEN
CAPITAL STOCK
7.1 STOCK CERTIFICATES. Each shareholder shall be
entitled to a certificate representing the number of shares
of
capital stock of the Corporation owned by such person. The
certificate shall be in such form as approved by the Board
of
Directors of the Corporation. Each certificate shall be
signed
by the President or a Vice President and by the Secretary or
an
Assistant Secretary and shall be sealed with the seal of the
Corporation or a facsimile thereof. The signatures upon a
certificate may be facsimiles. In case any officer who
shall
have signed or whose facsimile signature has been placed
upon a
certificate shall have ceased to be such officer of the
Corporation before such certificate shall have been issued
by
the Corporation, such certificate may nevertheless be issued
as
though the person who signed such certificate had not ceased
to
be such officer.
7.2 STOCK RECORDS. Each certificate for shares of
Stock
in the Corporation shall be numbered or otherwise identified
in
the stock records of the Corporation. The Corporation shall
keep stock records which shall show the names and addresses
of
the persons to whom the shares are issued, with the number
of
shares and date of issuance.
7.3 STOCK TRANSFERS. Transfers of shares of stock
of
the Corporation shall be made on the stock transfer books of
the
Corporation only when authorized by the person named in the
certificate, or by his legal representative, who shall
furnish
written evidence of such authority, or by his attorney
authorized by a duly executed power of attorney and filed
with
the Corporation. Such transfer shall be made only upon
surrender of the certificate therefor, or in the case of a
certificate alleged to have been lost, stolen or destroyed,
upon
compliance with the provisions of this Article and as may
otherwise be provided by statute. The Corporation shall be
entitled to recognize the exclusive right of a person
registered
on its books as the owner of shares to receive dividends and
to
vote as such owner, and for all other purposes, and shall
not be
bound to recognize any equitable or other claim to or
interest
in such share or shares on the part of any other person,
whether
or not it shall have express or other notice thereof, except
as
otherwise provided by law. No transfer shall be valid,
except
between the parties thereto, until such transfer shall have
been
made upon the books of the Corporation as herein provided.
The
Board of Directors shall have the power and authority to
make
such other rules and regulations concerning the issue,
transfer
and registration of certificates of the Corporation's stock
as
it may deem appropriate.
7.4 RECORD DATES. The Board of Directors may fix,
in
advance, a date as the record date for the purpose of
determining shareholders entitled to notice of, or to vote
at,
any meeting of shareholders or any adjournment thereof, or
shareholders entitled to receive payment of any dividend of
other distribution or allotment of any rights, or entitled
to
exercise any rights in respect of any change, conversion or
exchange of stock, or in order to make a determination of
shareholders for any other purpose. Such date in any case
shall
not be more than 70 days, and in the case of the meeting of
shareholders, not less than 10 days, prior to the date on
which
the particular action, requiring the determination of
shareholders is to be taken. Only those shareholders of
record
on the dates so fixed shall be entitled to any of the
foregoing
rights, notwithstanding the transfer of any such stock on
the
books of the Corporation after any such record date fixed by
the
Board of Directors.
7.5 TRANSFER AGENTS AND REGISTRARS. The Corporation
may
have one or more transfer agents and one or more registrars
of
its stock whose respective duties the Board of Directors or
Secretary may, from time to time, determine. No certificate
of
stock shall be valid until countersigned by a transfer
agent, if
the Corporation has a transfer agent, or until registered by
the
registrar, if the Corporation has a registrar. The duties
of
transfer agent and registrar may be combined.
7.6 LOST CERTIFICATES. The Corporation may issue a
new
certificate of stock in place of any certificate previously
issued and alleged to have been lost, stolen or destroyed,
and
the Corporation may require the owner of the lost, stolen or
destroyed certificate, or his legal representative to give
the
Corporation a bond sufficient to indemnify it against any
claim
that may be made against it on account of the alleged loss,
theft or destruction of any such certificate or the issuance
of
such new certificate and any other conditions as may
otherwise
be provided by statute.
