SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
[x] Filed by the Registrant
[ ] Filed by a Party other than the Registrant
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, For Use
of the
Commission Only (as permitted
by
[x] Definitive Proxy Statement Rule 14a-6(e)(2))
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
FLAG Financial Corporation
(Name of Registrant as Specified in Charter)
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and )-11.
(1) Title of each class of securities to which transaction applies:
__________________
(2) Aggregate number of securities to which transaction applies:
__________________
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
__________________
(5) Total fee paid: _______________
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount previously paid: ____________________
(2) Form, Schedule or Registration Statement No.: __________________
(3) Filing Party: ____________________________________________
(4) Date Filed: ________________________________
<PAGE>
FLAG FINANCIAL CORPORATION
NOTICE OF
1997 ANNUAL MEETING
AND
PROXY STATEMENT
<PAGE>
[FLAG FINANCIAL CORPORATION LETTERHEAD]
March 24, 1997
Dear Shareholder:
You are cordially invited to attend the 1997 Annual Meeting of
Shareholders of FLAG Financial Corporation to be held at the main office of
First Federal Savings Bank of LaGrange, 101 North Greenwood Street, LaGrange,
Georgia, on Wednesday, April 16, 1997 at 2:00 p.m., local time.
The attached Notice of Annual Meeting and Proxy Statement describe the
formal business to be transacted at the Annual Meeting. During the meeting, we
also will report on the operations of the Company and the Bank during the past
year, and the directors and officers of the Company and the Bank will be present
to respond to appropriate questions from shareholders.
I hope that you will be able to attend the Annual Meeting. If you plan to
attend, please mark the appropriate box at the bottom of your proxy card so that
we can make proper arrangements for the anticipated number of guests. Whether or
not you plan to attend the Annual Meeting, please sign, date and return your
proxy card in the enclosed envelope at your earliest convenience. This will
assure that your shares will be represented and voted at the Annual Meeting even
if you are unable to attend.
Sincerely,
/s/ John S. Holle
John S. Holle
Chairman of the Board,
President and Chief
Executive Officer
<PAGE>
FLAG FINANCIAL CORPORATION
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 16, 1997
NOTICE HEREBY IS GIVEN that the 1997 Annual Meeting of Shareholders of
FLAG Financial Corporation (the "Company") will be held at the main office of
First Federal Savings Bank of LaGrange, 101 North Greenwood Street, LaGrange,
Georgia, on Wednesday, April 16, 1997 at 2:00 p.m., local time, for the purposes
of:
(1) Electing four directors of the Company;
(2) Ratifying the appointment of Porter Keadle Moore, LLP as independent
accountants of the Company for the fiscal year ending December 31,
1997; and
(3) Transacting such other business as properly may come before the
Annual Meeting or any adjournments thereof.
Information relating to matters (1) and (2) above is set forth in the
attached Proxy Statement. Shareholders of record at the close of business on
February 28, 1997 will be entitled to receive notice of and to vote at the
Annual Meeting and any adjournments thereof.
By Order of the Board of Directors.
/s/ Lee W. Washam
Lee W. Washam
Secretary
LaGrange, Georgia
March 24, 1997
PLEASE READ THE ATTACHED PROXY STATEMENT AND THEN PROMPTLY COMPLETE, EXECUTE AND
RETURN THE ENCLOSED PROXY CARD IN THE ACCOMPANYING POSTAGE-PAID ENVELOPE. YOU
CAN SPARE YOUR COMPANY THE EXPENSE OF FURTHER PROXY SOLICITATION BY RETURNING
YOUR PROXY CARD PROMPTLY. IF YOU ATTEND THE ANNUAL MEETING, YOU MAY REVOKE THE
PROXY AND VOTE IN PERSON IF YOU SO DESIRE.
<PAGE>
FLAG FINANCIAL CORPORATION
---------
PROXY STATEMENT
FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 16, 1997
--------------
This Proxy Statement is furnished to the shareholders of FLAG Financial
Corporation (the "Company") in connection with the solicitation of proxies by
the Board of Directors of the Company for use at the 1997 Annual Meeting of
Shareholders of the Company and at any adjournments thereof (the "Annual
Meeting"). The Annual Meeting will be held on Wednesday, April 16, 1997 at 2:00
p.m. local time at the office of the Company's wholly-owned subsidiary, First
Federal Savings Bank of LaGrange (the "Bank"), 101 North Greenwood Street,
LaGrange, Georgia.
