-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CPs64FOjZlnYwpAPDuw6n5OnQbeAmTs6aZG0VcfSXCBr6fH7UlsFLsSxbr8HLvfG k1646gvz2hx7XiQSeM73Ow== 0000931763-97-000458.txt : 19970401 0000931763-97-000458.hdr.sgml : 19970401 ACCESSION NUMBER: 0000931763-97-000458 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 22 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970331 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: FIRST ALLIANCE/PREMIER BANCSHARES INC CENTRAL INDEX KEY: 0000836616 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 581793778 STATE OF INCORPORATION: GA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-12625 FILM NUMBER: 97569844 BUSINESS ADDRESS: STREET 1: 2180 ATLANTA PLAZA STREET 2: 950 EAST PACES FERRY ROAD CITY: ATLANTA STATE: GA ZIP: 30326 BUSINESS PHONE: 4044252265 FORMER COMPANY: FORMER CONFORMED NAME: FIRST ALLIANCE BANCORP DATE OF NAME CHANGE: 19960711 10-K 1 FORM 10-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED] FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the transition period from to COMMISSION FILE NUMBER 0-24528 PREMIER BANCSHARES, INC. (Exact name of Registrant as specified in its Charter) GEORGIA 58-1793778 (State of Incorporation) (I.R.S. Employer Identification No.) 2180 Atlanta Plaza 950 E. Paces Ferry Road Atlanta, Georgia 30326 (Address of principal office, including zip code) (404) 814-3090 Registrant's telephone number, including area code) Securities Registered pursuant to Section 12(b) of the Act: NONE Securities Registered pursuant to Section 12(g) of the Act: COMMON STOCK, PAR VALUE $1.00 Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO ----- ------ This Report contains a total of 34 pages; the Exhibit Index begins on Page 35. [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in this Form 10-K or any amendment to this Form 10-K. The aggregate market value of the voting stock held by nonaffiliates of the Registrant at March 26, 1997, was approximately $41,678,294 based on $13.875 per share, the closing price of the Common Stock as quoted on the American Stock Exchange. The number of shares of the Registrant's Common Stock outstanding at March 28, 1997, was 4,249,747 shares. DOCUMENT INCORPORATED BY REFERENCE Portions of the Annual Report to Shareholders for the year ended December 31, 1996, are incorporated by reference into Parts I and II of this report. Portions of the Proxy Statement for the 1997 Annual Meeting of Shareholders to be filed with the Securities and Exchange Commission within 120 days of the Registrant's 1996 fiscal year end are incorporated by reference into Part III of this report. Such Proxy Statement is contained in the Registrant's Form S-4 Registration Statement filed with the Securities and Exchange Commission on March 31, 1997. 2 PART I ITEM 1. BUSINESS THE COMPANY ----------- Premier Bancshares, Inc. (the "Company") formerly known as First Alliance/Premier Bancshares, Inc. and also formerly known as First Alliance Bancorp, Inc. was incorporated as a Georgia corporation in 1988 under the laws of the state of Georgia and the regulations of the Bank Holding Company Act of 1956. The Company's largest subsidiary, First Alliance Bank (the "First Alliance Bank"), is a commercial bank that opened for business in 1984. On August 31, 1996, the Company acquired, through a pooling of interests, a thrift holding company named Premier Bancshares, Inc. ("Premier"). Premier owned two subsidiaries: Premier Lending Corporation ("Premier Lending") and Premier Bank, FSB ("Premier Bank") which became wholly-owned subsidiaries of the Company. Premier Lending engages in the business of residential mortgage, construction and commercial finance loan originations. Premier Bank is a savings and loan association that engages in the business of providing savings banking services including personal and business checking accounts and other accounts and residential, commercial and consumer lending activities. The Company also owns a majority interest in a consumer finance company named Alliance Finance Corporation ("Alliance Finance"). For more in-depth background on all of the above companies, the reader is referred to the Registration Statement on Form S- 4 filed with the Securities and Exchange Commission on March 31, 1997. Any additional non-banking activities to be conducted by the Company may include financial and other activities permitted by law, and such activities could be conducted by subsidiary corporations that have not yet been organized. Commencement of non-banking operations by the Company or by its subsidiaries, if they are organized, will be contingent upon approval by the Board of Directors of the Company and by appropriate regulatory authorities. The Company's main office is located at 2180 Atlanta Plaza, 950 E. Paces Ferry Road, Atlanta, Georgia 30326. At the present time, the Company does not have any plans to establish additional offices, but its subsidiaries will establish new branch offices from time to time. RECENT DEVELOPMENTS ------------------- PROPOSED MERGER WITH THE CENTRAL AND SOUTHERN HOLDING COMPANY On February 3, 1997, the Company entered into an Agreement and Plan of Reorganization with The Central and Southern Holding Company ("Central and Southern") of Milledgeville, Georgia (the "Agreement"). Pursuant to the Agreement, Central and Southern will merge with and 3 into the Company and The Central and Southern Bank of Georgia and The Central and Southern Bank of North Georgia, F.S.B., which are wholly-owned subsidiaries of Central and Southern, will become wholly-owned subsidiaries of the Company. Upon consummation of the merger, each share of Central and Southern common stock issued and outstanding will be converted into and exchanged for the right to receive one share of the Company's common stock. Consummation of the merger is subject to certain conditions, including approval of the Agreement by the Company and Central and Southern shareholders and approval of the merger by the various regulatory agencies. In contemplation of the merger, the Board of Directors changed the Company's name to "Premier Bancshares, Inc." and approved a 1.8055-for-one split of the common stock of the Company which had a record date of March 6, 1997 and a distribution date of March 20, 1997. On March 26, 1997, the Agreement was amended to allow for the substitution of Central and Southern's outstanding stock options for options under the Company's proposed 1997 Stock Option Plan upon consummation of the Merger. PROPOSED TRANSACTION AMONG PREMIER BANK, FIRST ALLIANCE BANK AND NET.B@NK Premier Bank has entered into a Purchase and Assumption Agreement with First Alliance Bank dated December 19, 1996, whereby First Alliance Bank has agreed to purchase and assume substantially all of the assets and liabilities, respectively, of Premier Bank (except for Premier Bank's savings bank charter and approximately $5 million of assets and $5 million of deposit liabilities). Immediately following consummation of the Purchase and Assumption Agreement, all of the outstanding common stock of Premier Bank, now owned by Premier, will be purchased by Net.B@nk, Inc., a corporation organized and existing under the laws of the State of Georgia ("Net.B@nk"), pursuant to that certain Amended and Restated Stock Purchase Agreement by and between Premier and Net.B@nk dated December 19, 1996 (the "Stock Purchase Agreement"). On February 25, 1997, Premier and Net.B@nk executed a First Amendment to the Stock Purchase Agreement for the purpose of extending the termination date of the Stock Purchase Agreement to May 31, 1997, increasing the amount of Net.B@nk stock to be paid to Premier, and requiring a $150,000 cash payment from Net.B@nk to Premier for the purpose of reimbursing expenses incurred by Premier in connection with the Stock Purchase Agreement. In addition, the Purchase and Assumption Agreement was amended on March 13, 1997 for the purpose of extending the termination date to April 30, 1997. The Purchase and Assumption Agreement was amended again on March 25, 1997 to further extend the termination date to May 31, 1997. Under the Stock Purchase Agreement, as amended, Net.B@nk will transfer to Premier 1,250 shares of the common stock of Net.B@nk in exchange for the Premier Bank common stock. The Purchase and Assumption Agreement is subject to the approval of the Georgia Department of Banking and Finance (the "Georgia Department") and the Federal Deposit Insurance Corporation. In addition, Net.B@nk's purchase of the Premier Bank common stock is subject to the approval of the Federal Reserve Bank of Richmond. The transfer of all the Premier Bank common stock from Premier to Net.B@nk is contingent upon the successful completion of Net.B@nk's $10 million initial public offering. 4 The purpose of the Purchase and Assumption Agreement is to consolidate the operations of Premier Bank and First Alliance Bank. In the event that the transactions described in the Purchase and Assumption Agreement, as amended, have not been consummated by May 31, 1997, then the Purchase and Assumption Agreement shall, unless otherwise extended or modified, terminate under its own terms. In the event of the termination of the Purchase and Assumption Agreement, Premier Bank and First Alliance Bank intend to merge pursuant to an Agreement and Plan of Merger by and between Premier Bank and First Alliance Bank whereby Premier Bank would merge with and into First Alliance Bank, with First Alliance Bank being the surviving institution. FIRST ALLIANCE BANK ------------------- GENERAL First Alliance Bank is organized under the laws of the state of Georgia and operates a full-service commercial banking business based in northern Cobb County, Georgia. It provides all customary banking services such as checking and savings accounts, various types of time deposits, money transfers, safe deposit facilities, all types of credit and debit cards, and individual retirement accounts. It also finances short-and medium-term commercial transactions, makes secured and unsecured loans and provides other ancillary financial services to its customers. In addition, the Bank provides a traditional first mortgage product to its customers providing financing for single-family homes on a permanent basis. First Alliance Bank's main office is located at 63 Barrett Parkway, Marietta, Georgia. MARKET AREA AND COMPETITION First Alliance Bank has five locations in Marietta, Georgia, from which it serves its primary market area of northern Metropolitan Atlanta (as defined by Cobb, DeKalb, Fulton and Gwinnett Counties) and Cherokee, Paulding and Bartow Counties. First Alliance Bank competes for both deposits and loan customers with many other financial institutions with equal or greater resources than are available to First Alliance Bank. Currently, there are approximately 20 different commercial banks located in the northern Metropolitan Atlanta banking market. The banking business in this market is highly competitive. DEPOSITS First Alliance Bank offers a wide range of commercial and consumer deposit accounts, including non-interest bearing checking accounts, money market checking accounts (consumer and commercial), negotiable order of withdrawal ("NOW") accounts, individual retirement accounts, time certificates of deposit, and regular savings accounts. The sources of deposits typically are residents and businesses and their employees within First Alliance Bank's market area and are obtained through personal solicitation by First Alliance Bank's officers and directors, direct mail solicitation, and advertisements published in the local media. First Alliance Bank pays competitive interest rates on time and savings deposits and has implemented a service charge fee schedule 5 competitive with other financial institutions in First Alliance Bank's market area, covering such matters as maintenance fees on checking accounts, per item processing fees on checking accounts, returned check charges, and the like. For additional information regarding First Alliance Bank, see the information set forth under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operation" in the Company's 1996 Annual Report to Shareholders, which is included as Exhibit 13.1 to this Annual Report on Form 10-K and is incorporated herein by reference. LENDING ACTIVITIES As is typical of community banks in First Alliance Bank's primary market area, First Alliance Bank makes loans primarily secured by real estate for single family home construction, owner-occupied commercial buildings, and other loans to small businesses and individuals who secure these loans by mortgages on their homes (76% of total loans). In addition, loans are made to small- and medium-sized commercial business (15% of total loans), as well as to consumers for a variety of purposes (9% of total loans). With the exception of single family home construction loans, repayment of the Bank's loans does not depend on the sale or cash flow from the collateral securing the loan. For information concerning the dollar amount of each of the following loan types and loan loss experience associated with the loan types, see the information set forth under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operation" in the Company's 1996 Annual Report to Stockholders, which is included as Exhibit 13.1 to this Annual Report on Form 10-K and is incorporated herein by reference. Real Estate Loans. First Alliance Bank makes single-family residential construction loans, generally for one-to-four unit structures. First Alliance Bank requires a first lien position on the land associated with the construction projects and offers these loans only to bona fide professional building contractors. Loan disbursements require independent, on-site inspections to assure the project is on budget and that the loan proceeds are being used in accordance with the plans, specifications and survey for the construction project and not being diverted to other uses. The loan-to-value ratio for such loans is predominately 75% of the as-built appraised value. Loans for construction can present a high degree of risk to the lender, depending on, among other things, whether the builder can sell the home to a buyer, whether the buyer can obtain permanent financing, whether the transaction produces income in the interim, and the nature of changing economic conditions. The Bank seeks to reduce this risk by limiting the number of loans to any one builder and the number of loans made in any one subdivision. Additionally, First Alliance Bank makes acquisition and development loans to approved developers for the purpose of developing acreage into single-family lots on which houses will be built. These loans are carefully scrutinized by outside members of the Board of Directors as well as the senior officers of First Alliance Bank and require independent inspection of the project by 6 professional inspectors to ensure adherence to the loan agreement as well as to the construction budget. The loan-to-value ratio for such loans does not exceed 80%, or 100% of the discounted value, whichever is less, as defined by an independent appraisal. Loans for acquisition and development can present a high degree of risk to the lender, depending upon, among other things, whether the developer can find builders to buy the lots, whether the builder can obtain financing, whether the transaction produces income in the interim, and the nature of changing economic conditions. First Alliance Bank seeks to reduce this risk by limiting the number of loans to any one developer and the size of the development. Consumer Loans. First Alliance Bank makes consumer loans, consisting primarily of installment loans to individuals for personal, family and household purposes including loans for automobiles, home improvements and investments. Consumer lending decisions are based on a determination of the borrower's ability and willingness to repay the loan, which in turn are impacted by such factors as the borrower's income, job stability, length of time as a resident in the community, previous credit history and collateral for the loan. Risks associated with these loans include, but are not limited to, fraud, deteriorated or non-existing collateral, general economic downturn, and customer financial problems. Commercial Loans. Commercial lending is directed principally toward businesses (a) whose annual sales are in the $1 to $5 million category within the defined trade area of First Alliance Bank or whose demand for funds falls within First Alliance Banks's legal lending limits and (b) which are existing or potential deposit customers of First Alliance Bank. Commercial lending decisions are based upon a determination of the borrower's ability and willingness to repay the loan, which in turn are impacted by such factors as the borrower's cash flow, sales trends and inventory levels, as well as relevant economic conditions. This category includes loans made to individual, partnership or corporate borrowers and obtained for a variety of purposes. Risks associated with these loans can be significant. Risks include, but are not limited to, fraud, bankruptcy, economic downturn, deteriorated or non- existing collateral, and changes in interest rates. INVESTMENT ACTIVITIES After establishing necessary cash reserves and funding loans, First Alliance Bank invests its remaining liquid assets in investments allowed under banking laws and regulations. First Alliance Bank invests primarily in obligations of the United States or obligations guaranteed as to principal and interest by the United States, and other taxable securities and in certain obligations of states and municipalities. First Alliance Bank also engages in Federal Funds transactions with its principal correspondent banks and primarily acts as a net seller of such funds. The sale of Federal Funds amounts to a short-term loan from First Alliance Bank to another bank. Risks associated with these investments include, but are not limited to, mismanagement in terms of interest rate, maturity and concentration. Historically, losses associated with the investment portfolio have been minimal. For additional information concerning Investment Activities, see the information set forth under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operation" in the Company's 1996 Annual Report to Shareholders, which is included as Exhibit 13.1 to this Annual Report on Form 10-K and is incorporated herein by reference. 7 ASSET/LIABILITY MANAGEMENT It is the objective of First Alliance Bank to manage its assets and liabilities to provided a satisfactory, consistent level of profitability within the framework of established cash, loan, investment, borrowing and capital policies. Certain officers of First Alliance Bank are charged with the responsibility for developing and monitoring policies and procedures that are designed to insure acceptable composition of the asset/liability mix. It is the overall philosophy of management to support asset growth primarily through growth of core deposits, which include deposits of all categories made by individuals, partnerships and corporations. Management of First Alliance Bank seeks to invest the largest portion of First Alliance Bank's assets in loans to local builders, small businesses and individuals. First Alliance Bank's asset/liability mix is monitored on a timely basis with a report reflecting interest-sensitive assets and interest-sensitive liabilities being prepared and presented to the asset/liability committee of First Alliance Bank's Board of Directors on a quarterly basis. In addition, First Alliance Bank's liquidity is monitored on a monthly basis by its Board of Directors. The objective of this policy is to manage interest-sensitive assets and liabilities so as to minimize the impact of substantial movements in interest rates on First Alliance Bank's earnings. See the information set forth under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operation" in the Company's 1996 Annual Report to Shareholders, which is included as Exhibit 13.1 to this Annual Report on Form 10-K and is incorporated herein by reference. EMPLOYEES As of February 28, 1997, First Alliance Bank had 88 full-time equivalent employees. First Alliance Bank is not a party to any collective bargaining agreement, and, in the opinion of management, enjoys excellent relations with its employees. PREMIER BANK ------------ GENERAL Premier Bank received its charter as a federal stock savings bank from the Federal Home Loan Bank Board, the predecessor of the Office of Thrift Supervision ("OTS"), on November 21, 1986. Premier Bank commenced operations on March 29, 1988. The primary business of Premier Bank is to attract deposits from the general public and invest those funds in residential real estate loans, commercial real estate loans, commercial loans and consumer loans. Customer deposits with Premier Bank are insured to the maximum extent provided by law through the Savings Association Insurance Fund, a unit of the Federal Deposit Insurance Corporation. Premier Bank is also a member of the Federal Home Loan Bank System. 8 MARKET AREA AND COMPETITION Premier Bank's primary service area is currently Cobb County, Cherokee County, Bartow County, Gwinnett County and Paulding County, and the northern part of Fulton and DeKalb Counties, Georgia. Premier Bank's main office is located at 4900 Ross Road in Acworth, Cobb County, Georgia. Premier Bank experiences competition in attracting and retaining business and personal checking and savings accounts and in making residential real estate, commercial real estate and consumer loans in its primary service area. The principal factors in competing for such accounts are interest rates, the range of financial services offered, convenience of office and branch locations and flexible office hours. Direct competition for such accounts comes from other savings institutions, commercial banks, credit unions, brokerage firms and money market funds. The primary factors in competing for loans are interest rates, loan origination fees and the range of lending services offered. The competition for origination of loans normally comes from other savings institutions, commercial banks, credit unions and mortgage banking firms. Such entities may have competitive advantages as a result of greater resources and higher lending limits (by virtue of greater capitalization) and may offer their customers certain services which Premier Bank may not presently provide. OPERATIONS Premier Bank's income is primarily derived from interest and fees collected on loans and interest on investment securities and gains received on sales of loans. The principal expenses of Premier Bank are interest paid on deposits, interest paid on other borrowings by Premier Bank, employee compensation, office expenses and other overhead expenses. Premier Bank offers a full range of banking services to individuals, professional and business customers in its primary service area. These services include personal and business checking accounts and savings and other time certificates of deposit. Premier Bank acts as a merchant depository for cardholder drafts under both VISA and Mastercard. Premier Bank offers night depository and bank-by-mail services and sells official checks and travelers checks (issued by an independent entity). In addition, Premier Bank originates loans to small businesses secured by real estate and other collateral, which loans are in part (up to 75% of each loan) guaranteed by the U.S. Small Business Administration ("SBA") and are generally in amounts less than $500,000; and Premier Bank has been designated by the SBA as a certified lender. LENDING ACTIVITIES Premier Bank's residential real estate lending activities are directed primarily toward individuals requiring a 15- to 30-year mortgage loan. Commercial real estate lending activities are directed primarily toward builders and developers and are generally short- and medium-term loans. Commercial lending activities are primarily directed toward current customers for such purposes as business equipment, working capital, lines of credit and letters of credit secured by certificates of deposit. In addition, Premier Bank originates loans to small businesses secured by real estate and other collateral, which loans are in part (up to 75% of each loan) guaranteed by the U.S. Small Business Administration ("SBA") and are generally in amounts less than $500,000; and Premier Bank has been designated by the SBA as a Certified Lender. Consumer lending is oriented primarily to the needs of Premier Bank's customers for such purposes as automobiles and personal needs. Premier Bank also originates a limited number of variable rate and fixed rate mortgage loans for its own account and both variable and fixed rate mortgage loans for resale. 