ARTICLE EIGHT
GENERAL PROVISIONS
8.1 REFERENCES. Whenever in these Bylaws reference
is
made to an Article or Section number, such reference is to
the
number of an Article or Section of the Bylaws. Whenever in
the
Bylaws reference is made to the Bylaws, such reference is to
these Bylaws of the Corporation as the same may be amended
from
time to time. Whenever in the Bylaws reference is made to
the
Articles of Incorporation, such reference is to the Articles
of
Incorporation of the Corporation as the same may be amended
from
time to time.
8.2 REFERENCE TO GENDER. Whenever in the Bylaws
reference is made to the masculine gender, such reference
shall
where the context so requires be deemed to include the
feminine
gender and the neuter gender, and the Bylaws shall be read
accordingly.
8.3 LEGAL RESTRICTIONS. All matters covered in
these
Bylaws shall be subject to such restrictions as shall be
imposed
on the Corporation by applicable state and federal statutes,
rules and regulations.
8.4 SEAL. The seal of the Corporation shall be in
such
form as the Board of Directors may determine from time to
time.
The seal may be used by causing it or by facsimile thereof
to be
impressed or affixed or reproduced or otherwise. If it is
inconvenient to use such a seal at any time, the signature
of
the Chairman of the Board, President, Secretary or an
Assistant
Secretary of the Corporation, followed by the word "Seal"
shall
be deemed the seal of the Corporation.
8.5 FISCAL YEAR. The fiscal year of the Corporation
shall be fixed by resolution of the Board of Directors and
may
be changed from time to time.
8.6 VOTING SHARES IN SUBSIDIARIES. In the absence
of
other arrangements by the Board of Directors, shares of
stock
issued by another corporation and owned or controlled by the
Corporation, whether in a fiduciary capacity or otherwise,
may
be voted by the President of the Corporation or by such
other
person as the Board of Directors by resolution shall so
designate, and such person may execute the aforementioned
powers
by executing proxies and written waivers and consents on
behalf
of the Corporation.
8.7 INSPECTION OF BOOKS. The Board of Directors
shall
have the power to determine which accounts and books of the
Corporation, if any, shall be opened to the inspection of
shareholders, except such as may by statute be specifically
opened to inspection, and shall have the power to affix
reasonable rules and regulations not in conflict with the
applicable statute for the inspection of accounts and books
which by statute or by the determination of the Board of
Directors shall be opened to inspection, and the
shareholders'
rights in this respect are and shall be restricted and
limited
accordingly.
8.8 CONTRACTS. No contract or other transaction
between
Corporation and any other corporation, partnership or other
entity shall be affected or invalidated by the fact that a
shareholder, director or officer of the Corporation is a
shareholder, director, partner or other officer of, or is
interested in, such other corporation, partnership or other
entity, and no contract or other transaction between
Corporation
and any other person shall be affected or invalidated by the
fact that a shareholder, director or officer of the
Corporation
is a party to, or interested in, such contract or
transaction;
provided that, in each such case, the nature and extent of
the
interest of such shareholder, director or officer in such
contract or other transaction or the fact that such
shareholder,
director or officer is a shareholder, director, officer,
partner
or other party of such other corporation, partnership,
entity or
other person is known to the Board of Directors or is
disclosed
at the meeting of the Board of Directors at which such
contract
or the transaction is authorized.
8.9 AMENDMENT OF BYLAWS. These Bylaws may be
altered,
amended or repealed, or new Bylaws adopted, pursuant to the
provisions of the Articles of Incorporation.
ARTICLE NINE
INDEMNIFICATION
9.1 INDEMNIFICATION.
A. Each person who is or was a director or
officer
of the Corporation, and each person who is or was a director
or
officer of the Corporation who at request of the Corporation
is
serving or has served as an officer, director, partner,
agent,
joint venturer or trustee of another corporation,
partnership,
joint venture, trust or other enterprise, shall be
indemnified
by the Corporation against those expenses (including
attorneys'
fees), judgments, fines and amounts paid in settlement which
are
allowed to be paid or reimbursed by the Corporation under
the
laws of the State of Georgia and which are actually and
reasonably incurred in connection with any action, suit or
proceeding, pending or threatened, whether civil, criminal,
administrative or investigative, in which such person may be
involved by reason of his being or having been a director or
officer of this Corporation or as an officer, director,
partner,
agent, joint venturer or trustee of such other enterprise.