The approximate date on which this Proxy Statement and the accompanying
proxy card are first being sent or given to shareholders is March 24, 1997.
VOTING
General
The securities that can be voted at the Annual Meeting consist of Common
Stock of the Company, $1.00 par value per share, with each share entitling its
owner to one vote on each matter submitted to the shareholders. The record date
for determining the holders of Common Stock who are entitled to notice of and to
vote at the Annual Meeting is February 28, 1997. On the record date, 2,036,990
shares of Common Stock were outstanding and eligible to be voted at the Annual
Meeting.
Quorum and Vote Required
The presence, in person or by proxy, of a majority of the outstanding
shares of Common Stock is necessary to constitute a quorum at the Annual
Meeting. In counting the votes to determine whether a quorum exists at the
Annual Meeting, the proposal receiving the greatest number of all votes cast
"for" or "against," as well as any abstentions (including instructions to
withhold authority to vote) will be used.
In accordance with Georgia law (under which the Company is organized) and
the Company's Bylaws, the vote required to elect directors (Proposal 1) is a
plurality of the votes cast by the holders of shares entitled to vote, provided
a quorum is present. As a result, votes that are withheld will have no effect.
With regard to the proposal to ratify the Board of Directors' appointment of
independent accountants for the Company (Proposal 2), the proposal is approved
if the votes cast favoring such proposal exceed the votes cast opposing such
proposal, provided a quorum is present. As a result, abstentions and broker
non-votes will have no effect.
Proxies
The accompanying proxy card is for use at the Annual Meeting if a
shareholder is unable to attend in person or is able to attend but does not wish
to vote in person. Shareholders should specify their choices with regard to the
two proposals on the accompanying proxy card. All properly executed and dated
proxy cards delivered by shareholders to the Company in time to be voted at the
Annual Meeting and not revoked will be voted at the Annual Meeting in accordance
with the instructions given. If no specific instructions are given, the shares
represented by a signed and dated proxy card will be voted "FOR" the election of
<PAGE>
the four director nominees named in Proposal 1 and "FOR" the ratification of the
Board's selection of independent accountants described in Proposal 2. If any
other matters properly come before the Annual Meeting, the persons named as
proxies will vote upon such matters according to their judgment. The Board of
Directors is not aware of any other business to be presented to a vote of the
shareholders at the Annual Meeting.
The giving of a proxy does not affect the right to vote in person should
the shareholder attend the Annual Meeting. Any shareholder who has given a proxy
has the power to revoke it at any time before it is voted by giving written
notice of revocation to Lee W. Washam, the Secretary of the Company, at 101
North Greenwood Street, LaGrange, Georgia 30240; by executing and delivering to
Mr. Washam a proxy card bearing a later date; or by voting in person at the
Annual Meeting.
In addition to soliciting proxies directly, the Company has requested
brokerage firms, nominees, custodians and fiduciaries to forward proxy materials
to the beneficial owners of shares held of record by them. The Company also may
solicit proxies through its directors, officers and employees in person and by
telephone and facsimile, without payment of additional compensation to such
persons. All expenses incurred in connection with the solicitation of proxies
will be borne by the Company.
Stock Ownership
As of December 31, 1996, the 14 directors and executive officers of the
Company beneficially owned 379,452 shares, equal to 18.22%, of the Common Stock
of the Company (including 28,203 shares held under the Bank's Profit Sharing
Thrift Plan, 56,125 shares which are owned jointly with spouses or other family
members, 58,514 shares which are owned by spouses or related business interests,
and 46,000 shares which may be acquired upon the exercise of outstanding stock
options). See Note (1) on page 5 for the definition of "beneficial ownership."
The Company is unaware of any person that beneficially owns more than five
percent of the Company's Common Stock. For information regarding the beneficial
ownership of the Company's Common Stock as of December 31, 1996 by each of the
Company's directors and director nominees and certain executive officers, see
"Proposal 1 - Election of Directors - Information Regarding Nominees and
Continuing Directors."
PROPOSAL 1 - ELECTION OF DIRECTORS
Nominees
The Bylaws of the Company provide that the Board of Directors of the
Company shall consist of ten members who shall be divided into three classes as
nearly equal in number as possible. The directors in each class are elected by
the shareholders for a term of three years and until their successors are
elected and qualified. The term of office of one of the classes of directors
expires each year at the Annual Meeting of Shareholders, and a new class of
either three or four directors is elected by the shareholders each year at that
time.