9 EMPLOYEES As of February 28, 1997, Premier Bank employed 24 full-time equivalent employees. Premier Bank is not a party to any collective bargaining agreement and management believes that Premier Bank enjoys satisfactory relations with its employees. PREMIER LENDING CORPORATION --------------------------- GENERAL Premier Lending Corporation ("Premier Lending") is primarily a mortgage banker and acts as an intermediary between purchasers of residential real estate or homeowners refinancing their residences and correspondent or institutional investors seeking to purchase mortgage loan investments. Premier Lending is a retail originator of residential mortgage loans, which loans are then sold to correspondent mortgage investors. Premier Lending is an approved Federal National Mortgage Association ("FNMA") and Federal Home Loan Mortgage Corporation ("FHLMC") seller- servicer of mortgage loans. Premier Lending is also an approved Department of Housing and Urban Development ("HUD") and Veterans Administration ("VA") mortgage originator. The approval process under these federal programs requires, among other matters, evidence of industry experience, character references and credit reports of principals, financial statements, corporate net worth or bonding capacity, and a business plan. Premier Lending's administrative offices are located at 2759 Delk Road, Suite 20, Marietta, Georgia 30067, and its telephone number is (770) 952-0606. MARKET AREA AND COMPETITION Premier Lending's primary service area for its residential loan originations and its mortgage banking operations is the greater Atlanta, Georgia metropolitan area. Premier Lending operates from its administrative offices in Marietta (Cobb County), and has loan production offices in Gwinnett County, Fulton County, Henry County, DeKalb County and Cobb County. The mortgage banking business is highly competitive and fragmented. Premier Lending competes with other mortgage bankers, state and national banks, thrift institutions and insurance companies for loan originations. Many of its competitors have substantially greater resources than Premier Lending. OPERATIONS Premier Lending's loan officers originate residential mortgage loans through referrals from real estate agents and brokers, builders, developers, and 10 other relationships developed over the past years by management, as well as through direct solicitation of borrowers. The level of Premier Lending's loan originations is subject to seasonal variations with the heaviest demand occurring in the spring, summer and fall and with the lightest demand occurring in the winter. Premier Lending originates the mortgages and sells the loans to Premier Bank which independently underwrites the credit. Premier Bank holds these mortgage loans for a period ranging from one to 20 days after closing. During the holding period the loans are serviced by Premier Lending. The results of operations of Premier Lending depend primarily upon its ability to originate, fund and sell residential mortgage loans. This ability, in turn, depends substantially upon current interest rate levels and national economic conditions, which affect the degree to which prospective purchasers of residential real estate and homeowners considering refinancing their existing mortgage loans seek such mortgage financing. For example, mortgage loan origination activity is generally greater in a period of declining interest rates and favorable economic conditions. Economic conditions in Premier Lending's service area will also have a significant effect on the residential housing market and, therefore, on Premier Lending's mortgage loan origination activities. Loan Servicing. Premier Lending does not generally retain servicing of the permanent mortgage loans which it originates. However, Premier does service commercial finance loans for other investors. The servicing rights on all of Premier Lending's permanent mortgage loans are sold for a fee along with the loans to correspondent or institutional mortgage investors. Permanent Loan Market. Premier Lending's operations depend on the ability of its prospective borrowers to qualify for and obtain permanent loans through Premier Lending from correspondent or institutional mortgage investors. Accordingly, any significant change in the permanent loan market which reduces the ability of Premier Lending's borrowers to obtain permanent financing on a timely and acceptable basis, including a change in the operations, level of activity, or underwriting criteria of such correspondent or institutional investors or other permanent lenders, could have a material adverse effect on Premier Lending's business and the results of operations. Sale of Residential Loans. Premier Lending sells the mortgage loans which it originates or purchases indirectly through Premier Bank to correspondent or institutional mortgage investors. These loans are sold on a loan-by-loan basis, and the sales are made without recourse. LENDING ACTIVITIES Residential Loan Originations. Premier Lending principally originates conventional residential first and second mortgage loans primarily secured by one-to-four family residential properties. Premier Lending also originates both FNMA and FHLMC loans. Premier Lending concentrates on compliance with the spirit of the Community Reinvestment Act through originating government insured or guaranteed mortgages such as FHA, VA and state bond issues. Although Premier Lending's emphasis is on loan amounts which are considered "conforming" (less than $214,000), Premier Lending also originates a number of "non-conforming" loans (more than $214,000). Premier Lending has a subsidiary, Premier 11 Acceptance Corporation, which originates sub prime loans which assist borrowers with credit impairments. The level of revenues per loan from Premier Lending's loan originations are primarily a function of the sale of the loans and servicing to correspondent or institutional investors and the fees Premier Lending can charge. Premier Lending seeks to originate commercial finance loans which focus on revolving lines of credit secured primarily by receivables and, to a lesser extent, inventory. These loans are funded through loan participation from other financial institutions (including First Alliance Bank and Premier Bank) and lines of credit. Management will consider term loans secured by machinery, equipment or real estate based on traditional underwriting criteria, as well as prior experience of management with the borrower. Management focuses its commercial finance lending toward small and medium sized businesses that generally are not being served by banks or finance companies in the market area, especially as a result of the bank consolidation in Premier Lending's market area. In addition, Premier Lending originates commercial real estate loans which typically range from $500,000 to $5,000,000. These loans provide construction and permanent financing for both owner-occupied and income-producing properties; and, like the commercial finance loans, are funded through loan participations with other financial institutions (including First Alliance Bank and Premier Bank) and lines of credit. EMPLOYEES At February 28, 1997, Premier Lending employed 133 full time equivalent persons. Premier Lending is not a party to any collective bargaining agreement and management believes that Premier Lending enjoys satisfactory relations with its employees. ALLIANCE FINANCE CORPORATION ---------------------------- Alliance Finance is a traditional consumer finance company that makes small loans to individuals secured by varied collateral. Alliance Finance had assets of approximately $3,300,000, net loans of approximately $2,900,000 and shareholders' equity of approximately $68,000, with net income for the year ended December 31, 1996 of approximately $59,000. At February 28, 1997, Alliance Finance employed 6 full time equivalent persons. 12 SUPERVISION AND REGULATION - -------------------------- GENERAL Bank holding companies, thrift holding companies, banks, and thrifts are extensively regulated under both Federal and state law. The following is a brief summary of certain statutes and rules and regulations affecting the Company, the bank and the thrift. This summary is qualified in its entirety by reference to the particular statutes and regulatory provisions referred to below and is not intended to be an exhaustive description of the statutes or regulations applicable to the business of the Company and its subsidiaries. Supervision, regulation and examination of the Company and its subsidiaries by the bank and thrift regulatory agencies are intended primarily for the protection of depositors rather than shareholders of the Company. The Company is a registered bank holding company under the Bank Holding Company Act of 1956, as amended (the "BHC Act"), and the Georgia Bank Holding Company Act (the "Georgia Bank Holding Company Act") and is regulated under such acts by the Board of Governors of the Federal Reserve System (the "Federal Reserve") and the Georgia Department, respectively. As a savings and loan holding company, the Company is also registered with the OTS and is subject to regulation, supervision, and examination by and the reporting requirements of the OTS. The BHC Act requires every bank holding company to obtain the prior approval of the Federal Reserve before: (i) it may acquire direct or indirect ownership or control of any voting shares of any bank if, after such acquisition, the bank holding company will directly or indirectly own or control more than 5% of the voting shares of the bank; (ii) it or any of its subsidiaries, other than a bank, may acquire all or substantially all of the assets of any bank; or (iii) it may merge or consolidate with any other bank holding company. Similar federal statutes require savings and loan holding companies and other companies to obtain the prior approval of the OTS before acquiring direct or indirect ownership or control of a savings bank or savings association. The BHC Act further provides that the Federal Reserve may not approve any transaction that would result in a monopoly or would be in furtherance of any combination or conspiracy to monopolize or attempt to monopolize the business of banking in any section of the United States, or the effect of which may be substantially to lessen competition or to tend to create a monopoly in any section of the country, or that in any other manner would be in restraint of trade, unless the anticompetitive effects of the proposed transaction are clearly outweighed by the public interest in meeting the convenience and needs of the community to be served. The Federal Reserve is also required to consider the financial and managerial resources and future prospects of the bank holding companies and banks concerned and the convenience and needs of the communities to be served. Consideration of financial resources generally focuses on capital adequacy, which is discussed below. The BHC Act, as amended by the interstate banking provisions of the Riegle- Neal Interstate Banking and Branching Efficiency Act of 1994 (the "Interstate Banking Act"), which became effective on September 29, 1995, repealed the prior 13 statutory restrictions on interstate acquisitions of banks by bank holding companies, such that Premier, and any other bank holding company located in Georgia, may now acquire a bank located in any other state, and any bank holding company located outside Georgia may lawfully acquire any Georgia-based bank, regardless of state law to the contrary, in either case subject to certain deposit-percentage, aging requirements, and other restrictions. The Interstate Banking Act also generally provides that, after June 1, 1997, national and state-chartered banks may branch interstate through acquisitions of banks in other states. By adopting legislation prior to that date, a state has the ability either to "opt in" and accelerate the date after which interstate branching is permissible or "opt out" and prohibit interstate branching altogether. In response to the Interstate Banking Act, the Georgia General Assembly adopted the Georgia Interstate Banking Act, effective July 1, 1995. The Georgia Interstate Banking Act provides that (i) interstate acquisitions by institutions located in Georgia will be permitted in states which also allow national interstate acquisitions, and (ii) interstate acquisitions of institutions located in Georgia will be permitted by institutions located in states which allow national interstate acquisitions. Additionally, in February 1996, the Georgia Legislature adopted the Georgia Interstate Branching Act which permits Georgia-based banks and bank holding companies owning or acquiring banks outside of Georgia and all non-Georgia banks and bank holding companies owning or acquiring banks in Georgia the right to merge any lawfully acquired bank into an interstate branch network. Finally, the Georgia Intrastate Branching Act also allows banks to establish de novo branches on a limited basis beginning July 1, 1996. Beginning July 1, 1998, the number of de novo branches which may be established will no longer be limited. The BHC Act generally prohibits a bank holding company from engaging in activities other than banking or managing or controlling banks or other permissible subsidiaries and from acquiring or retaining direct or indirect control of any company engaged in any activities other than those activities determined by the Federal Reserve to be so closely related to banking or managing or controlling banks as to be a proper incident thereto. In determining whether a particular activity is permissible, the Federal Reserve must consider whether the performance of such an activity reasonably can be expected to produce benefits to the public, such as greater convenience, increased competition, or gains in efficiency, that outweigh possible adverse effects, such as undue concentration of resources, decreased or unfair competition, conflicts of interest, or unsound banking practices. For example, factoring accounts receivable, acquiring or servicing loans, leasing personal property, conducting discount securities brokerage activities, performing certain data processing services, acting as agent or broker in selling credit life insurance and certain other types of insurance in connection with credit transactions, and performing certain insurance underwriting activities all have been determined by the Federal Reserve to be permissible activities of bank holding companies. The BHC Act does not place territorial limitations on permissible non-banking activities of bank holding companies. Despite prior approval, the Federal Reserve has the power to order a holding company or its subsidiaries to terminate any activity or to terminate its ownership or control of any subsidiary when it has reasonable cause to believe that continuation of such activity or such ownership or control constitutes a serious risk to the financial safety, soundness, or stability of any bank subsidiary of that bank holding company. 14 Each of the bank and thrift subsidiaries of Premier and Central and Southern is a member of the Federal Deposit Insurance Corporation (the "FDIC"), and as such, its deposits are insured by the FDIC to the maximum extent provided by law. Each such subsidiary is also subject to numerous state and federal statutes and regulations that affect its business, activities, and operations, and each is supervised and examined by one or more state or federal bank regulatory agencies. First Alliance Bank is subject to regulation, supervision, and examination by the FDIC and the Georgia Department. Premier Bank is subject to regulation, supervision, and examination by the OTS and the FDIC. The federal banking regulators for the bank and thrift subsidiaries of Premier as well as the Georgia Department in the case of First Alliance Bank, regularly examine the operations of First Alliance Bank and Premier Bank and are given authority to approve or disapprove mergers, consolidations, the establishment of branches, and similar corporate actions. The federal banking regulators and the Georgia Department also have the power to prevent the continuance or development of unsafe or unsound banking practices or other violations of law. PAYMENT OF DIVIDENDS Premier is a legal entity separate and distinct from its banking and other subsidiaries. The principal sources of cash flow of Premier, including cash flow to pay dividends to its shareholders, are dividends from Premier Bank, Premier Lending Corporation, First Alliance Bank and Alliance Finance. There are statutory and regulatory limitations on the payment of dividends by Premier Bank and First Alliance Bank to Premier as well as by Premier to its shareholders. If, in the opinion of the federal banking regulators, a depository institution under its jurisdiction is engaged in or is about to engage in an unsafe or unsound practice (which, depending on the financial condition of the depository institution, could include the payment of dividends), such authority may require, after notice and hearing, that such institution cease and desist from such practice. The federal banking regulators have indicated that paying dividends that deplete a depository institution's capital base to an inadequate level would be an unsafe and unsound banking practice. Under the Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA"), a depository institution may not pay any dividend if payment would cause it to become undercapitalized or if it already is undercapitalized. See "--Prompt Corrective Action." Moreover, the federal agencies have issued policy statements that provide that bank holding companies and insured banks should generally only pay dividends out of current operating earnings. At December 31, 1996, under dividend restrictions imposed under federal and state laws, Premier Bank and First Alliance Bank, without obtaining governmental approvals, could declare aggregate dividends to Premier of approximately $1,345,000. The payment of dividends by Premier and its subsidiaries may also be affected or limited by other factors, such as the requirement to maintain adequate capital above regulatory guidelines. 15 CAPITAL ADEQUACY Premier and its bank and thrift subsidiaries are required to comply with the capital adequacy standards established by the Federal Reserve and the OTS, and the appropriate federal banking regulator in the case of their banking and thrift subsidiaries. There are two basic measures of capital adequacy for bank holding companies that have been promulgated by the Federal Reserve: a risk- based measure and a leverage measure. All applicable capital standards must be satisfied for a bank holding company to be considered in compliance. The risk-based capital standards are designed to make regulatory capital requirements more sensitive to differences in risk profile among banks and bank holding companies, to account for off-balance-sheet exposure, and to minimize disincentives for holding liquid assets. Assets and off-balance-sheet items are assigned to broad risk categories, each with appropriate weights. The resulting capital ratios represent capital as a percentage of total risk-weighted assets and off-balance-sheet items. The minimum guideline for the ratio (the "Total Risk-Based Capital Ratio") of total capital ("Total Capital") to risk-weighted assets (including certain off-balance-sheet items, such as standby letters of credit) is 8%. At least half of Total Capital must be comprised of common stock, minority interests in the equity accounts of consolidated subsidiaries, noncumulative perpetual preferred stock, and a limited amount of cumulative perpetual preferred stock, less goodwill and certain other intangible assets ("Tier 1 Capital"). The remainder may consist of subordinated debt, other preferred stock, and a limited amount of loan loss reserves ("Tier 2 Capital"). At December 31, 1996, Premier's consolidated Total Risk-Based Capital Ratio and its Tier 1 Risk-Based Capital Ratio (i.e., the ratio of Tier 1 Capital to risk-weighted assets) were 10.79% and 9.69%, respectively. In addition, the Federal Reserve has established minimum leverage ratio guidelines for bank holding companies. These guidelines provide for a minimum ratio (the "Leverage Ratio") of Tier 1 Capital to average assets, less goodwill and certain other intangible assets, of 3% for bank holding companies that meet certain specified criteria, including those having the highest regulatory rating. All other bank holding companies generally are required to maintain a Leverage Ratio of at least 3%, plus an additional cushion of 100 to 200 basis points. Premier's Leverage Ratio at December 31, 1996, was 7.27%. The guidelines also provide that bank holding companies experiencing internal growth or making acquisitions will be expected to maintain strong capital positions substantially above the minimum supervisory levels without significant reliance on intangible assets. Furthermore, the Federal Reserve has indicated that it will consider a "tangible Tier 1 Capital Leverage Ratio" (deducting all intangibles) and other indicia of capital strength in evaluating proposals for expansion or new activities. Premier Bank and First Alliance Bank are subject to risk-based and leverage capital requirements adopted by their respective federal banking regulators, which are substantially similar to those adopted by the Federal Reserve for bank holding companies. 16 Similarly, the OTS' regulatory capital regulations specify capital standards for thrifts and thrift holding companies consisting of three components: a "core capital" requirement, a "tangible capital" requirement, and a "risk-based capital" requirement. These regulations require thrifts to maintain core capital in an amount not less than 3% of adjusted total assets and to maintain tangible capital in an amount not less than 1.5% of adjusted total assets. Under the OTS' regulatory capital regulations, thrifts are required to maintain capital equal to 8% of risk-weighted assets. The OTS requires assets to be weighed on the basis of risk and assigns a weighing factor of between 0% and 100%. Approximately one-half of risk-based capital must consist of core capital and one-half may consist of other preferred stock, a portion of general loan loss reserves and other hybrid capital instruments such as convertible and subordinated debentures. In determining compliance with the capital standards, all of a thrift's investments in and extensions of credit to any subsidiary engaged in activity not permissible for a national bank are deducted from the savings association capital. Each of the subsidiary depository institutions was in compliance with applicable minimum capital requirements as of December 31, 1996. Premier has not been advised by any federal banking regulator of any specific minimum capital ratio requirement applicable to it or its subsidiary depository institutions. Failure to meet capital guidelines could subject a bank or thrift to a variety of enforcement remedies, including issuance of a capital directive, the termination of deposit insurance by the FDIC, a prohibition on the taking of brokered deposits, and certain other restrictions on its business. As described below, substantial additional restrictions can be imposed upon FDIC-insured depository institutions that fail to meet applicable capital requirements. See "Prompt Corrective Action." The federal bank regulators continue to indicate their desire to raise capital requirements applicable to banking organizations beyond their current levels. In this regard, the Federal Reserve and the FDIC have, pursuant to FDICIA, proposed an amendment to the risk-based capital standards that would calculate the change in an institution's net economic value attributable to increases and decreases in market interest rates and would require banks with excessive interest rate risk exposure to hold additional amounts of capital against such exposures. The OTS has already included an interest-rate risk component in its risk-based capital guidelines for savings associations that it regulates. SUPPORT OF SUBSIDIARY INSTITUTIONS Under Federal Reserve policy, Premier is expected to act as a source of financial strength for, and to commit resources to support, each of its banking subsidiaries. This support may be required at times when, absent such Federal Reserve policy, Premier may not be inclined to provide it. In addition, any capital loans by a bank holding company to any of its banking subsidiaries are subordinate in right of payment to deposits and to certain other indebtedness of such banks. In the event of a bank holding company's bankruptcy, any commitment by the bank holding company to a federal bank regulatory agency to maintain the 17 capital of a banking subsidiary will be assumed by the bankruptcy trustee and entitled to a priority of payment. Under the Federal Deposit Insurance Act ("FDIA"), a depository institution insured by the FDIC can be held liable for any loss incurred by, or reasonably expected to be incurred by, the FDIC after August 9, 1989, in connection with (i) the default of a commonly controlled FDIC-insured depository institution or (ii) any assistance provided by the FDIC to any commonly controlled FDIC-insured depository institution "in danger of default." "Default" is defined generally as the appointment of a conservator or receiver, and "in danger of default" is defined generally as the existence of certain conditions indicating that a default is likely to occur in the absence of regulatory assistance. The FDIC's claim for damages is superior to claims of shareholders of the insured depository institution or its holding company, but is subordinate to claims of depositors, secured creditors, and holders of subordinated debt (other than affiliates) of the commonly controlled insured depository institution. PROMPT CORRECTIVE ACTION FDICIA establishes a system of prompt corrective action to resolve the problems of undercapitalized institutions. Under this system, which became effective in December 1992, the federal banking regulators are required to establish five capital categories (well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized) and to take certain mandatory supervisory actions, and are authorized to take other discretionary actions, with respect to institutions in the three undercapitalized categories, the severity of which will depend upon the capital category in which the institution is placed. Generally, subject to a narrow exception, FDICIA requires the banking regulator to appoint a receiver or conservator for an institution that is critically undercapitalized. The federal banking agencies have specified by regulation the relevant capital level for each category. Under the final agency rules implementing the prompt corrective action provisions, an institution that (i) has a Total Risk-Based Capital Ratio of 10% or greater, a Tier 1 Risk-Based Capital Ratio of 6.0% or greater, and a Leverage Ratio of 5.0% or greater and (ii) is not subject to any written agreement, order, capital directive, or prompt corrective action directive issued by the appropriate federal banking agency is deemed to be well capitalized. An institution with a Total Risk-Based Capital Ratio of 8.0% or greater, a Tier 1 Risk-Based Capital Ratio of 4.0% or greater, and a Leverage Ratio of 4.0% or greater is considered to be adequately capitalized. A depository institution that has a Total Risk-Based Capital Ratio of less than 8.0%, a Tier 1 Risk-Based Capital Ratio of less than 4.0%, or a Leverage Ratio of less than 4.0% is considered to be undercapitalized. A depository institution that has a Total Risk-Based Capital Ratio of less than 6.0%, a Tier 1 Risk-Based Capital Ratio of less than 3.0%, or a Leverage Ratio of less than 3.0% is considered to be significantly undercapitalized, and an institution that has a tangible equity capital to assets ratio equal to or less than 2.0% is deemed to be critically undercapitalized. For purposes of the regulation, the term "tangible equity" includes core capital elements counted as Tier 1 Capital for purposes of the risk-based capital standards, plus the amount of outstanding cumulative perpetual preferred stock (including related surplus), minus all intangible 18 assets with certain exceptions. A depository institution may be deemed to be in a capitalization category that is lower than is indicated by its actual capital position if it receives an unsatisfactory examination rating. An institution that is categorized as undercapitalized, significantly undercapitalized, or critically undercapitalized is required to submit an acceptable capital restoration plan to its appropriate federal banking agency. Under FDICIA, a bank holding company must guarantee that a subsidiary depository institution meets its capital restoration plan, subject to certain limitations. The obligation of a controlling holding company under FDICIA to fund a capital restoration plan is limited to the lesser of 5% of an undercapitalized subsidiary's assets or the amount required to meet regulatory capital requirements. An undercapitalized institution is also generally prohibited from increasing its average total assets, making acquisitions, establishing any branches, or engaging in any new line of business, except in accordance with an accepted capital restoration plan or with the approval of the FDIC. In addition, the appropriate federal banking agency is given authority with respect to any undercapitalized depository institution to take any of the actions it is required to or may take with respect to a significantly undercapitalized institution as described below if it determines "that those actions are necessary to carry out the purpose" of FDICIA. For those institutions that are significantly undercapitalized or undercapitalized and either fail to submit an acceptable capital restoration plan or fail to implement an approved capital restoration plan, the appropriate federal banking agency must require the institution to take one or more of the following actions: (i) sell enough shares, including voting shares, to become adequately capitalized; (ii) merge with (or be sold to) another institution (or holding company), but only if grounds exist for appointing a conservator or receiver; (iii) restrict certain transactions with banking affiliates as if the "sister bank" exception to the requirements of Section 23A of the Federal Reserve Act did not exist; (iv) otherwise restrict transactions with bank or non-bank affiliates; (v) restrict interest rates that the institution pays on deposits to "prevailing rates" in the institution's "region"; (vi) restrict asset growth or reduce total assets; (vii) alter, reduce, or terminate activities; (viii) hold a new election of directors; (ix) dismiss any director or senior executive officer who held office for more than 180 days immediately before the institution became undercapitalized, provided that in requiring dismissal of a director or senior executive officer, the regulator must comply with certain procedural requirements, including the opportunity for an appeal in which the director or officer will have the burden of proving his or her value to the institution; (x) employ "qualified" senior executive officers; (xi) cease accepting deposits from correspondent depository institutions; (xii) divest certain nondepository affiliates which pose a danger to the institution; or (xiii) be divested by a parent holding company. In addition, without the prior approval of the appropriate federal banking agency, a significantly undercapitalized institution may not pay any bonus to any senior executive officer or increase the rate of compensation for such an officer. At December 31, 1996, First Alliance and Premier had the requisite capital levels to qualify as well capitalized. 