B. Expenses incurred in defending a criminal
or
civil action, suit, or proceeding may be paid by the
corporation
in advance of the final disposition of such action, suit, or
proceeding as authorized by the Board of Directors in the
specific case upon receipt of an undertaking by or on behalf
of
the Director, office, employee, or agent to repay such
amount
unless it shall ultimately be determined that he is entitled
to
be indemnified by the Corporation as authorized in this
section.
C. In any instance where the laws of the State
of
Georgia permit indemnification or advancement of expenses to
be
provided to persons who are or have been an officer or
director
the Corporation or who are or have been an officer,
director,
partner, agent, joint venturer trustee of any such other
enterprise only on a determination that certain specified
standards of conduct have been met, upon application for
indemnification, or advancement of expenses by any such
person
the Corporation shall promptly cause such determination to
be
made (i) by the Board of Directors by majority vote of a
quorum
consisting of directors not at the time parties to such
proceeding; (ii) if such a quorum cannot be obtained, then
by
majority vote of a committee duly designated by the Board of
Directors (in which designation directors who are parties
participate), consisting solely of two (2) or more directors
not
at the time parties to such proceeding; (iii) by special
legal
counsel selected by the Board of Directors cannot be
obtained
under (i) and a committee cannot be designated under (ii),
selected by majority vote of the full Board of Directors (in
which selection directors who are parties participate); or
(iv)
by the shareholders, but shares owned or voted under control
of
the directors who are at the time parties to such proceeding
may
not be voted with respect to such determination.
D. As a condition to any such right of
indemnification or advancement of expenses, the Corporation
may
require that it be permitted to participate in the defense
of
any such action or proceeding through legal counsel
designated
by the Corporation and at the expense of the Corporation.
E. The Corporation may purchase and maintain
insurance on behalf of any such persons, whether or not the
Corporation would have the power to indemnify such officers
and
directors against any liability under the laws of the State
of
Georgia. If any expenses or other amounts are paid by way
of
indemnification, other than by court order, action by
shareholders or by an insurance carrier, the Corporation
shall
provide notice of such payment to the shareholders in
accordance
with the provisions of the laws of the State of Georgia.
F. The indemnification and advancement of
expenses
provided in this Article shall not b deemed exclusive of any
other rights, in respect to indemnification or otherwise, to
which the persons seeking indemnification or advancement of
expenses may be entitled under any bylaws, resolution,
agreement, statute or otherwise.
G. The rights to indemnification and
advancement
of expenses provided by this Article shall be deemed a
contract
between the Corporation and each such person and any
modification or repeal of this Article shall not affect any
right or obligation then existing with respect to any stated
fact then or previously existing or any action, or
proceeding
previously or thereafter brought or threatened based in
whole or
in part of any such state of facts. Such contract right may
not
be modified or repealed without consent of each such person.
The rights to indemnification and advancement of expenses
provided by this Article shall continue to a person entitled
to
indemnification and advancement of expenses provided by this
Article shall continue to a person entitled to
indemnification
hereunder who has ceased to be a director or office and
shall
inure to the benefit of the heirs, executors, or
administrators
of each such person.
H. Notwithstanding anything contained herein
to
the contrary, Article 8 is intended to provide
indemnification
to each director and officer of the Corporation to the
fullest
extent authorized by the Code, as the same exists or may
hereafter be amended (but, in the case of any such
amendment,
only to the extent that such amendment permits the
Corporation
to provide broader rights than said statute permitted the
Corporation to provide prior thereto).
============
APPENDIX "G"
============
Registrant's Form 10-KSB for the year ended December 31,
19998, was filed on the EDGAR system on March 31, 1999 and
is incorporated herein by reference.
============
APPENDIX "H"
============
Registrant's Form 10-QSB for the Quarter ended September 30,
1999, was filed on the EDGAR system on November 12, 1999,
and is incorporated herein by reference.