At the Annual Meeting, the terms of H. Speer Burdette, III, John S. Holle,
John W. Stewart, Jr. and Robert W. Walters will expire, and the Board of
Directors has nominated each of these four individuals to stand for re-election
as directors at the Annual Meeting. If elected by the shareholders, each of the
nominees will serve a three year term which will expire at the 2000 Annual
Meeting of Shareholders. If any of the nominees should be unavailable to serve
for any reason (which is not anticipated), the Board of Directors may designate
a substitute nominee or nominees (in which case the persons named as proxies on
the enclosed proxy card will vote the shares represented by all valid proxy
cards for the election of such substitute nominee or nominees), allow the
vacancy or vacancies to remain open until a suitable candidate or candidates are
located, or by resolution provide for a lesser number of directors.
2
<PAGE>
The Board of Directors unanimously recommends that shareholders vote
"FOR" the proposal to re-elect H. Speer Burdette, III, John S. Holle, John W.
Stewart, Jr. and Robert W. Walters as directors of the Company for a
three-year term expiring at the 2000 Annual Meeting of Shareholders and until
their successors have been duly elected and qualified.
Information Regarding Nominees and Continuing Directors
The following table sets forth certain information regarding the four
nominees for director as well as the six incumbent directors whose terms as
directors will continue following the Annual Meeting. Except as otherwise
indicated, each of the named persons has been engaged in his present principal
occupation for more than five years. Stock ownership information is as of
December 31, 1996.
PERSONS NOMINATED FOR ELECTION TO SERVE AS DIRECTORS
UNTIL THE 2000 ANNUAL MEETING OF SHAREHOLDERS
<TABLE>
<CAPTION>
Shares of Company
Stock Beneficially
Name Business Information Owned (Percent
of Class)(1)(2)
<S> <C> <C>
H. Speer Burdette, III Mr. Burdette is an owner, director and Vice President/ 8,704
Treasurer of J.K. Boatwright & Co., P.C., an accounting firm (*)
located in LaGrange. He has been a director of the Bank
since 1993 and a director of the Company since 1994. Mr.
Burdette is 44.
John S. Holle Mr. Holle has served as Chairman of the Board, President, 66,823
Chief Executive Officer and a director of the Company since (3.28%)
1993, and he has been President, Chief Executive Officer and
a director of the Bank since 1985 and Chairman of the Board
of the Bank since 1990. Mr. Holle previously served in
various other executive positions with the Bank after
joining the Bank in 1972. Mr. Holle also has been Chairman
of the Board and President of the Bank's wholly-owned
subsidiary, Piedmont Mortgage Service, Inc., since 1986. Mr.
Holle is 46.
John W. Stewart, Jr. Mr.Stewart is an owner, Chairman of the Board and President 15,447
of Stewart Wholesale Hardware Company, a wholesale grocery (*)
and hardware business in LaGrange. He has been a director of
the Bank since 1982 and a director of the Company since
1994. Mr. Stewart is 62.
Robert W. Walters Mr. Walters retired in March 1996 as owner and director of 89,123
The Mill Store, Inc., a retail and contract floor covering (4.37%)
business in LaGrange. He has been a director of the Bank
since 1982 and a director of the Company since 1994. Mr.
Walters is 64.
</TABLE>
3
<PAGE>
<TABLE>
DIRECTORS TO SERVE UNTIL THE 1999 ANNUAL MEETING
OF SHAREHOLDERS
<CAPTION>
Shares of Company
Stock Beneficially
Owned (Percent
Name Business Information of Class)(1)(2)
<S> <C> <C>
Fred A. Durand III Mr. Durand is President, Chief Executive Officer and a 11,610
director of Durand-Wayland, Inc., a manufacturer of produce (*)
sorting and spray equipment. He has been a director of the
Bank since 1990 and director of the Company since 1994. Mr.
Durand is 55.
Gordon M. Smith Mr. Smith was owner and operator of Smith Three Points 27,128
Pharmacy from 1979 until 1990 when it was sold to Eckerd (1.33%)
Drugs. Mr. Smith is now employed by Eckerd Drugs. He has
been a director of the Bank since 1990 and a director of the
Company since 1994. Mr. Smith is 61.