19 FDIC INSURANCE ASSESSMENTS Pursuant to FDICIA, the FDIC adopted a new risk-based assessment system for insured depository institutions that takes into account the risks attributable to different categories and concentrations of assets and liabilities. The new system, which went into effect on January 1, 1994, and replaced a transitional system that the FDIC had utilized for the 1993 calendar year, assigns an institution to one of three capital categories: (i) well capitalized; (ii) adequately capitalized; and (iii) undercapitalized. These three categories are substantially similar to the prompt corrective action categories described above, with the "undercapitalized" category including institutions that are undercapitalized, significantly undercapitalized, and critically undercapitalized for prompt corrective action purposes. An institution is also assigned by the FDIC to one of three supervisory subgroups within each capital group. The supervisory subgroup to which an institution is assigned is based on a supervisory evaluation provided to the FDIC by the institution's primary federal regulator and information which the FDIC determines to be relevant to the institution's financial condition and the risk posed to the deposit insurance funds (which may include, if applicable, information provided by the institution's state supervisor). An institution's insurance assessment rate is then determined based on the capital category and supervisory category to which it is assigned. Under the final risk-based assessment system, as well as the prior transitional system, there are nine assessment risk classifications (i.e., combinations of capital groups and supervisory subgroups) to which different assessment rates are applied. Assessment rates for members of both the Bank Insurance Fund ("BIF") and the Savings Association Insurance Fund (SAIF) for the first half of 1995, as they had during 1994, ranged from 23 basis points (0.23% of deposits) for an institution in the highest category (i.e., "well capitalized" and "healthy") to 31 basis points (0.31% of deposits) for an institution in the lowest category (i.e., "undercapitalized" and "substantial supervisory concern"). These rates were established for both funds to achieve a designated ratio of reserves to insured deposits (i.e., 1.25%) within a specified period of time. Once the designated ratio for the BIF was reached in May 1995, the FDIC was authorized to reduce the minimum assessment rate below the 23 basis points and to set future assessment rates at such levels that would maintain the fund's reserve ratio at the designated level. In August 1995, the FDIC adopted regulations reducing the assessment rates for BIF-member banks. Under the revised schedule, BIF-member banks, starting with the second half of 1995, were to pay assessments ranging from 4 basis points to 31 basis points, with an average assessment rate of 4.5 basis points. Refunds with interest were paid for assessments for the month(s) after the month in which the designated reserve ratio for the BIF was reached. Subsequently, on November 14, 1995, the FDIC announced that, beginning in 1997, it would further reduce the deposit insurance premiums for 92% of all BIF members that are in the highest capital and supervisory categories to $2,000 per year, regardless of deposit size. At the same time, the FDIC elected to retain the existing assessment rate range of 23 to 31 basis points for SAIF members for the foreseeable future given the undercapitalized nature of that insurance fund. Thrift industry representatives argued that this significant premium disparity resulted in savings associations having to operate at a competitive disadvantage to their BIF insured bank counterparts. 20 On September 30, 1996, the President signed the Deposit Insurance Fund Act of 1996 ("DIFA") which was part of the omnibus spending bill enacted by Congress at the end of its 1996 session. DIFA mandated that the FDIC impose a one-time special assessment on the SAIF-assessable deposits of each insured depository institution at a rate applicable to all such institutions that the FDIC determined would cause the SAIF to achieve its designated reserve ratio of 1.25% as of October 1, 1996. The assessment was based on the amount of SAIF-insured deposits owned by each institution as of March 31, 1995, the record date established in the original drafts of the legislation. DIFA allowed the FDIC to exempt any insured institution that it determined to be weak from paying the special assessment if the FDIC determined that the exemption would reduce the risk to the SAIF. DIFA provides that the FDIC may not set semi-annual assessments with respect to SAIF or BIF in excess of the amount needed to maintain the 1.25% designated reserve ratio or, if the reserve ratio is less than the designated reserve ratio, to increase the reserve ratio to the designated reserve ratio. On October 10, 1996, the FDIC adopted a Final Rule governing the payment of the SAIF special assessment. The FDIC imposed a special assessment in the amount of 65.7 basis points. The SAIF special assessment was due by November 27, 1996. Premier Bank's portion of this special assessment amounted to $202,000. Premier Bank accrued this amount in the quarter ended September 30, 1996, as mandated by the Financial Accounting Standards Board that ruled that the SAIF special assessment should be recorded as an ordinary non-interest expense for the quarter ended September 30, 1996. In addition, DIFA mandates the merger of the SAIF and BIF, effective January 1, 1999, but only if no insured depository institution is a savings association on that date. The combined deposit insurance fund would be called the "deposit insurance fund" or "DIF." Prior to DIFA, federal regulators and thrift industry trade groups were predicting that a default would occur on the bonds issued by the Financing Corporation ("FICO") as early as 1998, as SAIF-assessable deposits continued to decline. DIFA amends the Federal Home Loan Bank Act to impose the FICO assessment against both SAIF and BIF deposits beginning after December 31, 1996. But the assessment imposed on insured depository institutions with respect to any BIF-assessable deposit will be assessed at a range equal to one-fifth (1/5) of the rate (approximately 1.3 basis points) of the assessments imposed on insured depository institutions with respect to any SAIF-assessable deposit (approximately 6.7 basis points). The FICO assessment for 1996 was paid entirely by SAIF-insured institutions. BIF-insured banks will pay the same FICO assessment as SAIF-insured institutions beginning as of the earlier of December 31, 1999, or the date as of which the last savings association ceases to exist. Under the FDIA, insurance of deposits may be terminated by the FDIC upon a finding that the institution has engaged in unsafe and unsound practices, is in an unsafe or unsound condition to continue operations, or has violated any applicable law, regulation, rule, order, or condition imposed by the FDIC. 21 SAFETY AND SOUNDNESS STANDARDS The FDIA, as amended by the FDICIA and the Riegle Community Development and Regulatory Improvement Act of 1994, requires the federal bank regulatory agencies to prescribe standards, by regulations or guidelines, relating to internal controls, information systems and internal audit systems, loan documentation, credit underwriting, interest rate risk exposure, asset growth, asset quality, earnings, stock valuation and compensation, fees and benefits, and such other operational and managerial standards as the agencies deem appropriate. The federal bank regulatory agencies have adopted, effective August 9, 1995, a set of guidelines prescribing safety and soundness standards pursuant to FDICIA, as amended. The guidelines establish general standards relating to internal controls and information systems, internal audit systems, loan documentation, credit underwriting, interest rate exposure, asset growth and compensation and fees and benefits. In general, the guidelines require, among other things, appropriate systems and practices to identify and manage the risks and exposures specified in the guidelines. The guidelines prohibit excessive compensation as an unsafe and unsound practice and describe compensation as excessive when the amounts paid are unreasonable or disproportionate to the services performed by an executive officer, employee, director, or principal shareholders. The federal banking agencies determined that stock valuation standards were not appropriate. In addition, the agencies adopted regulations that authorize, but do not require, an agency to order an institution that has been given notice by an agency that it is not satisfying any of such safety and soundness standards to submit a compliance plan. If, after being so notified, an institution fails to submit an acceptable compliance plan or fails in any material respect to implement an acceptable compliance plan, the agency must issue an order directing action to correct the deficiency and may issue an order directing other actions of the types to which an undercapitalized institution is subject under the "prompt corrective action" provisions of FDICIA. See "Prompt Corrective Action." If an institution fails to comply with such an order, the agency may seek to enforce such order in judicial proceedings and to impose civil money penalties. The federal bank regulatory agencies also proposed guidelines for asset quality and earnings standards. DEPOSITOR PREFERENCE The Omnibus Budget Reconciliation Act of 1993 provides that deposits and certain claims for administrative expenses and employee compensation against an insured depository institution would be afforded a priority over other general unsecured claims against such an institution in the "liquidation or other resolution" of such an institution by any receiver. CERTAIN APPLICABLE THRIFT REGULATIONS Premier Bank, as a thrift institution, is subject to extensive regulation by the OTS. The lending activities and other investments of thrift institutions must comply with various regulatory requirements. 22 Qualified Thrift Lender Test. One such set of requirements relates to an institution's status as a "Qualified Thrift Lender." Unless an institution so qualifies, its borrowing privileges from a Federal Home Loan Bank may be restricted, and it may be subject to other operating limitations. To meet the Qualified Thrift Lender Test ("QTL Test"), an institution must maintain at least 65% of its assets in "Qualified Thrift Investments," which under the regulations consist of (i) loans made to purchase, refinance, construct, improve or repair domestic residential or manufactured housing, (ii) home equity loans, (iii) securities backed by or representing an interest in mortgages on domestic, residential, or manufactured housing, and (iv) obligations issued by federal deposit insurance agencies. Subject to a 15%-of-assets limitation, "Qualified Thrift Investments" may also include consumer loans, investments in certain subsidiaries, loans for construction of schools, churches, nursing homes and hospitals, and 200% of investments in loans for low-to-moderate-income housing and certain other community oriented investments. In September, 1996, the Economic Growth and Regulatory Paperwork Reduction Act of 1996 (the "Economic Growth Act of 1996") was signed into law and contained provisions which significantly affected the QTL Test. The Economic Growth Act of 1996 liberalized the QTL Test for savings associations by permitting them to satisfy a similar, but different, 60% asset test under the Internal Revenue Code. Alternatively, savings associations may meet the QTL Test by satisfying a more liberal 65% asset test that allows an institution to include small business, credit card and education loans as qualified investments for purposes of the test. Furthermore, consumer loans now count as qualified thrift investments up to 20% of portfolio assets. On November 27, 1996, the OTS issued an Interim Final Rule that implements provisions of the Economic Growth Act of 1996, including the amended QTL Test. At December 31, 1996, approximately 75.6% of Premier Bank's assets were invested in Qualified Thrift Investments as currently defined. Liquidity Requirements. Thrift institutions, including Premier Bank, are required to maintain average daily balances of liquid assets sufficient to meet the institution's foreseeable cash needs. Specifically, Premier Bank must maintain liquid assets (consisting of cash, certain time deposits, bankers acceptance, highly rated corporate debt and commercial paper, securities of certain mutual funds, and specific U.S. government, state or federal agency obligations) of not less than 5% of the total amount of the institution's net withdrawable savings deposits plus short-term borrowings, and to maintain average daily balances of short-term liquid assets of not less than 1% of such total amount. The liquidity ratio of Premier Bank at December 31, 1996 was 8.83%. FUTURE REQUIREMENTS Statutes and regulations are regularly introduced which contain wide- ranging proposals for altering the structures, regulations and competitive relationships of the nation's financial institutions. It cannot be predicted whether or what form any proposed statute or regulation will be adopted or the extent to which the business of the Company and its subsidiaries may be affected by such statutes or regulations. 23 MONETARY POLICY The earnings of the Company are affected by domestic and foreign economic conditions, particularly by the monetary and fiscal policies of the United States government and its agencies. The Federal Reserve has had, and will continue to have, an important impact on the operating results of commercial banks through its power to implement national monetary policy in order, among other things, to mitigate recessionary and inflationary pressures by regulating the national money supply. The techniques used by the Federal Reserve include setting the reserve requirements of member banks and establishing the discount rate on member bank borrowings. The Federal Reserve also conducts open market transactions in United States government securities. ITEM 2. PROPERTIES The Company has 16 offices, five are offices of First Alliance Bank, three are offices of Premier Bank, seven are offices of Premier Lending, and two are Alliance Finance offices. First Alliance Bank's five offices are located in Marietta, Georgia at 63 Barrett Parkway; 2760 Cobb Parkway; 4210 Wade Green Road; 833 South Cobb Drive; and 1269 Barclay Circle. Premier Bank's offices are located at 4900 Ross Road, Acworth, Georgia; 2390 Mt. Vernon Road, Suite 100, Dunwoody, Georgia; and 875 Oak Road, Suite 101, Lawrenceville, Georgia; Premier Lending offices are located at 17 Executive Park Drive, Suite 290, Atlanta, Georgia; 2019 Scenic Highway, Snellville, Georgia; 205 Market Place, Suite 102, Roswell, Georgia; 1235 Eagle's Landing Parkway, Suite A, Stockbridge, Georgia; 3075 Breckenridge Boulevard, Suite 425, Duluth, Georgia; and 2759 Delk Road, Suite 201, Marietta, Georgia. Alliance Finance's two offices are located at 3451 South Cobb Drive, Smyrna, Georgia and 680 Hiram/Acworth Road, Hiram, Georgia. First Alliance Bank leases the land on which its main office is located pursuant to an agreement dated August 28, 1985, as amended. The lease provides for an initial term of 5 years following capitalization of First Peoples Bank of Cobb (a predecessor to the Company) with 9 renewal periods of 5 years each. Rent escalation features include a 5% increase every 5 years plus an additional amount equal to the average yearly amount for the Consumer Price Index (CPI) for metropolitan Atlanta for the previous five years, not to exceed 8% per year. At any time after the first 5 years, the Bank may exercise an option to purchase the property for $1,000,000. The Bank also leases its branch office at Barclay Circle pursuant to an agreement dated December 6, 1990. The lease provides for an initial term of 5 years following regulatory approval of the branch with 2 renewal periods of 4 years each. By letter agreement dated December 15, 1995, the parties agreed to renew the lease for 3 years at the then current annual rental amount. The Bank owns the remaining branches without encumbrance. Premier Bank owns its main office location in Acworth which contains approximately 4,880 square feet of space. Premier Bank leases its branch office in Dunwoody (which lease expires in July 2000) and leases its branch office in Lawrenceville (which lease expires in March 2001). 24 Premier Lending leases its administrative and loan production offices and does not own any real estate. Premier Lending leases the following seven locations in Fulton County, Gwinnett County, Henry County, DeKalb County and Cobb County.
LOCATION PRIMARY USE LEASE EXPIRATION DATE - ----------------------------- ------------------- --------------------- 17 Executive Park Drive Loan production May 2001 Suite 290 -- DeKalb County Atlanta, Georgia 30329 2019 Scenic Highway Loan production May 2001 Snellville, Georgia 30278 -- Gwinnett County 205 Market Place, Suite 102 Loan production September 1999 Roswell, Georgia 30075 -- Fulton County 1235 Eagle's Landing Loan production May 1997 Parkway, Suite A -- Henry County Stockbridge, Georgia 30281 3075 Breckenridge Blvd. Loan production January 1999 Suite 425 -- Gwinnett County Duluth, Georgia 30136 2759 Delk Road, Suite 201 Mortgage Division December 1999 Marietta, Georgia 30067 and Loan production -- Cobb County
Alliance Finance leases its main office pursuant to an agreement dated March 23, 1996. The lease, as amended, provides for an initial term of one year (from May 1, 1993 through April 30, 1994) with four renewal periods of one year each. Alliance Finance owns its other office without encumbrance. Other than normal real estate and commercial lending activities of the Bank, the Company generally does not invest in real estate, interests in real estate, real estate mortgages, or securities of or interests in persons primarily engaged in real estate activities. ITEM 3. LEGAL PROCEEDINGS In July 1996, the management of Premier Bank learned that a group in Dalton, Georgia was organizing a de novo bank under the name Premier National Bank ("PNB"). Specifically, Premier Bank learned of PNB's intent to provide commercial banking services from a facility located in Dalton, Whitfield County, Georgia. Premier Bank contacted PNB's banking consultant and advised the consultant of Premier Bank's demand that PNB cease any and all efforts to use the name Premier National Bank. Premier Bank had subsequent communications with representatives of PNB in which PNB was informed of Premier Bank's superior right, title and interest in the Premier name. PNB refused to cease using the name and filed a prospectus on October 8, 1996, publicly announcing its intent to open and operate a bank under the Premier name. 25 Due to the need to protect the strength and reputation of its trademark and trade name and due to PNB's refusal to abandon its intent to use the Premier name, Premier Bank filed suit in the Northern District of Georgia, Rome Division (Premier Bank, F.S.B. v. Premier National Bank v. T. Stephen Johnson & - ---------------------------------------------------------------------- Associates, Inc., United States District Court for the Northern District of - ---------------- Georgia, Rome Division, Civil Action File No. 4:96-CV-0283-HLM). Premier Bank seeks damages and injunctive relief based upon the Lanham Act, 15 U.S.C. section 1125(a)(1)(A), the Georgia Uniform Deceptive Trade Practices Act, O.C.G.A. section 10-1-370, the Georgia Unfair Competition Statute, O.C.G.A. section 23-2- 55, the trademark and trade name statute, O.C.G.A. section 10-1-451, and the common law of Georgia. In response, PNB opened for business and defended the lawsuit on the grounds that Premier Bank has no right, title or interest in the Premier name in the Whitfield County community and filed a counterclaim seeking injunctive relief and unspecified compensatory and punitive damages against Premier Bank. It is anticipated that a trial on the merits of the case will commence in May of this year. Other than as described above, there are no material pending proceedings to which the Company is a party or of which any of its properties are subject; nor are there material proceedings known to the Company to be contemplated by any governmental authority; nor are there material proceedings known to the Company, pending or contemplated, in which any director, officer or affiliate or any principal security holder of the Company, or any associate of any of the foregoing, is a party or has an interest adverse to the Company. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. 26 PART II ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The Company's common stock has been listed for quotation on the American Stock Exchange under the symbol "PMB" since January 10, 1997. Prior to that date, the Company's common stock was on the NASDAQ Small Cap Market under the symbol "FABC." The following table sets forth, for the indicated periods, the high and low closing sales prices for the Company's common stock as reported by American Stock Exchange and on NASDAQ Small Cap Market for prior periods since January 25, 1995 and the high and low sales prices for the Company's common stock for each of the quarters in which trading occurred in 1995. Historical stock prices have been adjusted to reflect the 1.8055-for-one split of the common stock of the Company effective on March 6, 1997.
SALES PRICE ------------------ CALENDAR PERIOD HIGH LOW - ---------------------------------------- ------- -------- 1995 First Quarter........................... $ 7.66 $ 6.86 Second Quarter.......................... 8.31 6.98 Third Quarter........................... 8.72 7.75 Fourth Quarter.......................... 9.28 8.72 1996 First Quarter........................... $ 9.83 $ 8.86 Second Quarter.......................... 10.80 7.28 Third Quarter........................... 11.63 10.37 Fourth Quarter.......................... 11.77 10.39 1997 First Quarter (through March 25, 1997).. $14.19 $11.77
The holders of the Company's Common Stock are entitled to receive dividends when and if declared by the Board of Directors out of funds legally available therefor. Premier paid a $.56 per share cash dividend on January 27, 1997 to its shareholders. The decision to declare this dividend was based on Premier's performance in 1996. The Company plans to pay quarterly dividends on an ongoing basis. The future declaration and payment of dividends will depend upon the earnings of its bank subsidiaries, business conditions, operating results, capital and reserve requirements, and the Board of Directors' consideration of other relevant factors. 27 ITEM 6. SELECTED FINANCIAL DATA The following selected financial data is derived from the consolidated financial statements of the Company. The financial highlights have been restated to reflect the business combination of First Alliance Bancorp, Inc. and Premier Bancshares, Inc. which was consummated on August 31, 1996. The financial statements for the years ended December 31, 1992 through 1996, and the operating data for the years ended December 31, 1992 through 1996 are derived from financial statements which reflect, in the opinion of the Company's management, all normal recurring adjustments necessary to present fairly such information for such periods. The following data should be read in conjunction with the Company's consolidated financial statements and the related notes contained elsewhere in this report.