Back Cover of Proxy Statement/Prospectus
- ----------------------------------------
This Proxy Statement/Prospectus incorporates important
business and financial information about Community and
Tarpon that is included in or delivered with the document.
This information is available without charge to the
Tarpon Shareholders upon written or oral request from:
Information about Community:
T. Brinson Brock, Sr.,
516 East Washington Avenue - Box 2619
Ashburn, Georgia 31714-2619
Telephone (912) 567-9686.
Information about Tarpon:
Barbara Richards
710 East Tarpon Avenue
Tarpon Springs, Florida 34689
Telephone: (727) 938-9771
To obtain timely delivery, Tarpon shareholders must
request the information no later than five business days
before the date they must make their investment decision and
not later than January __, 2000.
End of page 46
- --------------
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS; UNDERTAKINGS
Item 20. Indemnification of Directors and Officers
Subsection (a) of Section 14-2-851 of the Georgia
Business Corporation Code provides that a corporation may
indemnify or obligate itself to indemnify an individual made
a party to a proceeding because he or she is or was a
director against liability incurred in the proceeding if
such individual conducted himself or herself in good faith
and such individual reasonably believed, in the case of
conduct in an official capacity, that such conduct was in
the best interests of the corporation and, in all other
cases, that such conduct was at least not opposed to the
best interests of the corporation and, in the case of any
criminal proceeding, such individual had no reasonable cause
to believe such conduct was unlawful. Subsection (d) of
Section 14-2-851 of the Georgia Business Corporation Code
provides that a corporation may not indemnify a director in
connection with a proceeding by or in the right of the
corporation except for reasonable expenses incurred if it is
determined that the director has met the relevant standard
of conduct, or in connection with any proceeding with
respect to conduct under Section 14-2-851 of the Georgia
Business Corporation Code for which he was adjudged liable
on the basis that personal benefit was improperly received
by him. Notwithstanding the foregoing, pursuant to Section
14-2-854 of the Georgia Business Corporation Code a court
may order a corporation to indemnify a director or advance
expenses if such court determines that the director is
entitled to indemnification under the Georgia Business
Corporation Code or that the director is fairly and
reasonably entitled to indemnification in view of all the
relevant circumstances, whether or not such director met the
standard of conduct set forth in subsections (a) and (b) of
Section 14-2-851 of the Georgia Business Corporation Code,
failed to comply with Section 14-2-853 of the Georgia
Business Corporation Code or was adjudged liable as
described in paragraph (1) or (2) of subsection (d) of
Section 14-2-851 of the Georgia Business Corporation Code.
Section 14-2-852 of the Georgia Business Corporation
Code provides that to the extent that a director has been
successful, on the merits or otherwise, in the defense of
any proceeding to which he was a party, because he or she is
or was a director of the corporation, the corporation shall
indemnify the director against reasonable expenses incurred
by the director in connection therewith.
Section 14-2-857 of the Georgia Business Corporation
Code provides that a corporation may indemnify and advance
expenses to an officer of the corporation who is a party to
a proceeding because he or she is an officer of the
corporation to the same extent as a director and if he or
she is not a director to such further extent as may be
provided in its articles of incorporation, bylaws, action of
its board of directors or contract except for liability
arising out of conduct specified in Section 14-2-857(a)(2)
of the Georgia Business Corporation Code. Section 14-2-857
of the Georgia Business Corporation Code also provides that
an officer of the corporation who is not a director is
entitled to mandatory indemnification under Section 14-2-852
and is entitled to apply for court ordered indemnification
or advances for expenses under Section 14-2-854, in each
case to the same extent as a director. In addition, Section
14-2-857 provides that a corporation may also indemnify and
advance expenses to an employee or agent
End of page 47
- --------------
who is not a director to the extent, consistent with public
policy, that may be provided by its articles of
incorporation, bylaws, action of its board of directors or
contract.