Dr. Steven P. Teaver Dr. Teaver is a dentist in LaGrange. He has been a director 10,750
of the Bank since 1986 and a director of the Company since (*)
1994. Dr. Teaver is 45.
</TABLE>
<TABLE>
DIRECTORS TO SERVE UNTIL THE 1998 ANNUAL MEETING
OF SHAREHOLDERS
<CAPTION>
Shares of Company
Stock Beneficially
Owned (Percent
Name Business Information of Class)(1)(2)
<S> <C> <C>
Dr. A. Glenn Bailey Dr. Bailey is a physician and surgeon in LaGrange and is a 54,890
director, and from 1980 to 1989 was President, of (2.69%)
Clark-Holder Clinic, a LaGrange medical clinic. He has been
a director of the Bank since 1982 and a director of the
Company since 1994. Dr. Bailey is 62.
Kelly R. Linch Mr. Linch is owner of Linch's, Inc., a retail appliance and 33,290
electronics store in LaGrange. He has been a director of the (1.63%)
Bank since 1986 and a director of the Company since 1994.
Mr. Linch also is a director of Key Distributors of Georgia,
Inc. Mr. Linch is 54.
4
<PAGE>
Ellison C. Rudd Mr. Rudd has served as Executive Vice President, Chief 22,885
Financial Officer and Treasurer of the Company since 1994. (1.12%)
Mr. Rudd has also been Executive Vice President of the Bank
since 1993 and Chief Financial Officer and Treasurer since
1989 when he joined the Bank as a Vice President. Mr. Rudd
is 52.
</TABLE>
________________
(*) Less than one percent.
(1)Beneficial ownership includes shares of Common Stock as to which a person
possesses sole or shared voting and/or investment power and shares which may
be acquired within 60 days after December 31, 1996 upon the exercise of
outstanding stock options. Shares which may be acquired upon the exercise of
stock options are deemed to be outstanding for the purpose of computing the
percentage of Common Stock owned by a particular individual but are not
deemed to be outstanding for the purpose of computing the percentage
ownership of any other person. To the Company's knowledge, the named persons
have sole voting and investment power with regard to the shares shown as
owned by them except as otherwise referenced in Note (2) below.
(2)The shares shown include, with regard to Mr. Burdette, 5,750 shares which he
may acquire upon the exercise of stock options; with regard to Mr. Holle,
16,823 shares held for his account under the Bank's Profit Sharing Thrift
Plan; with regard to Mr. Stewart, 2,649 shares owned by Stewart Wholesale
Hardware, Inc. and 5,750 shares which he may acquire upon the exercise of
stock options; with regard to Mr. Walters, 27,800 shares owned jointly with
his wife, 30,196 shares owned by his wife, 273 shares held by Mr. Walters as
custodian for his minor grandson and 5,750 shares which he may acquire upon
the exercise of stock options; with regard to Mr. Durand, 110 shares owned by
his wife and 5,750 shares which he may acquire upon the exercise of stock
options; with regard to Mr. Smith, 750 shares owned jointly with his wife,
789 shares owned by his wife and 5,750 shares which he may acquire upon the
exercise of stock options; with regard to Dr. Teaver, 5,750 shares which he
may acquire upon the exercise of stock options; with regard to Dr. Bailey,
23,370 shares owned by his wife, 1,400 shares owned by a privately held
family corporation and 5,750 shares which he may acquire upon the exercise of
stock options; with regard to Mr. Linch, 5,750 shares which he may acquire
upon the exercise of stock options; and with regard to Mr. Rudd, 7,885 shares
held for his account under the Bank's Profit Sharing Thrift Plan.
Meetings and Committees of the Board of Directors
The Board of Directors of the Company conducts its business through
meetings of the full Board and through joint committees of the Boards of
Directors of the Company and the Bank, including an Audit Committee, an Employee
Benefits and Compensation Committee, and an Executive Committee. During 1996,
the Board of Directors held 15 meetings, the Audit Committee held 4 meetings,
the Employee Benefits and Compensation Committee held 2 meetings, and the
Executive Committee held 12 meetings. Each director attended at least 75% of all
meetings of the full Board of Directors and of each committee of the Board of
which he is a member.
The Audit Committee is responsible for reviewing with the Company's
independent accountants their audit plan, the scope and results of their
audit engagement and the accompanying management letter, if any; reviewing
the scope and results of the Company's internal auditing procedures;
consulting with the independent accountants and management with regard to the
Company's accounting methods and the adequacy of the Company's internal
accounting controls; approving professional services provided by the
independent accountants; reviewing the independence of the independent
accountants; and reviewing the range of the independent accountants' audit
and non-audit fees. The Audit Committee is composed of H. Speer Burdette,
III, Fred A. Durand III, Kelly R. Linch and Dr. Steven P. Teaver.