Years Ended December 31, ---------------------------------------------------- (Dollars in Thousands, Except Per Share Amounts) 1996 1995 1994 1993 1992 -------- -------- -------- -------- -------- BALANCE SHEET: Total assets $294,158 $237,525 $151,526 $140,313 $130,383 Loans held for sale 24,408 25,912 26,047 4,446 - Loans, net 184,452 131,072 81,097 83,838 82,221 Securities available-for-sale 35,154 45,795 11,584 26,427 25,444 Federal funds sold 21,680 2,530 19,110 10,880 9,027 Interest-bearing deposits 1,447 9,948 - 703 794 Deposits 236,733 178,453 118,166 117,323 113,751 Borrowings 30,221 30,692 14,429 4,399 Stockholders' equity 23,275 23,430 17,554 17,860 14,205 OPERATING DATA: Interest income 23,016 17,301 10,954 10,296 10,359 Interest expense 11,282 8,281 4,111 3,897 4,928 Net interest income 11,734 9,020 6,843 6,399 5,431 Provisions for losses on loans 598 338 285 1,007 441 Net interest income after provision for losses on loans 11,136 8,682 6,558 5,392 4,990 Other income 11,855 8,153 2,962 2,915 1,446 Other expenses 19,371 13,696 8,660 7,900 6,277 Income tax expense 1,068 1,137 569 98 5 Net income 2,552 2,002 291 309 154 Net income per share 1.06 .87 .15 .20 .10
28 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The information set forth under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operation" in the Company's 1996 Annual Report to Shareholders, which is included as Exhibit 13.1 to this Annual Report on Form 10-K, is incorporated herein by reference. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA The financial statements contained in the Company's 1996 Annual Report to Shareholders, which is included as Exhibit 13.1 to this Annual Report on Form 10-K, is incorporated herein by reference. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The information set forth under the caption "Election of Directors" in the Form S-4 Registration Statement filed by the Company which contains the Proxy Statement used in connection with the Company's 1997 Annual Shareholders Meeting, is incorporated herein by reference. ITEM 11. EXECUTIVE COMPENSATION The information set forth under the caption "Executive Compensation" in the Form S-4 Registration Statement filed by the Company which contains the Proxy Statement used in connection with the Company's 1997 Annual Shareholders Meeting, is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information set forth under the caption "Security Ownership of Certain Beneficial Owners and Management" in the Form S-4 Registration Statement filed by the Company which 29 contains the Proxy Statement used in connection with the Company's 1997 Annual Shareholders Meeting, is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information set forth under the caption "Certain Relationships and Related Transactions" in the Form S-4 Registration Statement filed by the Company which contains the Proxy Statement used in connection with the Company's 1997 Annual Shareholders Meeting, is incorporated herein by reference. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) Financial Statements, Financial Statement Schedules and Exhibits ---------------------------------------------------------------- Exhibits Exhibit Number Exhibit ------- ------- 2 Agreement and Plan of Reorganization dated February 3, 1997 between First Alliance/Premier Bancshares, Inc. and The Central and Southern Holding Company. 2.1 First Amendment to Agreement and Plan of Reorganization dated March 26, 1997 between Premier Bancshares, Inc. and The Central and Southern Holding Company. 3.1 Articles of Incorporation (incorporated by reference as Exhibit 3.1 to the Registrant's Form 10-QSB for the quarter ended September 30, 1996). 3.2 Articles of Amendment dated February 4, 1997. 3.3 Bylaws of Registrant, as amended (incorporated by reference as Exhibit 3.2 from the Registrant's Form 10-QSB for the quarter ended September 30, 1996). 4.1 Form of Common Stock Certificate. 10.1 First Alliance Bancorp, Inc. 1995 Stock Option Plan, dated as of August 8, 1995, and amended as of March 12, 1996 and related form of Employee Incentive Stock Option Agreement (incorporated by reference as Exhibit 10.6 to the Registrant's Form 10-KSB for the year ended December 31, 1995)./1/ 30 10.2 Guaranty, dated March 25, 1996, by First Alliance Bancorp, Inc. relating to a $2,000,000 loan made by The Bankers Bank to Interim Alliance Corporation d/b/a Alliance Finance (incorporated by reference as Exhibit 10.7 to the Registrant's Form 10-KSB for the year ended December 31, 1995). 10.3 Employment Agreement dated July 1, 1995 by and between Premier, First Alliance Bank and J. Edward Mulkey, Jr. (incorporated by reference as Exhibit 10.5 to the Registrant's Form 10-KSB for the year ended December 31, 1995)./1/ 10.4 Employment Agreement dated January 1, 1997, by and between Premier Lending Corporation and George S. Phelps./1/ 10.5 Employment Agreement dated January 1, 1997, by and between Premier Lending Corporation and Michael W. Lane./1/ 10.6 Employment Agreement dated January 1, 1997, by and between Premier Lending Corporation and Brian D. Schmitt./1/ 10.7 Amendment to Employment Agreement dated January 1, 1997, by and between First Alliance/Premier Bancshares, Inc. and Darrell D. Pittard./1/ 10.8 Form of Employment Agreement by and between Premier Bancshares, Inc, Premier Lending Corporation and Darrell D. Pittard./1/ 10.9 Amended and Restated Stock Purchase Agreement by and between Premier Bancshares, Inc. (formerly known as First Alliance/Premier Bancshares, Inc.) and Net.B@nk, Inc. dated December 19, 1996. 10.10 First Amendment to the Amended and Restated Stock Purchase Agreement by and between Premier Bancshares, Inc. and Net.B@nk, Inc. dated December 19, 1996. 10.11 Purchase and Assumption Agreement by and between Premier Bank, FSB and First Alliance Bank dated December 19, 1996. 10.12 First Amendment to Purchase and Assumption Agreement by and between Premier Bank, FSB and First Alliance Bank dated March 13, 1997. 10.13 Second Amendment to Purchase and Assumption Agreement by and between Premier Bank, FSB and First Alliance Bank dated March 25, 1997 10.14 Form of Premier Bancshares, Inc. 1997 Stock Option Plan./1/ 10.15 Form of Premier Bancshares, Inc. Directors' Stock Option Plan./1/ 11.1 Statement of Per Share Earnings. 31 13.1 Registrant's 1996 Annual Report to Shareholders. Only those portions of the Annual Report to Shareholders that are specifically incorporated by reference into this report on Form 10-K shall be deemed filed with the Commission. 21 Subsidiaries of Premier Bancshares, Inc. 23 Consent of Mauldin & Jenkins, LLC 24 Power of Attorney (appears on the signature pages to this Form 10-K). 27 Financial Data Schedule (for SEC use only). (b) Reports on Form 8-K filed in the fourth quarter of 1996: None. - -------- /1/ Registrant's plans, management contract and compensatory arrangements. 32 SIGNATURES In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. PREMIER BANCSHARES, INC. Date: March 28, 1997 By: /s/ Darrell D. Pittard ---------------------- Darrell D. Pittard, Chairman and Chief Executive Officer POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS that each person whose signature appears on the signature page to this report constitutes and appoints Darrell D. Pittard and Frank H. Roach, and each of them, his or her true and lawful attorneys-in- fact and agents, with full power of substitution and resubstitution, for the undersigned and in his or her name, place, and stead, in any and all capacities, to sign any and all amendments to this report, and to file the same, with all exhibits hereto, and other documents in connection herewith with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. In accordance with the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. Signature Title Date --------- ----- ---- /s/ N. Michael Anderson Director March 28, 1997 - --------------------------- N. Michael Anderson /s/ James L. Coxwell, Sr. Director March 28, 1997 - --------------------------- James L. Coxwell, Sr. /s/ William M. Evans, Jr. Director March 28, 1997 - --------------------------- William M. Evans, Jr. /s/ James E. Freeman Director March 28, 1997 - --------------------------- James E. Freeman 33 Signature Title Date --------- ----- ---- /s/ Robin R. Howell Director March 28, 1997 - --------------------------- Robin R. Howell /s/ Billy H. Martin Director March 28, 1997 - --------------------------- Billy H. Martin /s/ J. Edward Mulkey, Jr. Director, President and March 28, 1997 - --------------------------- Chief J. Edward Mulkey, Jr. Operating Officer /s/ Darrell D. Pittard Chairman and Chief Executive March 28, 1997 - --------------------------- Officer (Principal Executive Darrell D. Pittard Officer) /s/ Frank H. Roach Chief Financial Officer March 28, 1997 - --------------------------- (Principal Financial and Frank H. Roach Accounting Officer) 34 EXHIBIT INDEX Exhibit No. Description of Exhibit - ------- ---------------------------------------------------------------------- 2 Agreement and Plan of Reorganization dated February 3, 1997 between First Alliance/Premier Bancshares, Inc. and The Central and Southern Holding Company. 2.1 First Amendment to Agreement and Plan of Reorganization dated March 26, 1997 between Premier Bancshares, Inc. and The Central and Southern Holding Company. 3.1 Articles of Incorporation (incorporated by reference as Exhibit 3.1 to the Registrant's Form 10-QSB for the quarter ended September 30, 1996). 3.2 Articles of Amendment dated February 4, 1997. 3.3 Bylaws of Registrant, as amended (incorporated by reference as Exhibit 3.2 from the Registrant's Form 10-QSB for the quarter ended September 30, 1996). 4.1 Form of Common Stock Certificate. 10.1 First Alliance Bancorp, Inc. 1995 Stock Option Plan, dated as of August 8, 1995, and amended as of March 12, 1996 and related form of Employee Incentive Stock Option Agreement (incorporated by reference as Exhibit 10.6 to the Registrant's Form 10-KSB for the year ended December 31, 1995)./1/ 10.2 Guaranty, dated March 25, 1996, by First Alliance Bancorp, Inc. relating to a $2,000,000 loan made by The Bankers Bank to Interim Alliance Corporation d/b/a Alliance Finance (incorporated by reference as Exhibit 10.7 to the Registrant's Form 10-KSB for the year ended December 31, 1995). 10.3 Employment Agreement dated July 1, 1995 by and between Premier, First Alliance Bank and J. Edward Mulkey, Jr. (incorporated by reference as Exhibit 10.5 to the Registrant's Form 10-KSB for the year ended December 31, 1995)./1/ 10.4 Employment Agreement dated January 1, 1997, by and between Premier Lending Corporation and George S. Phelps./1/ 10.5 Employment Agreement dated January 1, 1997, by and between Premier Lending Corporation and Michael W. Lane./1/ 35 10.6 Employment Agreement dated January 1, 1997, by and between Premier Lending Corporation and Brian D. Schmitt./1/ 10.7 Amendment to Employment Agreement dated January 1, 1997, by and between First Alliance/Premier Bancshares, Inc. and Darrell D. Pittard./1/ 10.8 Form of Employment Agreement by and between Premier Bancshares, Inc., Premier Lending Corporation and Darrell D. Pittard. 10.9 Amended and Restated Stock Purchase Agreement by and between Premier Bancshares, Inc. (formerly known as First Alliance/Premier Bancshares, Inc.) and Net.B@nk, Inc. dated December 19, 1996. 10.10 First Amendment to the Amended and Restated Stock Purchase Agreement by and between Premier Bancshares, Inc. and Net.B@nk, Inc. dated December 19, 1996. 10.11 Purchase and Assumption Agreement by and between Premier Bank, FSB and First Alliance Bank dated December 19, 1996. 10.12 First Amendment to Purchase and Assumption Agreement by and between Premier Bank, FSB and First Alliance Bank dated March 13, 1997. 10.13 Second Amendment to Purchase and Assumption Agreement by and between Premier Bank, FSB and First Alliance Bank dated March 25, 1997 10.14 Form of Premier Bancshares, Inc. 1997 Stock Option Plan./1/ 10.15 Form of Premier Bancshares, Inc. Directors' Stock Option Plan./1/ 11.1 Statement of Per Share Earnings. 13.1 Registrant's 1996 Annual Report to Shareholders. Only those portions of the Annual Report to Shareholders that are specifically incorporated by reference into this report on Form 10-K shall be deemed filed with the Commission. 21 Subsidiaries of Premier Bancshares, Inc. 23 Consent of Mauldin & Jenkins, LLC 24 Power of Attorney (appears on the signature pages to this Form 10-K). 27 Financial Data Schedule (for SEC use only). ____________ /1/ Registrant's plans, management contract and compensatory arrangements. 36 EX-2 2 AGREEMENT AND PLAN OF REORGANIZATION AGREEMENT AND PLAN OF REORGANIZATION AGREEMENT AND PLAN OF REORGANIZATION BY AND BETWEEN FIRST ALLIANCE/PREMIER BANCSHARES, INC. AND CENTRAL AND SOUTHERN HOLDING COMPANY DATED AS OF FEBRUARY 3, 1997 A-1 TABLE OF CONTENTS
Page ---- Preamble................................................................ A-6 ARTICLE 1 TRANSACTIONS AND TERMS OF MERGER..................................... A-6 Merger............................................................... A-6 Time and Place of Closing............................................ A-7 Effective Time....................................................... A-7 ARTICLE 2 TERMS OF MERGER...................................................... A-7 Articles of Incorporation............................................ A-7 Bylaws............................................................... A-7 Directors and Officers............................................... A-7 Names................................................................ A-8 ARTICLE 3 MANNER OF CONVERTING SHARES.......................................... A-8 Conversion of Shares................................................. A-8 Anti-Dilution Provisions............................................. A-8 Shares Held by Premier or Central and Southern....................... A-8 Conversion of Stock Options; Restricted Stock........................ A-9 ARTICLE 4 EXCHANGE OF SHARES................................................... A-9 Exchange Procedures.................................................. A-9 Rights of Former Central and Southern Shareholders................... A-10 ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF CENTRAL AND SOUTHERN............................................ A-11 Organization, Standing, and Power.................................... A-11 Authority; No Breach By Agreement.................................... A-11 Common Stock......................................................... A-12 Central and Southern Subsidiaries.................................... A-12 Financial Statements................................................. A-13 Absence of Undisclosed Liabilities................................... A-13 Absence of Certain Changes or Events................................. A-14 Tax Matters.......................................................... A-14 Allowance for Possible Loan Losses................................... A-15 Assets............................................................... A-15
A-2
Page ---- Environmental Matters................................................ A-16 Compliance with Laws................................................. A-16 Labor Relations...................................................... A-17 Employee Benefit Plans............................................... A-17 Material Contracts................................................... A-19 Legal Proceedings.................................................... A-19 Reports.............................................................. A-20 Statements True and Correct.......................................... A-20 Accounting, Tax and Regulatory Matters............................... A-21 Charter Provisions................................................... A-21 ARTICLE 6 REPRESENTATIONS AND WARRANTIES OF PREMIER............................ A-21 Organization, Standing, and Power.................................... A-21 Authority; No Breach By Agreement.................................... A-21 Capital Stock........................................................ A-22 Premier Subsidiaries................................................. A-23 Financial Statements................................................. A-23 Absence of Undisclosed Liabilities................................... A-24 Absence of Certain Changes or Events................................. A-24 Tax Matters.......................................................... A-24 Allowance for Possible Loan Losses................................... A-25 Assets............................................................... A-25 Environmental Matters................................................ A-26 Compliance with Laws................................................. A-26 Labor Relations...................................................... A-27 Employee Benefit Plans............................................... A-27 Material Contracts................................................... A-29 Legal Proceedings.................................................... A-29 Reports.............................................................. A-30 Statements True and Correct.......................................... A-30 Accounting, Tax and Regulatory Matters............................... A-30 Charter Provisions................................................... A-31 ARTICLE 7 CONDUCT OF BUSINESS PENDING CONSUMMATION............................. A-31 Affirmative Covenants of Central and Southern........................ A-31 Negative Covenants of Central and Southern........................... A-31 Affirmative Covenants of Premier..................................... A-33 Negative Covenants of Premier........................................ A-34 Adverse Changes in Condition......................................... A-36 Reports.............................................................. A-36
A-3
Page ---- ARTICLE 8 ADDITIONAL AGREEMENTS................................................ A-36 Registration Statement; Proxy Statement; Shareholder Approval........ A-36 Exchange Listing..................................................... A-37 Applications......................................................... A-37 Filings with State Offices........................................... A-37 Agreement as to Efforts to Consummate................................ A-37 Investigation and Confidentiality.................................... A-37 Press Releases....................................................... A-38 Acquisition Proposals................................................ A-38 Accounting and Tax Treatment......................................... A-38 Agreement of Affiliates.............................................. A-39 Employee Benefits and Contracts...................................... A-39 ARTICLE 9 CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE.................... A-40 Conditions to Obligations of Each Party.............................. A-40 Conditions to Obligations of Premier................................. A-41 Conditions to Obligations of Central and Southern.................... A-43 ARTICLE 10 TERMINATION.......................................................... A-44 Termination.......................................................... A-44 Effect of Termination................................................ A-46 Non-Survival of Representations and Covenants........................ A-46 ARTICLE 11 MISCELLANEOUS........................................................ A-46 Definitions.......................................................... A-46 Expenses............................................................. A-53 Brokers and Finders.................................................. A-54 Entire Agreement..................................................... A-54 Amendments........................................................... A-54 Waivers.............................................................. A-55 Assignment........................................................... A-55 Notices.............................................................. A-55 Governing Law........................................................ A-56 Counterparts......................................................... A-56 Captions............................................................. A-56 Enforcement of Agreement............................................. A-57 Severability......................................................... A-57
A-4 LIST OF EXHIBITS - ---------------- Exhibit Number Description - -------------- ----------- 1. Form of Agreement of Affiliates of Central and Southern. ((S) 8.10). 2. Matters as to which Counsel for Central and Southern will opine. ((S) 9.2(d)). 3. Form of Claims/Indemnification Letter ((S) 9.2(e)). 4. Matters as to which Counsel for Premier will opine. ((S) 9.3(d)). 5. Central and Southern Employment Agreements. ((S) 8.11(b)). 6. Premier Employment Agreement. ((S) 8.11(c)). A-5 AGREEMENT AND PLAN OF REORGANIZATION ------------------------------------ THIS AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is made and entered into as of February 3, 1997 by and between FIRST ALLIANCE/PREMIER BANCSHARES, INC. ("Premier"), a corporation organized and existing under the laws of the State of Georgia, with its principal office located in Marietta, Georgia, and CENTRAL AND SOUTHERN HOLDING COMPANY ("Central and Southern"), a corporation organized and existing under the laws of the State of Georgia, with its principal office located in Milledgeville, Georgia. PREAMBLE --------- The Boards of Directors of Premier and Central and Southern are of the opinion that the transactions described herein are in the best interests of the parties and their respective shareholders. This Agreement provides for the merger of Central and Southern with and into Premier, with Premier being the surviving corporation of the merger. At the effective time of such merger, the outstanding shares of capital stock of Central and Southern will be converted into the right to receive shares of capital stock of the surviving corporation. As a result, shareholders of Central and Southern will become shareholders of the surviving corporation, and each of the subsidiaries of Central and Southern will continue to conduct its business and operations as a wholly-owned subsidiary of the surviving corporation. The transactions described in this Agreement are subject to the approvals of the Boards of Directors and the shareholders of both Central and Southern and Premier, the Board of Governors of the Federal Reserve System, the Georgia Department of Banking and Finance and the satisfaction of certain other conditions described in this Agreement. It is the intention of the parties to this Agreement that the merger (i) for federal income tax purposes shall qualify as a "reorganization" within the meaning of Section 368(a) of the Internal Revenue Code and (ii) for accounting purposes shall be accounted for as a "pooling of interests." Certain terms used in this Agreement are defined in Section 11.1 of this Agreement. NOW, THEREFORE, in consideration of the above and the mutual warranties, representations, covenants and agreements set forth herein, the parties agree as follows: ARTICLE 1 TRANSACTIONS AND TERMS OF MERGER -------------------------------- 1.1 MERGER. Subject to the terms and conditions of this Agreement, ------ at the Effective Time, Central and Southern shall be merged with and into Premier in accordance with the provisions of Section 14-2-1101 of the GBCC and with the effect provided in Section 14-2-1106 of the GBCC (the "Merger"). Premier shall be the Surviving Corporation resulting from the Merger. A-6 The Merger shall be consummated pursuant to the terms of this Agreement, which has been approved and adopted by the respective Boards of Directors of Premier and Central and Southern. 1.2 TIME AND PLACE OF CLOSING. The Closing will take place at 10:00 ------------------------- a.m. on the date that the Effective Time occurs (or the immediately preceding day if the Effective Time is earlier than 10:00 a.m.), or at such other time as the Parties, acting through their chief executive officers may mutually agree. The place of Closing shall be at the offices of Womble Carlyle Sandridge & Rice, PLLC, Atlanta, Georgia, or such other place as may be mutually agreed upon by the Parties. 1.3 EFFECTIVE TIME. The Merger and other transactions contemplated -------------- by this Agreement shall become effective on the date and at the time the Articles of Merger reflecting the Merger shall become effective with the Secretary of State of the State of Georgia (the "Effective Time"). Subject to the terms and conditions hereof, unless otherwise mutually agreed upon in writing by the chief executive officer of each Party, the Parties shall use their reasonable efforts to cause the Effective Time to occur on the last business day of the month in which occurs the last to occur of (a) the effective date (including expiration of any applicable waiting period) of the last required Consent of any Regulatory Authority having authority over and approving or exempting the Merger, (b) the date on which the shareholders of Central and Southern approve this Agreement to the extent such approval is required by applicable Law, and (c) the date on which the shareholders of Premier approve this Agreement to the extent such approval is required; or such later date as may be mutually agreed upon in writing by the chief executive officer of each Party. ARTICLE 2 TERMS OF MERGER --------------- 2.1 ARTICLES OF INCORPORATION. The Articles of Incorporation of ------------------------- Premier in effect immediately prior to the Effective Time shall be the Articles of Incorporation of the Surviving Corporation until otherwise amended or repealed. 2.2 BYLAWS. The Bylaws of Premier in effect immediately prior to ------ the Effective Time shall be the Bylaws of the Surviving Corporation until otherwise amended or repealed. 2.3 DIRECTORS AND OFFICERS. The directors of the Surviving ---------------------- Corporation from and after the Effective Time shall consist of six outside directors of Premier to be specified to Central and Southern within fifteen (15) days after the execution of this Agreement, six outside directors of Central and Southern to be specified to Premier within fifteen (15) days after the execution of this Agreement, and Darrell D. Pittard, Robert C. Oliver and J. Edward Mulkey, Jr., as inside directors who shall serve in accordance with the Bylaws of the Surviving Corporation. The officers of the Surviving Corporation shall be as follows: Darrell D. Pittard shall be its Chairman of the Board and Chief Executive Officer and Robert C. Oliver shall be its President and Chief Operating Officer, J. Edward Mulkey, Jr., shall be its Vice Chairman and Michael E. Ricketson and Frank H. Roach shall be its Executive Vice Presidents. Such officers, together with such additional persons as may A-7 thereafter be elected, shall serve as the officers of the Surviving Corporation from and after the Effective Time in accordance with the Bylaws of the Surviving Corporation. At the Effective Time of the Merger, Mr. Pittard, Mr. Mulkey and Mr. Oliver will be elected to the board of directors of all of the Subsidiaries of the Surviving Corporation. Mr. Pittard will continue as Chairman and Chief Executive Officer of Premier Lending Corporation. Mr. Oliver will continue as President of The Central and Southern Bank of Georgia and on the Board of Directors of The Central and Southern Bank of North Georgia, F.S.B. Mr. Mulkey will continue as President and Chief Executive Officer of Premier Bank and on the board of directors of Premier Bank, F.S.B. and Alliance Finance. Mr. Ricketson will continue as Chief Financial Officer of The Central and Southern Bank of Georgia and The Central and Southern Bank of North Georgia, F.S.B. 2.4 NAMES. At the Effective Time of the Merger, the Surviving ----- Corporation will change its name to "Premier Bancshares, Inc." As soon as practicable following the Effective Time, The Central and Southern Bank of North Georgia, F.S.B. will change its name to "Premier Bank F.S.B." ARTICLE 3 MANNER OF CONVERTING SHARES --------------------------- 3.1 CONVERSION OF SHARES. Subject to the provisions of this Article -------------------- 3, at the Effective Time, by virtue of the Merger and without any action on the part of the holders thereof, the shares of the constituent corporations shall be converted as follows: Each share of Premier Common Stock issued and outstanding immediately prior to the Effective Time shall remain issued and outstanding from and after the Effective Time. Each share of Central and Southern Common Stock (excluding shares held by Premier or Central and Southern or any of their respective Subsidiaries, in each case other than in a fiduciary capacity or as a result of debts previously contracted) issued and outstanding at the Effective Time shall cease to be outstanding and shall be converted into and exchanged for the right to receive one share of Surviving Corporation Common Stock (the "Exchange Ratio"). 