In accordance with Article Nine of Community's Bylaws,
every person who is or was a director, officer, employee or
agent of the Company shall be indemnified and held harmless
by Community against those expenses, judgments, fines and
amounts paid in settlement which are allowed to be paid or
reimbursed by a corporation under Georgia law and which are
actually and reasonably incurred by him or her in connection
with or resulting from any threatened, pending, or
completed, action, suit, or proceeding, in which he or she
may be involved by reason of his/her being a director,
officer, employee, or agent of Community or because he or
she is or was serving at the request of Community as a
director, officer, partner, trustee, employee, or agent of
another enterprise.
Pursuant to Article Nine of the Bylaws of Community,
reasonable expenses incurred in any proceeding may be paid
by Community in advance of the final disposition of such
proceeding if authorized by the Board of Directors in the
specific case, or if authorized in accordance with
procedures adopted by the Board of Directors, upon receipt
of an undertaking by or on behalf of the director, officer,
employee or agent to repay such amount unless it shall
ultimately be determined that he or she is entitled to be
indemnified by Community.
The foregoing rights of indemnification and advancement
of expenses are not intended to be exclusive of any other
right to which those indemnified may be entitled, and
Community has reserved the right to provide additional
indemnity and rights to its directors, officers, employees
or agents to the extent they are consistent with law.
Community carries insurance for the purpose of
providing indemnification to its directors and officers.
Such policy provides for indemnification of Community for
losses and expenses it might incur to its directors and
officers for successful defense of claims alleging negligent
acts, errors, omissions or breach of duty while acting in
their capacity as directors or officers and indemnification
of its directors and officers for losses and expense upon
the unsuccessful defense of such claims.
Item 21. Exhibits and Financial Statement Schedules
The following Exhibits are filed as part of this Registration Statement:
Exhibit No. Description
2 Agreement and Plan of Merger is attached as Appendix "C" to the
Proxy Statement/Prospectus included in this Registration
Statement.
3.1 Amended and Restated Articles of Incorporation of Registrant are
attached as Appendix "E" to the Proxy Statement/Prospectus
included in this Registration Statement, particularly pages 1, 2,
4, 5 and 6 thereof.
End of page 48
- --------------
3.2 Amended and Restated Bylaws of Registrant are attached as Appendix
"F" to the Proxy Statement/Prospectus included in this
Registration Statement, particularly pages 5, 6 and 15 thereof.
5 Legal opinion of Dinur & Associates, P.C., regarding the legality
of the Registrant's common stock being issued in the merger.
8 Tax Opinion of Francis & Co., CPA's, regarding certain tax
consequences of the merger is attached as Appendix "D" to the
Proxy Statement/Prospectus included in this Registration
Statement.
13.1 Annual Report on Form 10-KSB for the year ended December 31, 1998,
is attached as Appendix "G" to the Proxy Statement/Prospectus
included in this Registration Statement.
13.2 Quarterly Report on Form 10-QSB for the period ended September 30,
1999, is attached as Appendix "H" to the Proxy
Statement/Prospectus included in this Registration Statement.
23.1 The consent of Francis & Co., CPA's, re: Consolidated Financial
Statements of Registrant and Subsidiaries.
23.2 The consent of Francis & Co., CPA's, re: Financial Statements of
Tarpon Financial Corporation
23.3 The consent of Francis & Co., CPA's, regarding its tax opinion is
contained in its opinion attached as Appendix "D" to the Proxy
Statement/Prospectus included in this Registration Statement.
23.4 The consent of Dinur & Associates, P.C., is contained in its
opinion filed as Exhibit 5 to the Registration Statement.
23.5 The consent of Allen C. Ewing & Co., is contained in its
opinion filed as Appendix "B" to the Proxy Statement/Prospectus
included in this Registration Statement.
24 Powers of Attorney are contained on the signature pages of the
Registration Statement.
99.1 Form of Proxy.
99.2 Opinion of Allen C. Ewing & Co., as to the fairness of the
consideration to be received by Tarpon's shareholders is attached
as Appendix "B" to the Proxy Statement/Prospectus included in the
Registration Statement.
Item 22. Undertakings.
Insofar as indemnification for liabilities arising
under the Securities Act of 1933 may be permitted to
directors, officers and controlling persons of the
Registrant, the Registrant has been advised that in the
opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable.