5
<PAGE>
The Employee Benefits and Compensation Committee is responsible for
setting the compensation and benefits of the executive officers and other
employees of the Company and the Bank. The Employee Benefits and
Compensation Committee is composed of Dr. A. Glenn Bailey, Fred A. Durand
III, Kelly R. Linch and Gordon M. Smith.
The Executive Committee is authorized, within certain limitations, to
exercise all of the authority of the Board of Directors during the interval
between Board meetings. Among other functions, the Executive Committee
reviews monthly the reports on the loans made and on savings activities
during the preceding month. The Executive Committee also reviews and
ratifies any investments made by the Company. The Executive Committee
consists of Dr. A. Glenn Bailey, John S. Holle, John W. Stewart, Jr. and
Robert W. Walters.
The Board of Directors as a whole functions as a nominating committee to
select management's nominees for election as directors of the Company. The Board
of Directors will consider nominees recommended by shareholders if submitted to
the Company in accordance with the procedures set forth in Section 2.14 of the
Bylaws of the Company. See "Shareholders' Proposals for 1998 Annual Meeting"
below.
Director Compensation
Directors who are not employees of the Company or the Bank receive a fee
of $500 per Board meeting if in attendance. Members of the Executive Committee
who are not employees also receive a fee of $200 per committee meeting if in
attendance, and members of other Board committees who are not employees receive
a fee of $100 per committee meeting if in attendance. Additionally, a Loan
Committee meeting is held weekly among loan origination personnel, with one
director in attendance at each such meeting. Directors who are not employees
receive a fee of $50 per Loan Committee meeting which they attend. Each
non-employee director is permitted one paid absence from meetings of the full
Board and from meetings of each committee of which he is a member. Directors who
are employees of the Company or the Bank receive no directors' fees. The Company
paid a total of $78,100 in directors' fees in 1996.
Pursuant to the 1994 Directors Stock Incentive Plan, the Company granted
options in March 1994 for the purchase of 5,000 shares of Common Stock to each
of the eight directors who were not employees of the Company or any of its
subsidiaries on the date of grant. Similarly, each person who thereafter becomes
a director of the Company and who is not an employee of the Company or any of
its subsidiaries will be granted an option for the purchase of 5,000 shares of
Common Stock upon the commencement of his or her service as a director.
Additionally, the plan provides that as of each March 1st through March 1, 1995
and ending on March 1, 2004, the non-employee directors as a group on each such
date will be entitled to receive options for the purchase of 6,000 shares of
Common Stock which shall be divided equally among them, but only if the
Company's book value as of the December 31st immediately preceding such March
1st equals or exceeds 106% of the Company's book value as of the prior December
31st. In accordance with the plan, options for the purchase of 750 shares were
granted to each of the eight non-employee directors as of March 31, 1996. In the
event of a "change of control" of the Company as defined in the plan, all
options remaining under the plan shall be granted to and divided equally among
all of the non-employee directors as of the date immediately preceding the
"change of control." The plan authorizes options for the purchase of a total of
100,625 shares of Common Stock, of which options for the purchase of 46,000
shares had been granted as of December 31, 1996. All options are granted at an
exercise price equal to the fair market value of a share of Common Stock on the
date of grant, vest immediately upon granting and expire ten years from the date
of grant.
Effective as of February 3, 1995, the Bank established an indexed
retirement plan to provide retirement benefits to the directors (as well as a
similar plan for certain executive officers). The index used by the plan is the
earnings on life insurance policies purchased on the directors' lives. The Bank
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<PAGE>
retains the tax-free build-up of cash surrender value in the policies up to the
after-tax opportunity costs for premiums paid on the policies. Any remaining
earnings from the policies are accrued to deferred compensation liability
accounts for the directors. The earnings in a director's account are payable in
ten annual installments commencing 30 days following the director's retirement
as a director. No amounts had been accrued for the benefit of any director (or
any executive officer) as of December 31, 1996.
Additional Information
For additional information that should be considered with regard to the
election of directors, see "Executive Compensation" and "Section 16(a)
Beneficial Ownership Reporting" below.
EXECUTIVE COMPENSATION
Summary of Compensation
The following table summarizes by various categories, for the fiscal years
ended December 31, 1996, 1995 and 1994, the total compensation earned by each of
the Company's executive officers whose total salary and bonus for 1996 exceeded
$100,000.