3.2 ANTI-DILUTION PROVISIONS. In the event Premier or Central and ------------------------ Southern changes the number of shares of Premier Common Stock or Central and Southern Common Stock, respectively, issued and outstanding prior to the Effective Time as a result of a stock split, stock dividend or similar recapitalization with respect to such stock and the record date therefor (in the case of a stock dividend) or the effective date therefor (in the case of a stock split or similar recapitalization) shall be prior to the Effective Time, the Exchange Ratio shall be proportionately adjusted, provided, however, that the Exchange Ratio shall not be adjusted for the Premier stock split described in Section 9.3(e) herein. 3.3 SHARES HELD BY PREMIER OR CENTRAL AND SOUTHERN. Each of the ---------------------------------------------- shares of Premier Common Stock held by any Premier Company or by any Central and Southern Company, in each A-8 case other than in a fiduciary capacity or as a result of debts previously contracted, shall be canceled and retired at the Effective Time and no consideration shall be issued in exchange therefor. 3.4 CONVERSION OF STOCK OPTIONS; RESTRICTED STOCK. --------------------------------------------- (a) At the Effective Time, all rights with respect to Central and Southern Common Stock pursuant to stock options ("Central and Southern Options") granted by Central and Southern under the Central and Southern Stock Plans, which are outstanding at the Effective Time, whether or not exercisable, shall be converted into and become rights with respect to Surviving Corporation Common Stock, and the Surviving Corporation shall assume each Central and Southern Option, in accordance with the terms of the Central and Southern Stock Plan and stock option agreement by which it is evidenced. From and after the Effective Time, (i) each Central and Southern Option assumed by the Surviving Corporation may be exercised solely for shares of Surviving Corporation Common Stock, (ii) the number of shares of Surviving Corporation Common Stock subject to such Central and Southern Option shall be equal to the number of shares of Central and Southern Common Stock subject to such Central and Southern Option immediately prior to the Effective Time, and (iii) the per share exercise price under each such Central and Southern Option shall not be changed. It is intended that the foregoing assumption shall be undertaken in a manner that will not constitute a "modification" as defined in Section 424 of the Internal Revenue Code, as to any stock option which is an "incentive stock option." Central and Southern and Premier agree to take all necessary steps to effect the provisions of this Section 3.4. (b) All restrictions or limitations on transfer with respect to Central and Southern Common Stock awarded under the Central and Southern Stock Plans or any other plan, program or arrangement of any Central and Southern Company, to the extent that such restrictions or limitations shall not have already lapsed, and except as otherwise expressly provided in such plan, program or arrangement, shall remain in full force and effect with respect to shares of Surviving Corporation Common Stock into which such restricted stock is converted pursuant to Section 3.1 of this Agreement. ARTICLE 4 EXCHANGE OF SHARES ------------------ 4.1 EXCHANGE PROCEDURES. Unless the parties otherwise agree, ------------------- promptly after the Effective Time, the Surviving Corporation shall mail to the former holders of Central and Southern Common Stock appropriate transmittal materials which shall specify that delivery shall be effected, and risk of loss and title to the certificates theretofore representing shares of Central and Southern Common Stock shall pass, only upon proper delivery of such certificates to the Surviving Corporation. After the Effective Time, each holder of shares of Central and Southern Common Stock (other than shares to be canceled pursuant to Section 3.3 of this Agreement) issued and outstanding at the Effective Time shall surrender the certificate or certificates representing such shares to the Surviving Corporation and shall promptly upon surrender thereof receive in exchange A-9 therefor the consideration provided in Section 3.1 of this Agreement, together with all undelivered dividends or distributions in respect of such shares (without interest thereon) pursuant to Section 4.2 of this Agreement. The Surviving Corporation shall not be obligated to deliver the consideration to which any former holder of Central and Southern Common Stock is entitled as a result of the Merger until such holder surrenders his or her certificate or certificates representing the shares of Central and Southern Common Stock for exchange as provided in this Section 4.1. The certificate or certificates of Central and Southern Common Stock so surrendered shall be duly endorsed as the Surviving Corporation may require. Any other provision of this Agreement notwithstanding, the Surviving Corporation shall not be liable to a holder of Central and Southern Common Stock for any amounts paid or property delivered in good faith to a public official pursuant to any applicable abandoned property Law. 4.2 RIGHTS OF FORMER CENTRAL AND SOUTHERN SHAREHOLDERS. The stock -------------------------------------------------- transfer books of Central and Southern shall be closed as to holders of Central and Southern Common Stock immediately prior to the Effective Time and no transfer of Central and Southern Common Stock by any such holder shall thereafter be made or recognized. Until surrendered for exchange in accordance with the provisions of Section 4.1 of this Agreement, each certificate theretofore representing shares of Central and Southern Common Stock (other than shares to be canceled pursuant to Section 3.3) shall from and after the Effective Time represent for all purposes only the right to receive the consideration provided in Section 3.1 of this Agreement in exchange therefor. To the extent permitted by Law, former holders of record of Central and Southern Common Stock shall be entitled to vote after the Effective Time at any meeting of Surviving Corporation shareholders the number of whole shares of Surviving Corporation Common Stock into which their respective shares of Central and Southern Common Stock are converted, regardless of whether such holders have exchanged their certificates representing Central and Southern Common Stock for certificates representing Surviving Corporation Common Stock in accordance with the provisions of this Agreement. Whenever a dividend or other distribution is declared by the Surviving Corporation on the Surviving Corporation Common Stock, the record date for which is at or after the Effective Time, the declaration shall include dividends or other distributions on all shares issuable pursuant to this Agreement, but no dividend or other distribution payable to the holders of record of Surviving Corporation Common Stock as of any time subsequent to the Effective Time shall be delivered to the holder of any certificate representing shares of Central and Southern Common Stock issued and outstanding at the Effective Time until such holder surrenders such certificate for exchange as provided in Section 4.1 of this Agreement. However, upon surrender of such Central and Southern Common Stock certificate, the Surviving Corporation Common Stock certificate and with all such undelivered dividends or other distributions (without interest) shall be delivered and paid with respect to each share represented by such certificate. A-10 ARTICLE 5 REPRESENTATIONS AND WARRANTIES ------------------------------ OF CENTRAL AND SOUTHERN ----------------------- Central and Southern hereby represents and warrants to Premier as follows: 5.1 ORGANIZATION, STANDING, AND POWER. Central and Southern is a --------------------------------- corporation duly organized, validly existing, and in good standing under the Laws of the State of Georgia and is duly registered as a bank holding company under the BHC Act. Central and Southern has the corporate power and authority to carry on its business as now conducted and to own, lease and operate its Assets. Central and Southern is duly qualified or licensed to transact business as a foreign corporation in good standing in the States of the United States and foreign jurisdictions where the character of its Assets or the nature or conduct of its business requires it to be so qualified or licensed, except for such jurisdictions in which the failure to be so qualified or licensed is not reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on Central and Southern. 5.2 AUTHORITY; NO BREACH BY AGREEMENT. ---------------------------------- (a) Central and Southern has the corporate power and authority necessary to execute, deliver and perform its obligations under this Agreement and to consummate the transactions contemplated hereby. The execution, delivery and performance of this Agreement and the consummation of the transactions contemplated herein, including the Merger, have been duly and validly authorized by all necessary corporate action in respect thereof on the part of Central and Southern, subject to the approval of this Agreement by the holders of a majority of the outstanding Central and Southern Common Stock, which is the only shareholder vote required for approval of this Agreement and consummation of the Merger by Central and Southern. Subject to such requisite shareholder approval, this Agreement represents a legal, valid and binding obligation of Central and Southern, enforceable against Central and Southern in accordance with its terms (except in all cases as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, or similar Laws affecting the enforcement of creditors' rights generally and except that the availability of the equitable remedy of specific performance or injunctive relief is subject to the discretion of the court before which any proceeding may be brought). (b) Neither the execution and delivery of this Agreement by Central and Southern, nor the consummation by Central and Southern of the transactions contemplated hereby, nor compliance by Central and Southern with any of the provisions hereof will (i) conflict with or result in a breach of any provision of Central and Southern's Articles of Incorporation or Bylaws, or (ii) constitute or result in a Default under, or require any Consent pursuant to, or result in the creation of any Lien on any Asset of any Central and Southern Company under, any Contract or Permit of any Central and Southern Company, where such Default or Lien, or any failure to obtain such Consent, is reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on Central and Southern, or (iii) subject to receipt of the requisite approvals referred to in Section 9.1 (b) A-11 of this Agreement, violate any Law or Order applicable to any Central and Southern Company or any of their respective Assets. (c) Other than in connection or compliance with the provisions of the Securities Laws, applicable state corporate and securities Laws, and rules of the NASD, and other than Consents required from Regulatory Authorities, and other than notices to or filings with the Internal Revenue Service or the Pension Benefit Guaranty Corporation with respect to any employee benefit plans, and other than Consents, filings or notifications which, if not obtained or made, are not reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on Central and Southern, no notice to, filing with, or Consent of any public body or authority is necessary for the consummation by Central and Southern of the Merger and the other transactions contemplated in this Agreement. 5.3 COMMON STOCK. ------------ (a) The authorized Common stock of Central and Southern consists of 10,000,000 shares of Central and Southern Common Stock, of which 3,653,523 shares are issued and outstanding as of the date of this Agreement and not more than 3,653,523 shares will be issued and outstanding at the Effective Time (as a result of the exercise of outstanding options). All of the issued and outstanding shares of capital stock of Central and Southern are duly and validly issued and outstanding and are fully paid and nonassessable under the GBCC. None of the outstanding shares of capital stock of Central and Southern has been issued in violation of any preemptive rights of the current or past shareholders of Central and Southern. Central and Southern has reserved 170,000 shares of Central and Southern Common Stock for issuance under the Central and Southern Stock Plans, pursuant to which options to purchase not more than 153,000 shares of Central and Southern Common Stock are outstanding as of the date of this Agreement and at the Effective Time. (b) Except as set forth in Section 5.3(a) of this Agreement, or as disclosed in Section 5.3 of the Central and Southern Disclosure Memorandum, --------------------- there are no shares of capital stock or other equity securities of Central and Southern outstanding and no outstanding Rights relating to the capital stock of Central and Southern. 5.4 CENTRAL AND SOUTHERN SUBSIDIARIES. Central and Southern has --------------------------------- disclosed in Section 5.4 of the Central and Southern Disclosure Memorandum all --------------------- of the Central and Southern Subsidiaries as of the date of this Agreement. Except as disclosed in Section 5.4 of the Central and Southern Disclosure ---------- Memorandum, Central and Southern or one of its Subsidiaries owns all of the - ---------- issued and outstanding shares of capital stock of each Central and Southern Subsidiary. No equity securities of any Central and Southern Subsidiary are or may become required to be issued (other than to another Central and Southern Company) by reason of any Rights, and there are no Contracts by which any Central and Southern Subsidiary is bound to issue (other than to another Central and Southern Company) additional shares of its capital stock or Rights, or by which any Central and Southern Company is or may be bound to transfer any shares of the capital stock of any Central and Southern Subsidiary (other than to another Central and Southern Company), and there are no A-12 Contracts by which any Central and Southern Subsidiary is bound to issue (other than to another Central and Southern Company) additional shares of its capital stock. There are no Contracts relating to the rights of any Central and Southern Company to vote or to dispose of any shares of the capital stock of any Central and Southern Subsidiary. All of the shares of capital stock of each Central and Southern Subsidiary held by a Central and Southern Company are fully paid and nonassessable under the applicable Law of the jurisdiction in which such Subsidiary is incorporated or organized and are owned by the Central and Southern Company free and clear of any Lien. Each Central and Southern Subsidiary is either a bank, a savings association or a corporation and is duly organized, validly existing, and (as to corporations) in good standing under the Laws of the jurisdiction in which it is organized and has the corporate power and authority necessary for it to own, lease and operate its Assets and to carry on its business as now conducted. Each Central and Southern Subsidiary is duly qualified or licensed to transact business as a foreign corporation in good standing in the States of the United States and foreign jurisdictions where the character of its Assets or the nature or conduct of its business requires it to be so qualified or licensed, except for such jurisdictions in which the failure to be so qualified or licensed is not reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on Central and Southern. Each Central and Southern Subsidiary that is a depository institution is an "insured institution" as defined in the Federal Deposit Insurance Act and applicable regulations thereunder, and the deposits in which are insured by the Bank Insurance Fund or the Savings Association Insurance Fund, as appropriate. 5.5 FINANCIAL STATEMENTS. Central and Southern has included in -------------------- Section 5.5 of the Central and Southern Disclosure Memorandum copies of all --------------------- Central and Southern Financial Statements for periods ended prior to the date hereof and will deliver to Premier copies of all Central and Southern Financial Statements prepared subsequent to the date hereof. The Central and Southern Financial Statements (as of the dates thereof and for the periods covered thereby) (a) are, or if dated after the date of this Agreement will be, in accordance with the books and records of the Central and Southern Companies, which are or will be, as the case may be, complete and correct and which have been or will have been, as the case may be, maintained in accordance with good business practices, and (b) present or will present, as the case may be, fairly the consolidated financial position of the Central and Southern Companies as of the dates indicated and the consolidated results of operations, changes in shareholders' equity, and cash flows of Central and Southern Companies for the periods indicated, in accordance with GAAP (subject to any exceptions as to consistency specified therein or as may be indicated in the notes thereto or, in the case of interim financial statements, to normal recurring year-end adjustments that are not material in amount or effect). 5.6 ABSENCE OF UNDISCLOSED LIABILITIES. No Central and Southern ---------------------------------- Company has any Liabilities that are reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on Central and Southern except Liabilities which are accrued or reserved against in the consolidated balance sheets of Central and Southern as of December 30, 1995 and September 30, 1996, included in Central and Southern Financial Statements or reflected in the notes thereto. No Central and Southern Company has incurred or paid any Liability since September 30, 1996, except for such Liabilities incurred or paid in the ordinary course of business consistent with past business A-13 practice and which are not reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on Central and Southern. 5.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since September 30, 1996, ------------------------------------ except as disclosed in SEC Documents filed by Central and Southern prior to the date of this Agreement, and except as disclosed in Section 5.7 of the Central and Southern Disclosure Memorandum, (a) there have been no events, changes or --------------------- occurrences which have had, or are reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on Central and Southern, and (b) the Central and Southern Companies have not taken any action, or failed to take any action, prior to the date of this Agreement, which action or failure, if taken after the date of this Agreement, would represent or result in a material breach or violation of any of the covenants and agreements of Central and Southern provided in Article 7 of this Agreement. 5.8 TAX MATTERS. ----------- (a) All Tax returns required to be filed by or on behalf of any of the Central and Southern Companies have been timely filed or requests for extensions have been timely filed, granted, and have not expired for periods ended on or before September 30, 1996, and on or before the date of the most recent fiscal year end immediately preceding the Effective Time, except to the extent that all such failures to file, taken together, are not reasonably likely to have a Material Adverse Effect on Central and Southern and all returns filed are complete and accurate to the Knowledge of Central and Southern. All Taxes shown on filed returns have been paid. As of the date of this Agreement, there is no audit examination, deficiency or refund Litigation with respect to any Taxes that is reasonably likely to result in a determination that would have, individually or in the aggregate, a Material Adverse Effect on Central and Southern, except as reserved against in the Central and Southern Financial Statements delivered prior to the date of this Agreement or as disclosed in Section 5.8(a) of the Central and Southern Disclosure Memorandum. All Taxes and --------------------- other Liabilities due with respect to completed and settled examinations or concluded Litigation have been paid. (b) Except as disclosed in Section 5.8(b) of the Central and Southern Disclosure Memorandum, none of the Central and Southern Companies has executed - --------------------- an extension or waiver of any statute of limitations on the assessment or collection of any Tax due that is currently in effect, and no unpaid tax deficiency has been asserted in writing against or with respect to any Central and Southern Company, which deficiency is reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on Central and Southern. (c) Adequate provision for any Taxes due or to become due for any of the Central and Southern Companies for the period or periods through and including the date of the respective Central and Southern Financial Statements has been made and is reflected on such Central and Southern Financial Statements. A-14 (d) Deferred Taxes of the Central and Southern Companies have been provided for in accordance with GAAP. (e) Each of the Central and Southern Companies is in compliance with, and its records contain all information and documents (including, without limitation, properly completed IRS Forms W-9) necessary to comply with, all applicable information reporting and Tax withholding requirements under federal, state and local Tax Laws, and such records identify with specificity all accounts subject to backup withholding under Section 3406 of the Internal Revenue Code, except for such instances of noncompliance and such omissions as are not reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on Central and Southern. 5.9 ALLOWANCE FOR POSSIBLE LOAN LOSSES. The allowance for possible ---------------------------------- loan or credit losses (the "Allowance") shown on the consolidated balance sheets of Central and Southern included in the most recent Central and Southern Financial Statements dated prior to the date of this Agreement was, and the Allowance shown on the consolidated balance sheets of Central and Southern included in the Central and Southern Financial Statements as of dates subsequent to the execution of this Agreement will be, as of the dates thereof, adequate (within the meaning of GAAP and applicable regulatory requirements or guidelines) to provide for losses relating to or inherent in the loan and lease portfolios (including accrued interest receivables) of the Central and Southern Companies and other extensions of credit (including letters of credit and commitments to make loans or extend credit) by the Central and Southern Companies as of the dates thereof except where the failure of such Allowance to be so adequate is not reasonably likely to have a Material Adverse Effect on Central and Southern. 5.10 ASSETS. Except as disclosed in Section 5.10 of the Central and ------ Southern Disclosure Memorandum or as disclosed or reserved against in the --------------------- Central and Southern Financial Statements, the Central and Southern Companies have good and marketable title, free and clear of all Liens, to all of their respective Assets. All material tangible properties used in the businesses of the Central and Southern Companies are in good condition, reasonable wear and tear excepted, and are usable in the ordinary course of business consistent with Central and Southern's past practices. All Assets which are material to Central and Southern's business on a consolidated basis, held under leases or subleases by any of the Central and Southern Companies, are held under valid Contracts enforceable in accordance with their respective terms (except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other Laws affecting the enforcement of creditors' rights generally and except that the availability of the equitable remedy of specific performance or injunctive relief is subject to the discretion of the court before which any proceedings may be brought), and each such Contract is in full force and effect. The policies of fire, theft, liability and other insurance maintained with respect to the Assets or businesses of the Central and Southern Companies provide adequate coverage under current industry practices against loss or Liability, and the fidelity and blanket bonds in effect as to which any of the Central and Southern Companies is a named insured are reasonably sufficient. The Assets of the Central and Southern Companies include all assets required to operate the business of the Central and Southern Companies as presently conducted. A-15 5.11 ENVIRONMENTAL MATTERS. --------------------- (a) Except as disclosed in Section 5.11(a) of the Central and Southern Disclosure Memorandum, to the Knowledge of Central and Southern, each Central - --------------------- and Southern Company, its Participation Facilities and its Loan Properties are, and have been, in compliance with all Environmental Laws, except for noncompliance which is not reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on Central and Southern. (b) To the Knowledge of Central and Southern, there is no Litigation pending or threatened before any court, governmental agency or authority or other forum in which any Central and Southern Company or any of its Loan Properties or Participation Facilities has been or, with respect to threatened Litigation, may be named as a defendant or potentially responsible party (i) for alleged noncompliance with any Environmental Law or (ii) relating to the Release into the Environment of any Hazardous Material (as defined below), whether or not occurring at, on, under or involving a site owned, leased or operated by any Central and Southern Company or any of its Loan Properties or Participation Facilities, except for such Litigation pending or threatened the resolution of which is not reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on Central and Southern or to the Knowledge of Central and Southern, there is no reasonable basis for any such Litigation. (c) To the Knowledge of Central and Southern, there have been no releases of Hazardous Material in, on, under or affecting any Participation Facility or Loan Property, except such as are not reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on Central and Southern. 5.12 COMPLIANCE WITH LAWS. Central and Southern is duly registered -------------------- as a bank holding company and as a thrift holding company under the BHC Act and HOLA, respectively. Each Central and Southern Company has in effect all Permits necessary for it to own, lease or operate its Assets and to carry on its business as now conducted, except for those Permits the absence of which are not reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on Central and Southern, and there has occurred no Default under any such Permit, other than Defaults which are not reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on Central and Southern. Except as disclosed in Section 5.12 of the Central and Southern Disclosure Memorandum, no Central and Southern Company: - --------------------- (a) is in violation of any Laws, Orders or Permits applicable to its business or employees conducting its business, except for violations which are not reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on Central and Southern; and (b) has received any notification or communication from any agency or department of federal, state, or local government or any Regulatory Authority or the staff thereof (i) asserting that any Central and Southern Company is not in compliance with any of the Laws or A-16 Orders which such governmental authority or Regulatory Authority enforces, where such noncompliance is reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on Central and Southern, (ii) threatening to revoke any Permits, the revocation of which is reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on Central and Southern, or (iii) requiring any Central and Southern Company to enter into or consent to the issuance of a cease and desist order, formal agreement, directive, commitment or memorandum of understanding, or to adopt any Board resolution or similar undertaking, which restricts materially the conduct of its business, or in any manner relates to its capital adequacy, its credit or reserve policies, its management, or the payment of dividends. 5.13 LABOR RELATIONS. No Central and Southern Company is the --------------- subject of any Litigation asserting that it or any other Central and Southern Company has committed an unfair labor practice (within the meaning of the National Labor Relations Act or comparable state law) or seeking to compel it or any other Central and Southern Company to bargain with any labor organization as to wages or conditions of employment, nor is there any strike or other labor dispute involving any Central and Southern Company, pending or, to its Knowledge, threatened, nor, to its Knowledge, is there any activity involving any Central and Southern Company's employees seeking to certify a collective bargaining unit or engaging in any other organization activity. 