The undersigned Registrant hereby undertakes to respond
to requests for information that is incorporated by
reference into the prospectus pursuant to Item 4, 10(b), 11,
or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by
first class mail or other equally prompt means. This
includes the information contained in documents filed
subsequent to the effective date of the registration
statement through the date of responding to the request.
The undersigned Registrant hereby undertakes to supply
by means of a post-effective amendment all information
concerning a transaction, and the company being acquired
involved therein, that was not the subject of and included
in the registration statement when it became effective.
End of page 50
- --------------
SIGNATURES
Pursuant to the requirements of the Securities Act of
1933, as amended, the Registrant certifies that it has
reasonable grounds to believe that it meets all the
requirements for filing on Form S-4 and has duly caused this
Amendment 1 to the Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in
the City of Ashburn, State of Georgia, on the 13th day of
January, 2000.
COMMUNITY NATIONAL BANCORPORATION
(Registrant)
By: /S/
-------------------------------------
T. Brinson Brock, Sr.,
President and Principal Executive Officer
and Attorney-in-Fact for the Directors and
Principal Accounting and Financial Officer
=========
EXHIBIT 5
=========
[LETTERHEAD OF DINUR & ASSOCIATES, P,C,]
One Lakeside Commons
990 Hammond Drive
Suite 760
Atlanta, Georgia 30326
(770)395-3170
FAX: (770) 395-3171
December 2 1999
Securities and Exchange Commission
Judiciary Plaza
450 Fifth Street
Washington, D.C. 20549
Ladies and Gentlemen:
As outside general counsel to Community National
Bancorporation (the "Registrant"), we are familiar with the
preparation and filing of the Registrant's Registration
Statement on Form S-4, as filed with the Securities and
Exchange
Commission on or about December ___, 1999, pursuant to which
the
Registrant proposes to issue up to 248,000 shares of its no
par
value Common Stock ("Registrant's Common Stock") to certain
of
the former shareholders of Tarpon Financial Corporation upon
its
acquisition by Registrant.
We have examined, and are familiar with, the originals
or
copies, certified or otherwise, of the documents, corporate
records and other instruments of the Registrant relating to
the
proposed issuance of Registrant's Common Stock which we deem
relevant and which form the basis of the opinion hereinafter
set
forth.
We are of the opinion that under the laws of the State
of
Georgia, the jurisdiction in which the Registrant is
incorporated and the jurisdiction in which the Registrant
has
its principal office, upon the issuance of the shares of the
Registrant's Common Stock pursuant to the aforesaid
Registration
Statement, all such shares when so issued will be duly
authorized, validly issued and outstanding, and will be
fully
paid and non-assessable shares of the Registrant's Common
Stock,
and no personal liability will attach to the holders of any
of
the shares of the Registrant's Common Stock.
The undersigned counsel to the Registrant hereby
consents
to the use of their opinion as Exhibit 5 to the aforesaid
Registration Statement.
Sincerely,
/S/ Daniel D. Dinur
----------------------------------
Daniel D. Dinur
for Dinur & Associates, P. C.
DDD/mtl
============
EXHIBIT 23.1
============
[LETTERHEAD OF FRANCIS & CO., CPAS]
4400 Roswell Road
Bldg. 142, Suite 301
Marietta, GA 30062
TEL: 770/650-1180
FAX: 770/650-8299
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Community National Bancorporation
Ashburn, Georgia
We hereby consent to the use in this Registration Statement
on
Form S-4 of our report dated February 28, 1999, relating to
the
financial statements of Community National Bancorporation,
Ashburn, Georgia, and to the references to our Firm under
the
caption "Experts" in the Prospectus.
/S/ Francis & Co., CPAs
Atlanta, Georgia
December 3, 1999
============
EXHIBIT 23.2
============
[LETTERHEAD OF FRANCIS & CO., CPAS]
4400 Roswell Road
Bldg. 142, Suite 301
Marietta, GA 30062
TEL: 770/650-1180
FAX: 770/650-8299
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Tarpon Financial Corporation
Trapon Springs, Florida
We hereby consent to the use in this Registration Statement
on
Form S-4 of our report dated October 15, 1999, relating to
the
financial statements of Tarpon Financial Corporation, Tarpon
Springs, Florida, and to the references to our Firm under
the
caption "Experts" in the Prospectus.