<TABLE>
Summary Compensation Table
<CAPTION>
Annual Compensation (1)
All Other
Name and Principal Position Year Salary($) Bonus($) Compensation($)(2)
<S> <C> <C> <C> <C>
John S. Holle 1996 $140,000 -0- $15,902
Chairman of the Board, President 1995 128,500 $38,550 16,334
and Chief Executive Officer of 1994 123,500 15,500 7,446
the Company and the Bank
Ellison C. Rudd 1996 100,000 -0- 13,911
Executive Vice President, Chief 1995 87,500 21,875 11,692
Financial Officer and Treasurer 1994 82,500 8,250 9,271
of the Company and the Bank
</TABLE>
_____________________
(1) Excludes any perquisites and other personal benefits received, the total
value of which did not exceed 10% of Mr. Holle's and Mr. Rudd's total
annual salary and bonus, respectively. See also "Employment Agreements"
below.
(2) For 1996, 1995 and 1994, respectively, the amounts shown consist of the
aggregate contributions made by the Bank on behalf of Mr. Holle pursuant to
the Bank's Profit Sharing Thrift Plan and the Bank's Section 401(k) Plan
($13,809, $14,462 and $11,201 for Mr. Holle and $13,434, $11,315 and $8,916
for Mr. Rudd) and insurance premiums paid by the Bank in connection with
term life insurance policies payable to the estates of Mr. Holle and Mr.
Rudd ($26,093, $25,872 and $1,125 for Mr. Holle and $24,356, $24,337 and
$356 for Mr. Rudd).
7
<PAGE>
Stock Options
The following table sets forth information regarding stock options
exercised by Mr. Holle and Mr. Rudd during 1996 and the value of all of the
unexercised stock options held by them as of December 31, 1996. No stock
options were granted to Mr. Holle or Mr. Rudd in 1996.
Aggregated Option Exercises in Last Fiscal Year
and Fiscal Year End Option Values
Number of Securities
Shares Acquired Value Underlying Unexercised
Name on Exercise (#) Realized($)(1) Options at Fiscal Year End(#)
John S. Holle 48,707 $445,577 0
Ellison C. Rudd 15,000 114,750 0
_____________________
(1) Value realized is computed by subtracting the option exercise price from
the market price of the Common Stock on the date of exercise and
multiplying that figure by the total number of options exercised.
Employment Agreements
The Bank has entered into employment agreements with John S. Holle
effective as of January 1, 1993 and with Ellison C. Rudd effective as of January
1, 1995 (the "Employment Agreements"). Each of the Employment Agreements provide
for an initial term of three years, which three year term is automatically
extended each year for one additional year (subject to approval thereof by the
Board of Directors each year) until one party notifies the other to the
contrary. The Employment Agreements provide for an annual salary which is
reviewed at least annually by the Board of Directors of the Bank and may be
increased at its discretion, and annual bonuses which may be granted at the
discretion of the Board (but not to exceed the employee's then-current annual
salary) based on the operations of the Bank during the prior fiscal year, the
employee's contribution thereto and such other factors as the Board of Directors
in its discretion may determine. Information regarding the annual salary and
bonus paid to Mr. Holle and Mr. Rudd for 1996 pursuant to the Employment
Agreements is set forth in the Summary Compensation Table above. The Employment
Agreements provide that the employee shall be entitled to the use of an
automobile, reimbursement of club fees and dues, and participation in all group
employee benefit plans for which executives of the Bank are or may be eligible.
Further, the Employment Agreements provide for the payment of full compensation
to the employee for up to 12 months in the event of his complete disability (as
defined in the Employment Agreements) and disability payments thereafter in
accordance with the Bank's general disability policy.
The Employment Agreements also provide that in the event employment is
terminated by the Bank for any reason other than "cause," except after a "change
of control" (as those terms are defined in the Employment Agreements), the
employee shall be entitled to receive each month through the remaining term of
the Employment Agreement the monthly salary paid to him under the Employment
Agreement during the immediately preceding year, as well as a severance payment,
payable as soon as practicable after the termination date, equal to the
difference between three times his average annual salary (based on the most
recent five taxable years) immediately prior to the termination date and the
total amount that he is entitled to receive under this provision for the
8
<PAGE>
remaining term of the Employment Agreements. A "change of control" is deemed to
have occurred if, at any time during the period of employment, more than 25% of
the outstanding Common Stock of the Company, or the equivalent in voting power
of any class or classes of outstanding securities of the Company ordinarily
entitled to vote in elections of directors, is acquired by any other corporation
or other person or group. In the event employment is terminated after a change
of control for any reason other than cause, or the employee's present
responsibilities, authority, capacity, circumstances, compensation or benefits
are changed without his written consent following a change of control, the
employee will be entitled to receive, in lieu of his salary and any bonus for
the remaining employment term, a lump sum equal to (i) the present value of the
salary and bonus that he would be entitled to receive for the remaining
employment term (but for the termination) plus (ii) the difference between three
times his average annual salary (based on the most recent five taxable years)
immediately prior to the event of termination and the amount of salary and bonus
that he would be entitled to receive (but for the termination) for the remaining
employment term; but in no event shall such lump sum payment exceed the present
value of three times his average compensation for the preceding five years, less
$1.00. Additionally, the employee and his dependents shall continue for a period
of three years to be covered under all employee benefit plans of the Bank.