5.14 EMPLOYEE BENEFIT PLANS. ---------------------- (a) Central and Southern has disclosed in Section 5.14 of the Central and Southern Disclosure Memorandum and delivered or made available to Premier --------------------- prior to the execution of this Agreement copies in each case of all pension, retirement, profit-sharing, deferred compensation, stock option, employee stock ownership, severance pay, vacation, bonus, or other incentive plans, all other written employee programs, arrangements, or agreements, all medical, vision, dental, or other health plans, all life insurance plans, and all other employee benefit plans or fringe benefit plans, including, without limitation, "employee benefit plans" as that term is defined in Section 3(3) of ERISA, currently adopted, maintained by, sponsored in whole or in part by, or contributed to by any Central and Southern Company or Affiliate thereof for the benefit of employees, retirees, dependents, spouses, directors, independent contractors, or other beneficiaries and under which employees, retirees, dependents, spouses, directors, independent contractors, or other beneficiaries are eligible to participate (collectively, the "Central and Southern Benefit Plans"). Any of the Central and Southern Benefit Plans which is an "employee pension benefit plan," as that term is defined in Section 3(2) of ERISA, is referred to herein as a "Central and Southern ERISA Plan." Each Central and Southern ERISA Plan which is also a "defined benefit plan" (as defined in Section 414(j) of the Internal Revenue Code) is referred to herein as a "Central and Southern Pension Plan." No Central and Southern Pension Plan is or has been a multi-employer plan within the meaning of Section 3(37) of ERISA. (b) All Central and Southern Benefit Plans are in compliance with the applicable terms of ERISA, the Internal Revenue Code, and any other applicable Laws the breach or violation of which are reasonably likely to have, individually or in the aggregate, a Material Adverse Effect A-17 on Central and Southern. Each Central and Southern ERISA Plan which is intended to be qualified under Section 401(a) of the Internal Revenue Code has received a favorable determination letter from the Internal Revenue Service, and Central and Southern is not aware of any circumstances likely to result in revocation of any such favorable determination letter. To the Knowledge of Central and Southern, no Central and Southern Company nor any other party has engaged in a transaction with respect to any Central and Southern Benefit Plan that, assuming the taxable period of such transaction expired as of the date hereof, would subject any Central and Southern Company to a tax or penalty imposed by either Section 4975 of the Internal Revenue Code or Section 502(i) of ERISA in amounts which are reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on Central and Southern. (c) Central and Southern maintains an "employee pension benefit plan," within the meaning of Section 3(2) of ERISA that is or was subject to Title IV of ERISA. (d) Neither Central and Southern nor any ERISA Affiliate of Central and Southern has any past, present or future obligation or liability to contribute to any multi-employer plan, as defined in Section 3(37) of ERISA. (e) Except as disclosed in Section 5.14(e) of the Central and Southern Disclosure Memorandum, (i) no Central and Southern Company has any obligations - --------------------- for retiree health and life benefits under any of the Central and Southern Benefit Plans, except as required by Section 6.01 of ERISA and Section 4980B of the Code; (ii) there are no restrictions on the rights of any Central and Southern Company to amend or terminate any such Plan; and (iii) any amendment or termination of any such Plan will not cause any Central and Southern Company to incur any Liability that is reasonably likely to have a Material Adverse Effect on Central and Southern. (f) Except as disclosed in Section 5.14(f) of the Central and Southern Disclosure Memorandum, neither the execution and delivery of this Agreement nor - --------------------- the consummation of the transactions contemplated hereby will (i) result in any payment (including, without limitation, severance, unemployment compensation, golden parachute or otherwise) becoming due to any director or any employee of any Central and Southern Company from any Central and Southern Company under any Central and Southern Benefit Plan or otherwise, (ii) increase any benefits otherwise payable under any Central and Southern Benefit Plan, or (iii) result in any acceleration of the time of payment or vesting of any such benefit. (g) The actuarial present values of all accrued deferred compensation entitlements (including, without limitation, entitlements under any executive compensation, supplemental retirement, or employment agreement) of employees and former employees of any Central and Southern Company and their respective beneficiaries have been fully reflected on the Central and Southern Financial Statements to the extent required by and in accordance with GAAP. A-18 (h) Central and Southern and each ERISA Affiliate of Central and Southern has complied with the continuation of coverage requirements of Section 1001 of the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended, and ERISA Sections 601 through 608. (i) Neither Central and Southern nor any ERISA Affiliate of Central and Southern is obligated, contingently or otherwise, under any agreement to pay any amount which would be treated as a "parachute payment," as defined in Section 280G(b) of the Internal Revenue Code (determined without regard to Section 280G(b)(2)(A)(ii) of the Internal Revenue Code). (j) Other than routine claims for benefits, there are no actions, audits, investigations, suits or claims pending, or threatened against any Central and Southern Benefit Plan, any trust or other funding agency created thereunder, or against any fiduciary of any Central and Southern Benefit Plan or against the assets of any Central and Southern Benefit Plan. 5.15 MATERIAL CONTRACTS. Except as disclosed in Section 5.15 of the ------------------ Central and Southern Disclosure Memorandum or otherwise reflected in the Central --------------------- and Southern Financial Statements, none of the Central and Southern Companies, nor any of their respective Assets, businesses or operations, is a party to, or is bound or affected by, or receives benefits under, (a) any employment, severance, termination, consulting or retirement Contract providing for aggregate payments to any Person in any calendar year in excess of $10,000, excluding "at will" employment arrangements, (b) any Contract relating to the borrowing of money by any Central and Southern Company or the guarantee by any Central and Southern Company of any such obligation (other than Contracts evidencing deposit liabilities, purchases of federal funds, Federal Home Loan Bank advances, fully-secured repurchase agreements, trade payables, and Contracts relating to borrowings or guarantees made in the ordinary course of business), (c) any Contracts between or among Central and Southern Companies, and (d) any other Contract (excluding this Agreement) or amendment thereto that is required to be filed as an exhibit to a Form 10-KSB or Form 10-QSB filed by Central and Southern with the SEC as of the date of this Agreement that has not been filed as an exhibit to any Central and Southern Form 10-KSB or 10-QSB filed with the SEC (together with all Contracts referred to in Sections 5.10 and 5.14(a) of this Agreement, the "Central and Southern Contracts"). None of the Central and Southern Companies is in Default under any Central and Southern Contract, other than Defaults which are not reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on Central and Southern. All of the indebtedness of any Central and Southern Company for money borrowed is prepayable at any time by such Central and Southern Company without penalty or premium. 5.16 LEGAL PROCEEDINGS. Except as disclosed in Section 5.16 of the ----------------- Central and Southern Disclosure Memorandum, there is no Litigation instituted or --------------------- pending, or, to the Knowledge of Central and Southern, threatened (or unasserted but considered probable of assertion and which if asserted would have at least a reasonable probability of an unfavorable outcome) against any Central and Southern Company, or against any Asset, interest, or right of any of them, that is reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on Central and Southern, nor are there any Orders of any Regulatory Authorities, other governmental authorities, or arbitrators A-19 outstanding against any Central and Southern Company, that are reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on Central and Southern. 5.17 REPORTS. Since January 1, 1996, each Central and Southern ------- Company has timely filed all reports and statements, together with any amendments required to be made with respect thereto, that it was required to file with (a) the SEC, including, but not limited to, Forms 10-KSB, Forms 10-QSB, Forms 8-KSB, and Proxy Statements, (b) other Regulatory Authorities, and (c) any applicable state securities or banking authorities (except, in the case of state securities authorities, failures to file which are not reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on Central and Southern). As of their respective dates, each of such reports and documents, including the financial statements, exhibits, and schedules thereto, complied in all material respects with all applicable Laws. As of its respective date, each such report and document to Central and Southern's Knowledge did not, in any material respects, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances under which they were made, not misleading. 5.18 STATEMENTS TRUE AND CORRECT. No statement, certificate, --------------------------- instrument or other writing furnished or to be furnished by any Central and Southern Company or any Affiliate thereof to Premier pursuant to this Agreement or any other document, agreement or instrument referred to herein contains or will contain any untrue statement of material fact or will omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. None of the information supplied or to be supplied by any Central and Southern Company or any Affiliate thereof for inclusion in the Registration Statement to be filed by Premier with the SEC will, when the Registration Statement becomes effective, be false or misleading with respect to any material fact, or omit to state any material fact necessary to make the statements therein not misleading. None of the information supplied or to be supplied by any Central and Southern Company or any Affiliate thereof for inclusion in the Proxy Statement to be mailed to Central and Southern's shareholders in connection with the Central and Southern Shareholders' Meeting, and any other documents to be filed by a Central and Southern Company or any Affiliate thereof with the SEC or any other Regulatory Authority in connection with the transactions contemplated hereby, will, at the respective time such documents are filed, and with respect to the Proxy Statement, when first mailed to the shareholders of Central and Southern, be false or misleading with respect to any material fact, or omit to state any material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, or, in the case of the Proxy Statement or any amendment thereof or supplement thereto, at the time of the Central and Southern Shareholders' Meeting, be false or misleading with respect to any material fact, or omit to state any material fact necessary to correct any statement in any earlier communication with respect to the solicitation of any proxy for the Central and Southern Shareholders' Meeting. All documents that any Central and Southern Company or any Affiliate thereof is responsible for filing with any Regulatory Authority in connection with the transactions contemplated hereby will comply as to form in all material respects with the provisions of applicable Law. A-20 5.19 ACCOUNTING, TAX AND REGULATORY MATTERS. No Central and -------------------------------------- Southern Company or any Affiliate thereof has taken any action, or agreed to take any action, or has any Knowledge of any fact or circumstance that is reasonably likely to (a) prevent the transactions contemplated hereby, including the Merger, from qualifying for pooling-of-interests accounting treatment or treatment as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code, or (b) materially impede or delay receipt of any Consents of Regulatory Authorities referred to in Section 9.1(b) of this Agreement or result in the imposition of a condition or restriction of the type referred to in the second sentence of such Section. To the Knowledge of Central and Southern, there exists no fact, circumstance, or reason why the requisite Consents referred to in Section 9.1(b) of this Agreement cannot be received in a timely manner without the imposition of any condition or restriction of the type described in the second sentence of such Section 9.1(b). 5.20 CHARTER PROVISIONS. Each Central and Southern Company has ------------------ taken all action so that the entering into of this Agreement and the consummation of the Merger and the other transactions contemplated by this Agreement do not and will not result in the grant of any rights to any Person under the Articles of Incorporation, Bylaws or other governing instruments of any Central and Southern Company or restrict or impair the ability of the Surviving Corporation to vote, or otherwise to exercise the rights of a shareholder with respect to, shares of any Central and Southern Company that may be acquired or controlled by it. ARTICLE 6 REPRESENTATIONS AND WARRANTIES OF PREMIER ----------------------------------------- Premier hereby represents and warrants to Central and Southern as follows: 6.1 ORGANIZATION, STANDING, AND POWER. Premier is a corporation --------------------------------- duly organized, validly existing, and in good standing under the Laws of the State of Georgia, and is duly registered as a bank holding company under the BHC Act. Premier has the corporate power and authority to carry on its business as now conducted and to own, lease and operate its Assets. Premier is duly qualified or licensed to transact business as a foreign corporation in good standing in the States of the United States and foreign jurisdictions where the character of its Assets or the nature or conduct of its business requires it to be so qualified or licensed, except for such jurisdictions in which the failure to be so qualified or licensed is not reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on Premier. 6.2 AUTHORITY; NO BREACH BY AGREEMENT. --------------------------------- (a) Premier has the corporate power and authority necessary to execute, deliver and perform its obligations under this Agreement and to consummate the transactions contemplated hereby. The execution, delivery and performance of this Agreement and the consummation of the transactions contemplated herein, including the Merger, have been duly and validly authorized by A-21 all necessary corporate action in respect thereof on the part of Premier, subject to the approval of this Agreement by the holders of a majority of the outstanding Premier Common Stock, which is the only shareholder vote required for approval of this Agreement and consummation of the Merger by Premier. Subject to such requisite shareholder approval, this Agreement represents a legal, valid and binding obligation of Premier, enforceable against Premier in accordance with its terms (except in all cases as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, or similar Laws affecting the enforcement of creditors' rights generally and except that the availability of the equitable remedy of specific performance or injunctive relief is subject to the discretion of the court before which any proceeding may be brought). (b) Neither the execution and delivery of this Agreement by Premier, nor the consummation by Premier of the transactions contemplated hereby, nor compliance by Premier with any of the provisions hereof will (i) conflict with or result in a breach of any provision of Premier's Articles of Incorporation or Bylaws, or (ii) constitute or result in a Default under, or require any Consent pursuant to, or result in the creation of any Lien on any Asset of any Premier Company under, any Contract or Permit of any Premier Company, where such Default or Lien, or any failure to obtain such Consent, is reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on Premier, or (iii) subject to receipt of the requisite approvals referred to in Section 9.1(b) of this Agreement, violate any Law or Order applicable to any Premier Company or any of their respective Assets. (c) Other than in connection or compliance with the provisions of the Securities Laws, applicable state corporate and securities Laws, and rules of the NASD, and other than Consents required from Regulatory Authorities, and other than notices to or filings with the Internal Revenue Service or the Pension Benefit Guaranty Corporation with respect to any employee benefit plans, and other than Consents, filings or notifications which, if not obtained or made, are not reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on Premier, no notice to, filing with, or Consent of any public body or authority is necessary for the consummation by Premier of the Merger and the other transactions contemplated in this Agreement. 6.3 CAPITAL STOCK. ------------- (a) The authorized capital stock of Premier consists of 20,000,000 shares of Premier Common Stock, of which 2,353,779 shares were issued and outstanding as of the date of this Agreement and not more than 2,353,779 shares will be issued and outstanding at the Effective Time (as a result of the exercise of outstanding options). All of the issued and outstanding shares of Premier Common Stock are, and all of the shares of Surviving Corporation Common Stock to be issued in exchange for shares of Central and Southern Common Stock upon consummation of the Merger, when issued in accordance with the terms of this Agreement, will be, duly and validly issued and outstanding and fully paid and nonassessable under the GBCC. None of the outstanding shares of Premier Common Stock has been, and none of the shares of Surviving Corporation Common Stock to be issued in exchange for shares of Central and Southern Common Stock upon consummation of the Merger will be, issued in violation of any preemptive rights of the current or A-22 past shareholders of Premier. Premier has reserved 210,000 shares of Premier Common Stock for issuance under the Premier Stock Plans, pursuant to which options to purchase not more than 136,250 shares of Premier Common Stock are outstanding as of the date of this Agreement and at the Effective Time. (b) Except as set forth in Section 6.3(a) of this Agreement, or as disclosed in Section 6.3(b) of the Premier Disclosure Memorandum, there are no --------------------- shares of capital stock or other equity securities of Premier outstanding and no outstanding Rights relating to the capital stock of Premier. 6.4 PREMIER SUBSIDIARIES. Premier has disclosed in Section 6.4 of -------------------- the Premier Disclosure Memorandum all of the Premier Subsidiaries as of the date --------------------- of this Agreement. Except as disclosed in Section 6.4 of the Premier Disclosure ---------- Memorandum, Premier or one of its Subsidiaries owns all of the issued and - ---------- outstanding shares of capital stock of each Premier Subsidiary. No equity securities of any Premier Subsidiary are or may become required to be issued (other than to another Premier Company) by reason of any Rights, and there are no Contracts by which any Premier Subsidiary is bound to issue (other than to another Premier Company) additional shares of its capital stock or Rights, or by which any Premier Company is or may be bound to transfer any shares of the capital stock of any Premier Subsidiary (other than to another Premier Company), and there are no Contracts by which any Premier Company is bound to issue (other than to another Premier Company) additional shares of its capital stock. There are no Contracts relating to the rights of any Premier Company to vote or to dispose of any shares of the capital stock of any Premier Subsidiary. All of the shares of capital stock of each Premier Subsidiary held by a Premier Company are fully paid and nonassessable under the applicable Law of the jurisdiction in which such Subsidiary is incorporated or organized and are owned by the Premier Company free and clear of any Lien. Each Premier Subsidiary is either a bank, a savings association or a corporation and is duly organized, validly existing, and (as to corporations) in good standing under the Laws of the jurisdiction in which it is organized and has the corporate power and authority necessary for it to own, lease and operate its Assets and to carry on its business as now conducted. Each Premier Subsidiary is duly qualified or licensed to transact business as a foreign corporation in good standing in the States of the United States and foreign jurisdictions where the character of its Assets or the nature or conduct of its business requires it to be so qualified or licensed, except for such jurisdictions in which the failure to be so qualified or licensed is not reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on Premier. Each Premier Subsidiary that is a depository institution is an "insured institution" as defined in the Federal Deposit Insurance Act and applicable regulations thereunder, and the deposits in which are insured by the Bank Insurance Fund or the Savings Association Insurance Fund, as appropriate. 6.5 FINANCIAL STATEMENTS. Premier has included in Section 6.5 of -------------------- the Premier Disclosure Memorandum copies of all Premier Financial Statements for periods ended prior to the date hereof and will deliver to Central and Southern copies of all Premier Financial Statements prepared subsequent to the date hereof. The Premier Financial Statements (as of the dates thereof and for the periods covered thereby) (a) are, or if dated after the date of this Agreement will be, in accordance A-23 with the books and records of the Premier Companies, which are or will be, as the case may be, complete and correct and which have been or will have been, as the case may be, maintained in accordance with good business practices, and (b) present or will present, as the case may be, fairly the consolidated financial position of the Premier Companies as of the dates indicated and the consolidated results of operations, changes in shareholders' equity, and cash flows of the Premier Companies for the periods indicated, in accordance with GAAP (subject to exceptions as to consistency specified therein or as may be indicated in the notes thereto or, in the case of interim financial statements, to normal recurring year-end adjustments that are not material in amount or effect). 6.6 ABSENCE OF UNDISCLOSED LIABILITIES. No Premier Company has any ---------------------------------- Liabilities that are reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on Premier, except Liabilities which are accrued or reserved against in the consolidated balance sheets of Premier as of December 31, 1995 and September 30, 1996, included in the Premier Financial Statements or reflected in the notes thereto. No Premier Company has incurred or paid any Liability since September 30, 1996, except for such Liabilities incurred or paid in the ordinary course of business consistent with past business practice and which are not reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on Premier. 6.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since September 30, 1996, ------------------------------------ except as disclosed in SEC Documents filed by Premier prior to the date of this Agreement and except as disclosed in Section 6.7 of the Premier Disclosure ---------- Memorandum, (a) there have been no events, changes or occurrences which have - ---------- had, or are reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on Premier, and (b) the Premier Companies have not taken any action, or failed to take any action, prior to the date of this Agreement, which action or failure, if taken after the date of this Agreement, would represent or result in a material breach or violation of any of the covenants and agreements of Premier provided in Article 7 of this Agreement. 6.8 TAX MATTERS. ----------- (a) All Tax returns required to be filed by or on behalf of any of the Premier Companies have been timely filed or requests for extensions have been timely filed, granted, and have not expired for periods ended on or before September 30, 1996, and on or before the date of the most recent fiscal year end immediately preceding the Effective Time, except to the extent that all such failures to file, taken together, are not reasonably likely to have a Material Adverse Effect on Premier, and all returns filed are complete and accurate to the Knowledge of Premier. All Taxes shown on filed returns have been paid. As of the date of this Agreement, there is no audit examination, deficiency or refund Litigation with respect to any Taxes that is reasonably likely to result in a determination that would have, individually or in the aggregate, a Material Adverse Effect on Premier, except as reserved against in the Premier Financial Statements delivered prior to the date of this Agreement or as disclosed in Section 6.8(a) of the Premier Disclosure Memorandum. All Taxes and other --------------------- Liabilities due with respect to completed and settled examinations or concluded Litigation have been paid. A-24 (b) Except as disclosed in Section 6.8(b) of the Premier Disclosure ---------- Memorandum none of the Premier Companies has executed an extension or waiver of - ---------- any statute of limitations on the assessment or collection of any Tax due that is currently in effect, and no unpaid tax deficiency has been asserted in writing against or with respect to any Premier Company, which deficiency is reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on Premier. (c) Adequate provision for any Taxes due or to become due for any of the Premier Companies for the period or periods through and including the date of the respective Premier Financial Statements has been made and is reflected on such Premier Financial Statements. (d) Deferred Taxes of the Premier Companies have been provided for in accordance with GAAP. (e) Each of the Premier Companies is in compliance with, and its records contain all information and documents (including, without limitation, properly completed IRS Forms W-9) necessary to comply with, all applicable information reporting and Tax withholding requirements under federal, state and local Tax Laws, and such records identify with specificity all accounts subject to backup withholding under Section 3406 of the Internal Revenue Code, except for such instances of noncompliance and such omissions as are not reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on Premier. 6.9 ALLOWANCE FOR POSSIBLE LOAN LOSSES. The Allowance shown on the ---------------------------------- consolidated balance sheets of Premier included in the most recent Premier Financial Statements dated prior to the date of this Agreement was, and the Allowance shown on the consolidated balance sheets of Premier included in the Premier Financial Statements as of dates subsequent to the execution of this Agreement will be, as of the dates thereof, adequate (within the meaning of GAAP and applicable regulatory requirements or guidelines) to provide for losses relating to or inherent in the loan and lease portfolios (including accrued interest receivables) of the Premier Companies and other extensions of credit (including letters of credit and commitments to make loans or extend credit) by the Premier Companies as of the dates thereof except where the failure of such Allowance to be so adequate is not reasonably likely to have a Material Adverse Effect on Premier. 6.10 ASSETS. Except as disclosed in Section 6.10 of the Premier ------ Disclosure Memorandum or as disclosed or reserved against in the Premier - --------------------- Financial Statements, the Premier Companies have good and marketable title, free and clear of all Liens, to all of their respective Assets. All material tangible properties used in the businesses of the Premier Companies are in good condition, reasonable wear and tear excepted, and are usable in the ordinary course of business consistent with Premier's past practices. All Assets which are material to Premier's business on a consolidated basis, held under leases or subleases by any of the Premier Companies, are held under valid Contracts enforceable in accordance with their respective terms (except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other Laws affecting the enforcement of creditors' rights generally and except that the availability of the equitable remedy A-25 of specific performance or injunctive relief is subject to the discretion of the court before which any proceedings may be brought), and each such Contract is in full force and effect. The policies of fire, theft, liability and other insurance maintained with respect to the Assets or businesses of the Premier Companies provide adequate coverage under current industry practices against loss or Liability, and the fidelity and blanket bonds in effect as to which any of the Premier Companies is a named insured are reasonably sufficient. The Assets of the Premier Companies include all assets required to operate the business of the Premier Companies as presently conducted. 