/S/ Francis & Co., CPAs
Atlanta, Georgia
December 3, 1999
============
EXHIBIT 23.5
============
[LETTERHEAD OF ALLEN C. EWING & CO.]
December 2, 1999
Board of Directors
Tarpon Financial Corporation
710 East Tarpon Avenue
Tarpon Springs, Florida 34689
Gentlemen:
You have requested our opinion as to the fairness, from a
financial point of
view, to the shareholders of Tarpon Financial Corporation
("Company"), the
holding company for First National Bank ("Bank") of Tarpon
Springs, Florida,
of the consideration to be paid to the shareholders of the
Company by
Community National Bancorporation ("Community") of Ashburn,
Georgia, as
provided by the Agreement and Plan of Merger ("Merger
Agreement") entered
into by the parties on October 8, 1999. Pursuant to the
Merger Agreement,
Community will acquire all of the outstanding shares of the
Company by
offering cash and Community shares for the shares of the
Company. The
Company will be merged with and into a subsidiary of
Community and the
Company will cease to exist.
In arriving at our opinion, we have relied upon the accuracy
and completeness
of the information provided to us by the Company which we
have used in the
accompanying analysis. We have not conducted an independent
verification of
such information or performed an independent appraisal of
the Company's
assets and liabilities.
Based upon the accompanying analysis and our knowledge of
and experience in
the valuation of Florida banks and their securities, it is
our opinion that
the consideration to be paid by Community for the common
shares of the
Company is fair, from a financial point of view, to the
shareholders of the
Company.
The opinion of Allen C. Ewing & Co. ("Ewing") is directed to
the Board of
Directors and does not constitute a recommendation to any
shareholder as to
how such shareholder should vote at the shareholders'
meeting held in
connection with the proposed transaction. Ewing has not
been requested to
opine as to, and the opinion does not address, the Board's
underlying
business decision to support and recommend the acquisition
to the
shareholders.
Very truly yours,
ALLEN C. EWING & CO.
By: /S/ Benjamin C. Bishop, Jr.
_____________________________
Benjamin C. Bishop, Jr.
President
============
EXHIBIT 99.1
============
January --, 2000
The undersigned shareholder of Tarpon Financial
Corporation
hereby appoints Mary Z. Smitzes, with full power of
substitution, as proxy to vote the shares of stock that the
undersigned could vote if personally present at the Special
Meeting of Shareholders of Tarpon Financial Corporation, to
be
held at 10:00 A.M., local time, on January --, 2000, or at
any
adjournment thereof.
(1) PROPOSAL TO APPROVE THE AGREEMENT AND PLAN OF
MERGER, EFFECTIVE OCTOBER 8, 1999, BY AND BETWEEN COMMUNITY
NATIONAL BANCORPORATION AND TARPON FINANCIAL CORPORATION,
AND
THE TRANSACTIONS CONTEMPLATED BY SUCH AGREEMENT AND PLAN OF
MERGER.
FOR AGAINST ABSTAIN
----- ----- -----
(2) IN HER DISCRETION UPON SUCH OTHER MATTERS AS
MAY
PROPERLY COME BEFORE THE SPECIAL MEETING OF SHAREHOLDERS OR
ANY
ADJOURNMENT THEREOF.
IF NO DIRECTION TO THE CONTRARY IS INDICATED, THIS
PROXY
WILL BE VOTED FOR PROPOSAL (1).
Dated: , 2000
---------------------------
___________________________________
Signature(s) of Shareholder(s)
Please sign exactly as name appears hereon. If shares
are
held jointly, each shareholder should sign. Agents,
executors,
administrators, guardians, trustees, etc., should use full
title. and if more than one, all should sign. If the
shareholder is a corporation, please sign full corporate
name by
an authorized officer.
Please fill in, date and sign the proxy and return it
in
the enclosed postpaid envelope.