Retirement Plan
The Bank maintains a non-contributory defined benefit pension plan (the
"Retirement Plan") for the benefit of substantially all employees of the Bank.
The amounts of the Bank's contributions to the Retirement Plan are determined on
an actuarial basis to provide benefits to each participant based on (i) his or
her highest average compensation earned during any consecutive
five-calendar-year period and (ii) his or her years of service to normal
retirement date. The following table sets forth the estimated annual pension
benefits payable under the Retirement Plan to employees in the specified
compensation and period-of-service classifications, assuming (i) normal
retirement at age 65 as of January 1, 1996 and (ii) a benefit payment in the
form of a life annuity.
Pension Plan Table
Average Annual Estimated Annual Retirement Benefits(1)
Compensation for Years of Service Indicated(2)
___________________________________________________
15 20 25 30 35
-- -- -- -- --
$125,000 $ 27,518 $ 36,691 $ 43,364 $ 50,036 $ 56,709
150,000+ 33,518 44,691 52,864 61,036 69,209
_______________
(1) The retirement benefits shown in the table are payable as a life annuity
with 60 months guaranteed. The current Retirement Plan formula is 1% of
final five year average compensation for the first 20 years of credited
service, plus .6% of final five year average compensation for the next 15
years of credited service, plus .6% of final five year average
compensation in excess of Social Security Covered Compensation for the
first 35 years of credited service. For a person retiring at age 65 in
1996, Social Security Covered Compensation is equal to $27,576. The total
compensation covered by the Retirement Plan at January 1, 1996, the most
recent valuation date, was $2,236,587, of which $146,681 was attributable
to Mr. Holle and $100,462 was attributable to Mr. Rudd. The amount of the
Bank's contributions to the Retirement Plan for the accounts of Mr. Holle
and Mr. Rudd in 1996 was $9,862 and $2,480, respectively.
(2) As of January 1, 1996, Mr. Holle had 24.0 years of credited service,
and Mr. Rudd had 6.05 years of credited service.
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Loans to Management
Directors, executive officers and principal shareholders of the Company
and the Bank and their associates have been customers of the Bank from time to
time in the ordinary course of business, and additional transactions may be
expected to take place in the future. In accordance with applicable federal laws
and regulations, all loans by the Bank to such persons are made on substantially
the same terms, including interest rates and collateral, as those prevailing at
the time for comparable transactions with other persons, do not involve more
than the normal risk of collectibility or embody other unfavorable features, and
comply with specified quantitative limits imposed by such federal laws and
regulations. At December 31, 1996, the aggregate amount of loans and extensions
of credit outstanding to such persons was approximately $1,675,900, which
represented 8.17% of the total equity capital of the Bank as of such date.
None of the Bank's loans outstanding at any time during or subsequent to
1996 to directors, executive officers or principal shareholders of the Company
or the Bank or their associates is or has been on past due or non-accrual
status, has been restructured, or is considered by the Bank to be a problem
loan.
Sale of Stock to Certain Directors
On December 20, 1995, the Company sold 565 shares of Common Stock to H.
Speer Burdette, III, 4,040 shares of Common Stock to Kelly R. Linch and 202
shares of Common Stock to Gordon M. Smith, each of whom are directors of the
Company. The purchase price was $12.375 per share, representing a discount of
approximately 15% from the public trading price of $14.50 per share on the date
of purchase because the shares were not registered under federal and state
securities laws and therefore were restricted as to transfer. In accordance with
applicable law, the transactions were approved by the Company's Board of
Directors, and shareholder approval was not required.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, and
regulations of the Securities and Exchange Commission thereunder require the
Company's directors and executive officers and any persons who beneficially own
more than 10% of the Company's Common Stock, as well as certain affiliates of
such persons, to file initial reports of their ownership of Common Stock and
subsequent reports of changes in such ownership with the Securities and Exchange
Commission and the National Association of Securities Dealers, Inc. Directors,
executive officers and persons beneficially owning more than 10% of such stock
are required by applicable regulations to furnish the Company with copies of all
Section 16(a) reports they filed. To the Company's knowledge, no person
beneficially owned more than 10% of the Company's Common Stock during 1996.