6.11 ENVIRONMENTAL MATTERS. --------------------- (a) Except as disclosed in Section 6.11(a) of the Premier Disclosure ---------- Memorandum, to the Knowledge of Premier, each Premier Company, its Participation - ---------- Facilities and its Loan Properties are, and have been, in compliance with all Environmental Laws, except for noncompliance which is not reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on Premier. (b) To the Knowledge of Premier, there is no Litigation pending or threatened before any court, governmental agency or authority or other forum in which any Premier Company or any of its Loan Properties or Participation Facilities has been or, with respect to threatened Litigation, may be named as a defendant or potentially responsible party (i) for alleged noncompliance with any Environmental Law or (ii) relating to the Release into the Environment of any Hazardous Material (as defined below), whether or not occurring at, on, under or involving a site owned, leased or operated by any Premier Company or any of its Loan Properties or Participation Facilities, except for such Litigation pending or threatened the resolution of which is not reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on Premier or to the Knowledge of Premier, there is no reasonable basis for any such Litigation. (c) To the Knowledge of Premier, there have been no releases of Hazardous Material in, on, under or affecting any Participation Facility or Loan Property, except such as are not reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on Premier. 6.12 COMPLIANCE WITH LAWS. Premier is duly registered as a bank -------------------- holding and thrift holding company under the BHC Act and HOLA, respectively. Each Premier Company has in effect all Permits necessary for it to own, lease or operate its Assets and to carry on its business as now conducted, except for those Permits the absence of which are not reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on Premier, and there has occurred no Default under any such Permit, other than Defaults which are not reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on Premier. Except as disclosed in Section 6.12 of the Premier Disclosure Memorandum, no Premier Company: - --------------------- (a) is in violation of any Laws, Orders or Permits applicable to its business or employees conducting its business, except for violations which are not reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on Premier; and A-26 (b) has received any notification or communication from any agency or department of federal, state, or local government or any Regulatory Authority or the staff thereof (i) asserting that any Premier Company is not in compliance with any of the Laws or Orders which such governmental authority or Regulatory Authority enforces, where such noncompliance is reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on Premier, (ii) threatening to revoke any Permits, the revocation of which is reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on Premier, or (iii) requiring any Premier Company to enter into or consent to the issuance of a cease and desist order, formal agreement, directive, commitment or memorandum of understanding, or to adopt any Board resolution or similar undertaking, which restricts materially the conduct of its business, or in any manner relates to its capital adequacy, its credit or reserve policies, its management, or the payment of dividends. 6.13 LABOR RELATIONS. No Premier Company is the subject of any --------------- Litigation asserting that it or any other Premier Company has committed an unfair labor practice (within the meaning of the National Labor Relations Act or comparable state law) or seeking to compel it or any other Premier Company to bargain with any labor organization as to wages or conditions of employment, nor is there any strike or other labor dispute involving any Premier Company, pending or, to its Knowledge, threatened, nor, to its Knowledge, is there any activity involving any Premier Company's employees seeking to certify a collective bargaining unit or engaging in any other organization activity. 6.14 EMPLOYEE BENEFIT PLANS. ---------------------- (a) Premier has disclosed in Section 6.14 of the Premier Disclosure ---------- Memorandum and delivered or made available to Central and Southern prior to the - ---------- execution of this Agreement copies in each case of all pension, retirement, profit-sharing, deferred compensation, stock option, employee stock ownership, severance pay, vacation, bonus, or other incentive plans, all other written employee programs, arrangements, or agreements, all medical, vision, dental, or other health plans, all life insurance plans, and all other employee benefit plans or fringe benefit plans, including, without limitation, "employee benefit plans" as that term is defined in Section 3(3) of ERISA, currently adopted, maintained by, sponsored in whole or in part by, or contributed to by any Premier Company or Affiliate thereof for the benefit of employees, retirees, dependents, spouses, directors, independent contractors, or other beneficiaries and under which employees, retirees, dependents, spouses, directors, independent contractors, or other beneficiaries are eligible to participate (collectively, the "Premier Benefit Plans"). Any of the Premier Benefit Plans which is an "employee pension benefit plan," as that term is defined in Section 3(2) of ERISA, is referred to herein as a "Premier ERISA Plan." Each Premier ERISA Plan which is also a "defined benefit plan" (as defined in Section 414(j) of the Internal Revenue Code) is referred to herein as a "Premier Pension Plan." No Premier Pension Plan is or has been a multi-employer plan within the meaning of Section 3(37) of ERISA. A-27 (b) All Premier Benefit Plans are in compliance with the applicable terms of ERISA, the Internal Revenue Code, and any other applicable Laws the breach or violation of which are reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on Premier. Each Premier ERISA Plan which is intended to be qualified under Section 401(a) of the Internal Revenue Code has received a favorable determination letter from the Internal Revenue Service, and Premier is not aware of any circumstances likely to result in revocation of any such favorable determination letter. To the Knowledge of Premier, no Premier Company nor any other party has engaged in a transaction with respect to any Premier Benefit Plan that, assuming the taxable period of such transaction expired as of the date hereof, would subject any Premier Company to a tax or penalty imposed by either Section 4975 of the Internal Revenue Code or Section 502(i) of ERISA in amounts which are reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on Premier. (c) Neither Premier nor any ERISA Affiliate of Premier maintains or has maintained an "employee pension benefit plan," within the meaning of Section 3(2) of ERISA that is or was subject to Title IV of ERISA. (d) Neither Premier nor any ERISA Affiliate of Premier has any past, present or future obligation or liability to contribute to any multi-employer plan, as defined in Section 3(37) of ERISA. (e) Except as disclosed in Section 6.14(e) of the Premier Disclosure ---------- Memorandum, (i) no Premier Company has any obligations for retiree health and - ---------- life benefits under any of the Premier Benefit Plans, except as required by Section 6.01 of ERISA and Section 4980B of the Code; (ii) there are no restrictions on the rights of any Premier Company to amend or terminate any such Plan; and (iii) any amendment or termination of any such Plan will not cause any Premier Company to incur any Liability that is reasonably likely to have a Material Adverse Effect on Premier. (f) Except as disclosed in Section 6.14(f) of the Premier Disclosure ---------- Memorandum, neither the execution and delivery of this Agreement nor the - ---------- consummation of the transactions contemplated hereby will (i) result in any payment (including, without limitation, severance, unemployment compensation, golden parachute or otherwise) becoming due to any director or any employee of any Premier Company from any Premier Company under any Premier Benefit Plan or otherwise, (ii) increase any benefits otherwise payable under any Premier Benefit Plan, or (iii) result in any acceleration of the time of payment or vesting of any such benefit. (g) The actuarial present values of all accrued deferred compensation entitlements (including, without limitation, entitlements under any executive compensation, supplemental retirement, or employment agreement) of employees and former employees of any Premier Company and their respective beneficiaries have been fully reflected on the Premier Financial Statements to the extent required by and in accordance with GAAP. A-28 (h) Premier and each ERISA Affiliate of Premier has complied with the continuation of coverage requirements of Section 1001 of the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended, and ERISA Sections 601 through 608. (i) Except as disclosed in Section 6.14(i) of the Premier Disclosure ---------- Memorandum, neither Premier nor any ERISA Affiliate of Premier is obligated, - ---------- contingently or otherwise, under any agreement to pay any amount which would be treated as a "parachute payment," as defined in Section 280G(b) of the Internal Revenue Code (determined without regard to Section 280G(b)(2)(A)(ii) of the Internal Revenue Code). (j) Other than routine claims for benefits, there are no actions, audits, investigations, suits or claims pending, or threatened against any Premier Benefit Plan, any trust or other funding agency created thereunder, or against any fiduciary of any Premier Benefit Plan or against the assets of any Premier Benefit Plan. 6.15 MATERIAL CONTRACTS. Except as disclosed in Section 6.15 of the ------------------ Premier Disclosure Memorandum or otherwise reflected in the Premier Financial --------------------- Statements, none of the Premier Companies, nor any of their respective Assets, businesses or operations, is a party to, or is bound or affected by, or receives benefits under, (a) any employment, severance, termination, consulting or retirement Contract providing for aggregate payments to any Person in any calendar year in excess of $10,000, excluding "at will" employment arrangements, (b) any Contract relating to the borrowing of money by any Premier Company or the guarantee by any Premier Company of any such obligation (other than Contracts evidencing deposit liabilities, purchases of federal funds, Federal Home Loan Bank advances, fully-secured repurchase agreements, trade payables, and Contracts relating to borrowings or guarantees made in the ordinary course of business), (c) any Contracts between or among Premier Companies, and (d) any other Contract (excluding this Agreement) or amendment thereto that is required to be filed as an exhibit to a Form 10-KSB or Form 10-QSB filed by Premier with the SEC as of the date of this Agreement that has not been filed as an exhibit to any Premier Form 10-KSB filed with the SEC (together with all Contracts referred to in Sections 6.10 and 6.14(a) of this Agreement, the "Premier Contracts"). None of the Premier Companies is in Default under any Premier Contract, other than Defaults which are not reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on Premier. All of the indebtedness of any Premier Company for money borrowed is prepayable at any time by such Premier Company without penalty or premium. 6.16 LEGAL PROCEEDINGS. Except as disclosed in Section 6.16 of the ----------------- Premier Disclosure Memorandum, there is no Litigation instituted or pending, or, --------------------- to the Knowledge of Premier, threatened (or unasserted but considered probable of assertion and which if asserted would have at least a reasonable probability of an unfavorable outcome) against any Premier Company, or against any Asset, interest, or right of any of them, that is reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on Premier, nor are there any Orders of any Regulatory Authorities, other governmental authorities, or arbitrators outstanding against any Premier Company, A-29 that are reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on Premier. 6.17 REPORTS. Since January 1, 1996, each Premier Company has ------- timely filed all reports and statements, together with any amendments required to be made with respect thereto, that it was required to file with (a) the SEC, including, but not limited to, Forms 10-KSB, Forms 10-QSB, Forms 8-KSB, and Proxy Statements, (b) other Regulatory Authorities, and (c) any applicable state securities or banking authorities (except, in the case of state securities authorities, failures to file which are not reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on Premier). As of their respective dates, each of such reports and documents, including the financial statements, exhibits, and schedules thereto, complied in all material respects with all applicable Laws. As of its respective date, each such report and document to Premier's Knowledge did not, in any material respects, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances under which they were made, not misleading. 6.18 STATEMENTS TRUE AND CORRECT. No statement, certificate, --------------------------- instrument or other writing furnished or to be furnished by any Premier Company or any Affiliate thereof to Central and Southern pursuant to this Agreement or any other document, agreement or instrument referred to herein contains or will contain any untrue statement of material fact or will omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. None of the information supplied or to be supplied by any Premier Company or any Affiliate thereof for inclusion in the Registration Statement to be filed by Premier with the SEC, will, when the Registration Statement becomes effective, be false or misleading with respect to any material fact, or omit to state any material fact necessary to make the statements therein not misleading. None of the information supplied or to be supplied by any Premier Company or any Affiliate thereof for inclusion in the Proxy Statement to be mailed to Premier's shareholders in connection with the Premier Shareholders' Meeting, and any other documents to be filed by any Premier Company or any Affiliate thereof with the SEC or any other Regulatory Authority in connection with the transactions contemplated hereby, will, at the respective time such documents are filed, and with respect to the Proxy Statement, when first mailed to the shareholders of Premier, be false or misleading with respect to any material fact, or omit to state any material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, or, in the case of the Proxy Statement or any amendment thereof or supplement thereto, at the time of the Premier Shareholders' Meeting, be false or misleading with respect to any material fact, or omit to state any material fact necessary to correct any statement in any earlier communication with respect to the solicitation of any proxy for the Premier Shareholders' Meeting. All documents that any Premier Company or any Affiliate thereof is responsible for filing with any Regulatory Authority in connection with the transactions contemplated hereby will comply as to form in all material respects with the provisions of applicable Law. 6.19 ACCOUNTING, TAX AND REGULATORY MATTERS. No Premier Company or -------------------------------------- any Affiliate thereof has taken any action, or agreed to take any action, or has any Knowledge of any fact or A-30 circumstance that is reasonably likely to (a) prevent the transactions contemplated hereby, including the Merger, from qualifying for pooling-of- interests accounting treatment or treatment as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code, or (b) materially impede or delay receipt of any Consents of Regulatory Authorities referred to in Section 9.1(b) of this Agreement. To the Knowledge of Premier, there exists no fact, circumstance, or reason why the requisite Consents referred to in Section 9.1(b) of this Agreement cannot be received in a timely manner without the imposition of any condition or restriction of the type described in the second sentence of such Section 9.1(b). 6.20 CHARTER PROVISIONS. Each Premier Company has taken all action ------------------ so that the entering into of this Agreement and the consummation of the Merger and the other transactions contemplated by this Agreement do not and will not result in the grant of any rights to any Person under the Articles of Incorporation, Bylaws or other governing instruments of any Premier Company or restrict or impair the ability of the Surviving Corporation to vote, or otherwise to exercise the rights of a shareholder with respect to, shares of any Premier Company that may be acquired or controlled by it. ARTICLE 7 CONDUCT OF BUSINESS PENDING CONSUMMATION ---------------------------------------- 7.1 AFFIRMATIVE COVENANTS OF CENTRAL AND SOUTHERN. Unless the prior --------------------------------------------- written consent of Premier shall have been obtained, and except as otherwise contemplated herein or disclosed in the Central and Southern Disclosure ---------- Memorandum, Central and Southern shall, and shall cause each of its - ---------- Subsidiaries, from the date of this Agreement until the Effective Time or termination of this Agreement: (a) to operate its business in the usual, regular and ordinary course; (b) to preserve intact its business organization and Assets and maintain its rights and franchises; (c) to use its reasonable efforts to cause its representations and warranties to be correct at all times; and (d) to take no action which would (i) adversely affect the ability of any Party to obtain any Consents required for the transactions contemplated hereby without imposition of a condition or restriction of the type referred to in the last sentence of Section 9.1(b) or 9.1(c) of this Agreement or (ii) adversely affect in any material respect the ability of either Party to perform its covenants and agreements under this Agreement. 7.2 NEGATIVE COVENANTS OF CENTRAL AND SOUTHERN. Except as disclosed ------------------------------------------ in the Central and Southern Disclosure Memorandum, from the date of this --------------------- Agreement until the earlier of the Effective Time or the termination of this Agreement, Central and Southern covenants and agrees that it will not do or agree or commit to do, or permit any of its Subsidiaries to do or agree or commit to do, any of the following without the prior written consent of the chief executive officer of Premier, which consent shall not be unreasonably withheld: (a) amend the Articles of Incorporation, Bylaws or other governing instruments of any Central and Southern Company, or A-31 (b) incur any additional debt obligation or other obligation for borrowed money (other than indebtedness of a Central and Southern Company to another Central and Southern Company) in excess of an aggregate of $100,000 (for the Central and Southern Companies on a consolidated basis) except in the ordinary course of the business of Central and Southern Companies consistent with past practices (which shall include, for any of its Subsidiaries, creation of deposit liabilities, purchases of federal funds, advances from the Federal Reserve Bank or Federal Home Loan Bank, and entry into repurchase agreements fully secured by U.S. government or agency securities), or impose, or suffer the imposition, on any Asset of any Central and Southern Company of any Lien or permit any such Lien to exist (other than in connection with deposits, repurchase agreements, bankers acceptances, Federal Home Loan Bank advances, "treasury tax and loan" accounts established in the ordinary course of business, the satisfaction of legal requirements in the exercise of trust powers, and Liens in effect as of the date hereof that are disclosed in the Central and Southern Disclosure Memorandum); or --------------------- (c) repurchase, redeem, or otherwise acquire or exchange (other than exchanges in the ordinary course under employee benefit plans), directly or indirectly, any shares, or any securities convertible into any shares, of the capital stock of any Central and Southern Company, or declare or pay any dividend or make any other distribution in respect of Central and Southern's capital stock; provided, however, that Central and Southern may (to the extent legally and contractually permitted to do so) pay an annual cash dividend of up to $.27 per share on the shares of Central and Southern Common Stock in quarterly installments during 1997; or (d) except for this Agreement, or pursuant to the exercise of stock options outstanding as of the date hereof and pursuant to the terms thereof in existence on the date hereof, or as disclosed in Section 7.2(d) of the Central and Southern Disclosure Memorandum, issue, sell, pledge, encumber, authorize the --------------------- issuance of or enter into any Contract to issue, sell, pledge, encumber, or authorize the issuance of or otherwise permit to become outstanding, any additional shares of Central and Southern Common Stock or any other capital stock of any Central and Southern Company, or any stock appreciation rights, or any option, warrant, conversion, or other right to acquire any such stock, or any security convertible into any such stock; or (e) except as disclosed in Section 7.2(e) of the Central and Southern Disclosure Memorandum, adjust, split, combine or reclassify any capital stock of - --------------------- any Central and Southern Company or issue or authorize the issuance of any other securities in respect of or in substitution for shares of Central and Southern Common Stock or sell, lease, mortgage or otherwise dispose of or otherwise encumber (i) any shares of capital stock of any Central and Southern Subsidiary (unless any such shares of stock are sold or otherwise transferred to another Central and Southern Company) or (ii) any Asset having a book value in excess of $50,000 other than in the ordinary course of business for reasonable and adequate consideration; or (f) except for purchases of U.S. Treasury securities or U.S. Government agency securities or securities of like maturity or grade or general obligations of states and municipalities, purchase any securities or make any material investment, either by purchase of stock or securities, A-32 contributions to capital, Asset transfers, or purchase of any Assets, in any Person other than a wholly-owned Central and Southern Subsidiary; or otherwise acquire direct or indirect control over any Person, other than in connection with (i) foreclosures in the ordinary course of business, or (ii) acquisitions of control by Central and Southern Bank in its fiduciary capacity; or (g) grant any increase in compensation or benefits to any employees whose annual salary exceeds $50,000 of any Central and Southern Company (including such discretionary increases as may be contemplated by existing employment agreements), except in accordance with past practice or previously approved by the Board of Directors of Central and Southern, in each case as disclosed in Section 7.2(g) of the Central and Southern Disclosure Memorandum or --------------------- as required by Law; pay any severance or termination pay or any bonus other than pursuant to written policies or written Contracts in effect on the date of this Agreement and disclosed in Section 7.2(g) of the Central and Southern Disclosure ---------- Memorandum; enter into or amend any severance agreements with officers of any - ---------- Central and Southern Company; grant any general increase in compensation to all employees; grant any increase in fees or other increases in compensation or other benefits to directors of any Central and Southern Company; or voluntarily accelerate the vesting of any stock options or other stock-based compensation or employee benefits; or (h) enter into or amend any employment Contract between any Central and Southern Company and any Person (unless such amendment is required by Law) that the Central and Southern Company does not have the unconditional right to terminate without Liability (other than Liability for services already rendered), at any time on or after the Effective Time; or (i) adopt any new employee benefit plan of any Central and Southern Company or make any material change in or to any existing employee benefit plans of any Central and Southern Company other than any such change that is required by Law or that, in the opinion of counsel, is necessary or advisable to maintain the tax qualified status of any such plan; or (j) make any significant change in any Tax or accounting methods or systems of internal accounting controls, except as may be appropriate to conform to changes in Tax Laws or regulatory accounting requirements or GAAP; or (k) commence any Litigation other than in accordance with past practice, settle any Litigation involving any Liability of any Central and Southern Company for money damages in excess of $50,000 or which imposes material restrictions upon the operations of any Central and Southern Company; or (l) except in the ordinary course of business, modify, amend or terminate any material Contract or waive, release, compromise or assign any material rights or claims. 7.3 AFFIRMATIVE COVENANTS OF PREMIER. Unless the prior written -------------------------------- consent of Central and Southern shall have been obtained, and except as otherwise contemplated herein or as disclosed in the Premier Disclosure ---------- Memorandum, Premier shall, and shall cause each of its Subsidiaries, from - ---------- A-33 the date of this Agreement until the Effective Time or termination of this Agreement: (a) to operate its business in the usual, regular and ordinary course; (b) to preserve intact its business organization and Assets and maintain its rights and franchises; (c) to use its reasonable efforts to cause its representations and warranties to be correct at all times; and (d) to take no action which would (i) adversely affect the ability of any Party to obtain any Consents required for the transactions contemplated hereby without imposition of a condition or restriction of the type referred to in the last sentence of Section 9.1(b) or 9.1(c) of this Agreement or (ii) adversely affect in any material respect the ability of either Party to perform its covenants and agreements under this Agreement. 