Based solely on its review of the copies of such reports received by it and
written representations that no other reports were required of those persons,
the Company believes that during 1996, all of its directors and executive
officers complied with applicable Section 16(a) filing requirements except as
described below. Due to an oversight by management, each of the Company's
non-employee directors (Dr. A. Glenn Bailey, H. Speer Burdette, III, Fred A.
Durand III, Kelly R. Linch, Gordon M. Smith, John W. Stewart, Jr., Dr. Steven P.
Teaver and Robert W. Walters) failed to timely file a Form 5 regarding options
granted to them in March 1996 for the purchase of 750 shares of Common Stock.
Also due to an oversight by management, Raymond C. Smith, Jr., Senior Vice
President, Human Resources, and Mary E. Winks, Senior Vice President, Retail
Banking, each failed to file a Form 3 upon their commencement of employment as
executive officers in June and August 1996, respectively. All of such persons
subsequently reported such events on Form 5s filed on February 3, 1997.
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PROPOSAL 2 - RATIFICATION OF APPOINTMENT
OF INDEPENDENT ACCOUNTANTS
The Board of Directors has appointed the firm of Porter Keadle Moore, LLP
to serve as independent accountants of the Company for the fiscal year ending
December 31, 1997 and has directed that such appointment be submitted to the
shareholders for ratification at the Annual Meeting. Porter Keadle Moore, LLP is
being appointed as the Company's independent accountants for the first time and
is considered by management of the Company to be well qualified. The firm of
Robinson, Grimes & Company, P.C. served as independent accountants of the
Company from 1968 until 1996. If the shareholders do not ratify the appointment
of Porter Keadle Moore, LLP, the Board of Directors will reconsider the
appointment.
Representatives of Porter Keadle Moore, LLP will be present at the Annual
Meeting. They will have an opportunity to make a statement if they desire to do
so and will be available to respond to appropriate questions from shareholders.
The Board of Directors unanimously recommends that shareholders vote "FOR"
the proposal to ratify the appointment of Porter Keadle Moore, LLP as
independent accountants of the Company for the fiscal year ending December 31,
1997.
SHAREHOLDERS' PROPOSALS FOR 1998 ANNUAL MEETING
Director nominations and other proposals of shareholders intended to be
presented at the 1998 Annual Meeting of Shareholders must be submitted to the
Company in accordance with the procedures set forth in Sections 2.14 and 1.1,
respectively, of the Bylaws of the Company and in accordance with applicable
rules of the Securities and Exchange Commission. The effect of these provisions
is that shareholders must submit such nominations and proposals, together with
certain related information specified in the above-referenced sections of the
Bylaws, in writing to the Company on or before November 24, 1997 in order for
such matters to be included in the Company's proxy materials for, and voted upon
at, the 1998 Annual Meeting. All such proposals, nominations and related
information should be submitted on or before such date by certified mail, return
receipt requested, to the Secretary of the Company, 101 North Greenwood Street,
LaGrange, Georgia 30240. A copy of the above-referenced sections of the Bylaws
will be provided upon request in writing to the Secretary of the Company at such
address.
OTHER MATTERS THAT MAY COME BEFORE THE ANNUAL MEETING
The Board of Directors of the Company knows of no matters other than those
referred to in the accompanying Notice of Annual Meeting of Shareholders which
may properly come before the Annual Meeting. However, if any other matter should
be properly presented for consideration and voting at the Annual Meeting or any
adjournments thereof, it is the intention of the persons named as proxies on the
enclosed form of proxy card to vote the shares represented by all valid proxy
cards in accordance with their judgment of what is in the best interest of the
Company.
By Order of the Board of Directors.
/s/ Lee W. Washam
Lee W. Washam
Secretary
LaGrange, Georgia
March 24, 1997
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___________
The Company's 1996 Annual Report, which includes audited financial
statements, has been mailed to shareholders of the Company with these proxy
materials. The Annual Report does not form any part of the material for the
solicitation of proxies
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