7.4 NEGATIVE COVENANTS OF PREMIER. Except as disclosed in the ----------------------------- Premier Disclosure Memorandum, from the date of this Agreement until the earlier --------------------- of the Effective Time or the termination of this Agreement, Premier covenants and agrees that it will not do or agree or commit to do, or permit any of its Subsidiaries to do or agree or commit to do, any of the following without the prior written consent of the chief executive officer of Central and Southern, which consent shall not be unreasonably withheld: (a) amend the Articles of Incorporation, Bylaws or other governing instruments of any Premier Company, or (b) incur any additional debt obligation or other obligation for borrowed money (other than indebtedness of a Premier Company to another Premier Company) in excess of an aggregate of $100,000 (for the Premier Companies on a consolidated basis) except in the ordinary course of the business of Premier Companies consistent with past practices (which shall include, for Premier Bank, creation of deposit liabilities, purchases of federal funds, advances from the Federal Reserve Bank or Federal Home Loan Bank, and entry into repurchase agreements fully secured by U.S. government or agency securities), or impose, or suffer the imposition, on any Asset of any Premier Company of any Lien or permit any such Lien to exist (other than in connection with deposits, repurchase agreements, bankers acceptances, Federal Home Loan Bank advances, "treasury tax and loan" accounts established in the ordinary course of business, the satisfaction of legal requirements in the exercise of trust powers, and Liens in effect as of the date hereof that are disclosed in the Premier Disclosure Memorandum); or - --------------------- (c) repurchase, redeem, or otherwise acquire or exchange (other than exchanges in the ordinary course under employee benefit plans), directly or indirectly, any shares, or any securities convertible into any shares, of the capital stock of any Premier Company, or declare or pay any dividend or make any other distribution in respect of Premier's capital stock; provided, however, that Premier may (to the extent legally and contractually permitted to do so) pay a cash dividend of up to $.56 per share on the shares of Premier Common Stock in January or February of 1997; or (d) except for this Agreement, or pursuant to the exercise of stock options outstanding as of the date hereof and pursuant to the terms thereof in existence on the date hereof, or as disclosed in Section 7.4(d) of the Premier Disclosure Memorandum, issue, sell, pledge, - --------------------- A-34 encumber, authorize the issuance of or enter into any Contract to issue, sell, pledge, encumber, or authorize the issuance of or otherwise permit to become outstanding, any additional shares of Premier Common Stock or any other capital stock of any Premier Company, or any stock appreciation rights, or any option, warrant, conversion, or other right to acquire any such stock, or any security convertible into any such stock; or (e) adjust, split, combine or reclassify any capital stock of any Premier Company (other than the stock split contemplated in Section 9.3(e) hereof) or issue or authorize the issuance of any other securities in respect of or in substitution for shares of Premier Common Stock or sell, lease, mortgage or otherwise dispose of or otherwise encumber (i) any shares of capital stock of any Premier Subsidiary (unless any such shares of stock are sold or otherwise transferred to another Premier Company) or (ii) any Asset having a book value in excess of $50,000 other than in the ordinary course of business for reasonable and adequate consideration; or (f) except for purchases of U.S. Treasury securities or U.S. Government agency securities or securities of like maturity or grade or general obligations of states and municipalities, purchase any securities or make any material investment, either by purchase of stock or securities, contributions to capital, Asset transfers, or purchase of any Assets, in any Person other than a wholly-owned Premier Subsidiary; or otherwise acquire direct or indirect control over any Person, other than in connection with (i) foreclosures in the ordinary course of business, or (ii) acquisitions of control by Premier Bank in its fiduciary capacity; or (g) grant any increase in compensation or benefits to any employees whose annual salary exceeds $50,000 of any Premier Company (including such discretionary increases as may be contemplated by existing employment agreements), except in accordance with past practice or previously approved by the Board of Directors of Premier, in each case as disclosed in Section 7.4(g) of the Premier Disclosure Memorandum or as required by Law; pay any severance --------------------- or termination pay or any bonus other than pursuant to written policies or written Contracts in effect on the date of this Agreement and disclosed in Section 7.4(g) of the Premier Disclosure Memorandum; enter into or amend any --------------------- severance agreements with officers of any Premier Company; grant any general increase in compensation to all employees; grant any increase in fees or other increases in compensation or other benefits to directors of any Premier Company; or voluntarily accelerate the vesting of any stock options or other stock-based compensation or employee benefits; or (h) enter into or amend any employment Contract between any Premier Company and any Person (unless such amendment is required by Law) that the Premier Company does not have the unconditional right to terminate without Liability (other than Liability for services already rendered), at any time on or after the Effective Time; or (i) adopt any new employee benefit plan of any Premier Company or make any material change in or to any existing employee benefit plans of any Premier Company other than any such change that is required by Law or that, in the opinion of counsel, is necessary or advisable to maintain the tax qualified status of any such plan; or A-35 (j) make any significant change in any Tax or accounting methods or systems of internal accounting controls, except as may be appropriate to conform to changes in Tax Laws or regulatory accounting requirements or GAAP; or (k) commence any Litigation other than in accordance with past practice, settle any Litigation involving any Liability of any Premier Company for money damages in excess of $50,000 or which imposes material restrictions upon the operations of any Premier Company; or (l) except in the ordinary course of business, modify, amend or terminate any material Contract or waive, release, compromise or assign any material rights or claims. 7.5 ADVERSE CHANGES IN CONDITION. Each Party agrees to give written ---------------------------- notice promptly to the other Party upon becoming aware of the occurrence or impending occurrence of any event or circumstance relating to it or any of its Subsidiaries which (a) is reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on it or (b) is reasonably likely to cause or constitute a material breach of any of its representations, warranties, or covenants contained herein, and to use its reasonable efforts to prevent or promptly to remedy the same. 7.6 REPORTS. Each Party and its Subsidiaries shall file all reports ------- required to be filed by it with Regulatory Authorities between the date of this Agreement and the Effective Time and shall deliver to the other Party copies of all such reports promptly after the same are filed. ARTICLE 8 ADDITIONAL AGREEMENTS --------------------- 8.1 REGISTRATION STATEMENT; PROXY STATEMENT; SHAREHOLDER APPROVAL. ------------------------------------------------------------- (a) As soon as practicable after execution of this Agreement, Premier shall file the Registration Statement with the SEC, and shall use its reasonable efforts to cause the Registration Statement to become effective under the 1933 Act and take any action required to be taken under the applicable state Blue Sky or securities Laws in connection with the issuance of the shares of Surviving Corporation Common Stock upon consummation of the Merger. Central and Southern shall furnish all information concerning it and the holders of its capital stock as Premier may reasonably request in connection with such action. (b) Central and Southern shall call a Shareholders' Meeting, to be held as soon as reasonably practicable after the Registration Statement is declared effective by the SEC, for the purpose of voting upon approval of this Agreement and such other related matters as Central and Southern deems appropriate. (c) In connection with the Central and Southern Shareholders' Meeting, (i) Premier shall prepare and file with the SEC on Central and Southern's behalf a Proxy Statement A-36 (which shall be included in the Registration Statement) and mail it to Central and Southern's shareholders, (ii) the Parties shall furnish to each other all information concerning them that they may reasonably request in connection with such Proxy Statement, (iii) the Board of Directors of Central and Southern shall recommend (subject to compliance with the fiduciary duties of the members of the Board of Directors as advised by counsel) to its shareholders the approval of this Agreement and (iv) the Board of Directors and officers of Central and Southern shall use their reasonable efforts to obtain such shareholders' approval (subject to compliance with their fiduciary duties as advised by counsel). 8.2 EXCHANGE LISTING. Premier shall use its reasonable efforts to ---------------- list, prior to the Effective Time, on the American Stock Exchange the Premier Common Stock and the shares of Surviving Corporation Common Stock to be issued to the holders of Central and Southern Common Stock pursuant to the Merger. 8.3 APPLICATIONS. Premier shall promptly prepare and file, and ------------ Central and Southern shall cooperate in the preparation and, where appropriate, filing of, applications with the Board of Governors of the Federal Reserve System and the Georgia Department of Banking and Finance seeking the requisite Consents necessary to consummate the transactions contemplated by this Agreement. 8.4 FILINGS WITH STATE OFFICES. Upon the terms and subject to the -------------------------- conditions of this Agreement, Premier shall execute and file the Certificate of Merger with the Secretary of State of the State of Georgia in connection with the Closing. 8.5 AGREEMENT AS TO EFFORTS TO CONSUMMATE. Subject to the terms and ------------------------------------- conditions of this Agreement, each Party agrees to use, and to cause its Subsidiaries to use, its reasonable efforts to take, or cause to be taken, all actions, and to do, or cause to be done, all things necessary, proper or advisable under applicable Laws, as promptly as practicable so as to permit consummation of the Merger at the earliest possible date and to otherwise enable consummation of the transactions contemplated hereby and shall cooperate fully with the other Party hereto to that end (it being understood that any amendments to the Registration Statement filed by Premier in connection with the Surviving Corporation Common Stock to be issued in the Merger shall not violate this covenant), including, without limitation, using its reasonable efforts to lift or rescind any Order adversely affecting its ability to consummate the transactions contemplated herein and to cause to be satisfied the conditions referred to in Article 9 of this Agreement. Each Party shall use, and shall cause each of its Subsidiaries to use, its reasonable efforts to obtain all Consents necessary or desirable for the consummation of the transactions contemplated by this Agreement. 8.6 INVESTIGATION AND CONFIDENTIALITY. --------------------------------- (a) Prior to the Effective Time, each Party will keep the other Party advised of all material developments relevant to its business and to consummation of the Merger and shall permit the other Party to make or cause to be made such investigation of the business and properties A-37 of it and its Subsidiaries and of their respective financial and legal conditions as the other Party reasonably requests, provided that such investigation shall be reasonably related to the transactions contemplated hereby and shall not interfere unnecessarily with normal operations. No investigation by a Party shall affect the representations and warranties of the other Party. (b) Each Party shall, and shall cause its advisers and agents to, maintain the confidentiality of all confidential information furnished to it by the other Party concerning its and its Subsidiaries' businesses, operations, and financial positions and shall not use such information for any purpose except in furtherance of the transactions contemplated by this Agreement. If this Agreement is terminated prior to the Effective Time, each Party shall promptly return all documents and copies thereof and all work papers containing confidential information received from the other Party, except for one copy of any materials prepared by that Party or any attorney for or other representative of that Party based upon such confidential information. (c) Each Party agrees to give the other Party notice as soon as practicable after any determination by it of any fact or occurrence relating to the other Party which it has discovered through the course of its investigation and which represents, or is reasonably likely to represent, either a material breach of any representation, warranty, covenant or agreement of the other Party or which has had or is reasonably likely to have a Material Adverse Effect on the other Party. 8.7 PRESS RELEASES. Prior to the Effective Time, Premier and Central -------------- and Southern shall agree with each other as to the form and substance of any press release or other public disclosure materially related to this Agreement or any other transaction contemplated hereby; provided, however, that nothing in this Section 8.7 shall be deemed to prohibit any Party from making any disclosure which its counsel deems necessary or advisable in order to satisfy such Party's disclosure obligations imposed by Law. 8.8 ACQUISITION PROPOSALS. Except with respect to this Agreement --------------------- and the transactions contemplated hereby, no Party nor any Affiliate thereof nor any investment banker, attorney, accountant or other representative (collectively, "Representatives") retained by any Party shall directly or indirectly solicit any Acquisition Proposal by any Person. Except to the extent necessary to comply with the fiduciary duties of a Party's Board of Directors as advised by counsel, no Party or any Affiliate or Representative thereof shall furnish any non-public information that it is not legally obligated to furnish, negotiate with respect to, or enter into any Contract with respect to, any Acquisition Proposal, but a Party may communicate information about such an Acquisition Proposal to its shareholders if and to the extent that it is required to do so in order to comply with its legal obligations as advised by counsel. Each Party shall promptly notify the other orally and in writing in the event that it receives any inquiry or proposal relating to any such transaction. Unless the prior written consent of the other Party is obtained, each Party shall (a) immediately cease and cause to be terminated any existing activities, discussions or negotiations with any Persons conducted heretofore with respect to any of the foregoing, and (b) direct and use its reasonable efforts to cause all of its Representatives not to engage in any of the foregoing. A-38 8.9 ACCOUNTING AND TAX TREATMENT. Each of the Parties undertakes ---------------------------- and agrees to use its reasonable efforts to cause the Merger to qualify, and to take no action which would cause the Merger not to qualify, for treatment as a "reorganization" within the meaning of Section 368(a) of the Internal Revenue Code for federal income tax purposes. Each of the Parties further undertakes and agrees to use its reasonable best efforts to cause the Merger to be eligible, and to take no action which would cause the Merger not to be eligible, to be accounted for as a "pooling of interests." 8.10 AGREEMENT OF AFFILIATES. Central and Southern has disclosed in ----------------------- Section 8.10 of the Central and Southern Disclosure Memorandum all Persons whom --------------------- it reasonably believes is an "affiliate" of Central and Southern for purposes of Rule 145 under the 1933 Act. Central and Southern shall use its reasonable efforts to cause each such Person to deliver to Premier and Central and Southern, not later than thirty (30) days after the date of this Agreement, a written agreement, substantially in the form of Exhibit 1, providing that such --------- Person will not sell, pledge, transfer or otherwise dispose of the shares of Central and Southern Common Stock held by such Person except as contemplated by such agreement or by this Agreement and will not sell, pledge, transfer or otherwise dispose of the shares of Surviving Corporation Common Stock to be received by such Person upon consummation of the Merger except in compliance with applicable provisions of the 1933 Act and the rules and regulations thereunder. The Surviving Corporation shall be entitled to place restrictive legends upon certificates for shares of Surviving Corporation Common Stock issued to Affiliates of Central and Southern pursuant to this Agreement to enforce the provisions of this Section 8.10. The Surviving Corporation shall not be required to maintain the effectiveness of the Registration Statement under the 1933 Act for the purposes of resale of Surviving Corporation Common Stock by such Affiliates. 8.11 EMPLOYEE BENEFITS AND CONTRACTS. ------------------------------- (a) Following the Effective Time, the Surviving Corporation shall provide generally to officers and employees of the Central and Southern Companies who continue employment with the Surviving Corporation or its Subsidiaries following the Effective Time employee benefits under employee benefit plans, on terms and conditions which when taken as a whole are substantially similar to those currently provided by the Premier Companies to their similarly situated officers and employees. For purposes of participation under such employee benefit plans, the service of the employees of the Central and Southern Companies prior to the Effective Time shall be treated as service with a Premier Company participating in such employee benefit plans, provided that, with respect to any employee benefit plan where the benefits are funded through insurance, the granting of such service shall be subject to the consent of the appropriate insurer and may be conditioned upon an employee's participation in a Central and Southern Benefit Plan of the same type immediately prior to the Effective Time. (b) The Surviving Corporation and its Subsidiaries also shall honor in accordance with their terms all employment, severance, consulting and other compensation Contracts disclosed in Section 8.11 of the Central and Southern Disclosure Memorandum to Premier between any Central and Southern Company and - --------------------- any current or former director, officer, or employee thereof and A-39 all provisions for vested benefits accrued through the Effective Time under the Central and Southern Benefit Plans. The Surviving Corporation shall enter into three year employment agreements with each of Robert C. Oliver and Michael E. Ricketson and shall enter into one year employment agreements with each of George D. Henderson and Tren B. Watson in substantially the forms attached hereto as Exhibit 5. --------- (c) At the Effective Time the Surviving Corporation shall enter into a three year employment agreement with Darrell D. Pittard in substantially the form attached hereto as Exhibit 6. ARTICLE 9 CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE ------------------------------------------------- 9.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY. The respective --------------------------------------- obligations of each Party to perform this Agreement and consummate the Merger and the other transactions contemplated hereby are subject to the satisfaction of the following conditions, unless waived by both Parties pursuant to Section 11.6 of this Agreement: (a) Shareholder Approval. The shareholders of Premier and Central and -------------------- Southern shall have approved this Agreement, and the consummation of the transactions contemplated hereby, including the Merger, as and to the extent required by Law, the American Stock Exchange or by the provisions of any governing instruments. (b) Regulatory Approvals. All Consents of, filings and registrations -------------------- with, and notifications to all Regulatory Authorities required for consummation of the Merger shall have been obtained or made and shall be in full force and effect and all waiting periods required by Law shall have expired. No Consent obtained from any Regulatory Authority which is necessary to consummate the transactions contemplated hereby shall be conditioned or restricted in a manner (including, without limitation, requirements relating to the raising of additional capital or the disposition of Assets) which in the reasonable judgment of the Board of Directors of either Party would so materially adversely impact the economic or business benefits of the transactions contemplated by this Agreement as to render inadvisable the consummation of the Merger. (c) Consents and Approvals. Each Party shall have obtained any and ---------------------- all Consents required for consummation of the Merger (other than those referred to in Section 9.1(b) of this Agreement) or for the preventing of any Default under any Contract or Permit of such Party which, if not obtained or made, is reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on such Party. No Consent so obtained which is necessary to consummate the transactions contemplated hereby shall be conditioned or restricted in a manner which in the reasonable judgment of the Board of Directors of either Party would so materially adversely impact the economic or business benefits of the transactions contemplated by this Agreement as to render inadvisable the consummation of the Merger. A-40 (d) Registration Statement. The Registration Statement shall be ---------------------- effective under the 1933 Act, no stop orders suspending the effectiveness of the Registration Statement shall have been issued, no action, suit, proceeding or investigation by the SEC to suspend the effectiveness thereof shall have been initiated and be continuing, and all necessary approvals under state securities Laws or the 1933 Act or 1934 Act relating to the issuance or trading of the shares of the Surviving Corporation Common Stock issuable pursuant to the Merger shall have been received. (e) Exchange Listing. The shares of Surviving Corporation Common ---------------- Stock issuable pursuant to the Merger shall have been approved for listing on the American Stock Exchange. (f) Tax Matters. Premier and Central and Southern shall have received ----------- a written opinion of counsel from Womble Carlyle Sandridge & Rice, PLLC, in form reasonably satisfactory to them (the "Tax Opinion"), to the effect that for federal income tax purposes (i) the Merger will constitute a reorganization within the meaning of Section 368(a) of the Internal Revenue Code, (ii) the exchange in the Merger of Central and Southern Common Stock for Surviving Corporation Common Stock will not give rise to gain or loss to the shareholders of Central and Southern with respect to such exchange (except to the extent of any cash received), and (iii) neither Premier nor Central and Southern will recognize gain or loss as a consequence of the Merger (except for income and deferred gain recognized pursuant to Treasury regulations issued under Section 1502 of the Internal Revenue Code). In rendering such Tax Opinion, counsel shall be entitled to rely upon representations of officers of Premier and Central and Southern reasonably satisfactory in form and substance to such counsel. (g) Affiliate Agreements. The Parties shall have received from each -------------------- affiliate of Central and Southern the affiliates letter referred to in Section 8.10 hereof. (h) Pooling Letter. The Parties shall have received a letter from -------------- Mauldin & Jenkins, LLC, and from Porter Keadle Moore, LLP dated as of the Effective Time, to the effect that the Merger will qualify for pooling-of- interests accounting treatment under Accounting Principles Board Opinion No. 16 if closed and consummated in accordance with this Agreement. 9.2 CONDITIONS TO OBLIGATIONS OF PREMIER. The obligations of Premier ------------------------------------ to perform this Agreement and consummate the Merger and the other transactions contemplated hereby are subject to the satisfaction of the following conditions, unless waived by Premier pursuant to Section 11.6(a) of this Agreement: (a) Representations and Warranties. For purposes of this Section ------------------------------ 9.2(a), the accuracy of the representations and warranties of Central and Southern set forth or referred to in this Agreement shall be assessed as of the date of this Agreement and as of the Effective Time with the same effect as though all such representations and warranties had been made on and as of the Effective Time (provided that representations and warranties which are confined to a specified date A-41 shall speak only as of such date). The representations and warranties of Central and Southern set forth in Section 5.3 of this Agreement shall be true and correct (except for inaccuracies which are de minimis in amount). The representations and warranties of Central and Southern set forth in Section 5.19 of this Agreement shall be true and correct in all material respects. There shall not exist inaccuracies in the representations and warranties of Central and Southern set forth in this Agreement (excluding the representations and warranties set forth in Sections 5.3 and 5.19) such that the aggregate effect of such inaccuracies would have, or is reasonably likely to have, a Material Adverse Effect on Central and Southern; provided that, for purposes of this sentence only, those representations and warranties which are qualified by references to "material" or "Material Adverse Effect" shall be deemed not to include such qualifications. (b) Performance of Agreements and Covenants. Each and all of the --------------------------------------- agreements and covenants of Central and Southern to be performed and complied with pursuant to this Agreement and the other agreements contemplated hereby prior to the Effective Time shall have been duly performed and complied with in all material respects. (c) Certificates. Central and Southern shall have delivered to ------------ Premier (i) a certificate, dated as of the Effective Time and signed on its behalf by its chief executive officer and its chief financial officer, to the effect that the conditions of its obligations set forth in Sections 9.2(a) and 9.2(b) of this Agreement have been satisfied, and (ii) certified copies of resolutions duly adopted by Central and Southern's Board of Directors and shareholders evidencing the taking of all corporate action necessary to authorize the execution, delivery and performance of this Agreement, and the consummation of the transactions contemplated hereby, all in such reasonable detail as Premier and its counsel shall request. (d) Opinion of Counsel. Central and Southern shall have delivered to ------------------ Premier an opinion of Kilpatrick & Cody, LLP, counsel to Central and Southern, dated as of the Effective Time, in form reasonably satisfactory to Premier, as to the matters set forth in Exhibit 2 hereto. --------- (e) Claims/Indemnification Letters. Each of the directors and ------------------------------ officers of Central and Southern shall have executed and delivered to Premier letters in substantially the form of Exhibit 3 hereto. --------- (f) Premier Fairness Opinion. Premier shall have received from Brown, ------------------------ Burke Capital Partners, Inc. a letter, dated not more than five (5) business days prior to the date of the Proxy Statement, to the effect that, in the opinion of such firm, the consideration to be paid to Central and Southern shareholders in connection with the Merger is fair, from a financial point of view, to the shareholders of Premier. (g) Litigation. No preliminary or permanent injunction or other order ---------- by any federal or state court which prevents the consummation of the Merger shall have been issued and shall remain in effect, nor any action therefor initiated which, in the good faith judgment of the Board of Directors of Premier, it is not in the best interests of the shareholders of Premier to contest; A-42 and there shall not have been instituted or be pending any action or proceeding by any United States federal or state government or governmental agency or instrumentality (i) challenging or seeking to restrain or prohibit the consummation of the Merger or seeking material damages in connection with the Merger; or (ii) seeking to prohibit Premier's or the Surviving Corporation's ownership or operation of all or a material portion of Premier's or Central and Southern's business or assets, or compel Premier or the Surviving Corporation to dispose of or hold separate all or a material portion of Premier's or Central and Southern's business or assets as a result of the Merger, which, in any case, in the reasonable judgment of Premier based upon a legal opinion from legal counsel, could result in the relief sought being obtained. 9.3 CONDITIONS TO OBLIGATIONS OF CENTRAL AND SOUTHERN. The ------------------------------------------------- obligations of Central and Southern to perform this Agreement and consummate the Merger and the other transactions contemplated hereby are subject to the satisfaction of the following conditions, unless waived by Central and Southern pursuant to Section 11.6(b) of this Agreement: (a) Representations and Warranties. For purposes of this Section ------------------------------ 9.3(a), the accuracy of the representations and warranties of Premier set forth or referred to in this Agreement shall be assessed as of the date of this Agreement and as of the Effective Time with the same effect as though all such representations and warranties had been made on and as of the Effective Time (provided that representations and warranties which are confined to a specified date shall speak only as of such date). The representations and warranties of Premier set forth in Section 6.3 of this Agreement shall be true and correct (except for inaccuracies which are de minimis in amount). The representations and warranties of Premier set forth in Section 6.19 of this Agreement shall be true and correct in all material respects. There shall not exist inaccuracies in the representations and warranties set forth in this Agreement (excluding the representations and warranties set forth in Sections 6.3 and 6.19) such that the aggregate effect of such inaccuracies would have, or is reasonably likely to have a Material Adverse Effect on Premier; provided that, for purposes of this sentence only, those representations and warranties which are qualified by reference to "material" or "Material Adverse Effect" shall be deemed not to include such qualifications. (b) Performance of Agreements and Covenants. Each and all of the --------------------------------------- agreements and covenants of Premier to be performed and complied with pursuant to this Agreement and the other agreements contemplated hereby prior to the Effective Time shall have been duly performed and complied with in all material respects. (c) Certificates. Premier shall have delivered to Central and ------------ Southern (i) a certificate, dated as of the Effective Time and signed on its behalf by its chief executive officer and its chief financial officer, to the effect that the conditions of its obligations set forth in Section 9.3(a) and 9.3(b) of this Agreement have been satisfied, and (ii) certified copies of resolutions duly adopted by Premier's Board of Directors evidencing the taking of all corporate action necessary to authorize the execution, delivery and performance of this Agreement, and the consummation of the transactions contemplated hereby, all in such reasonable detail as Central and Southern and its counsel shall request. A-43 (d) Opinion of Counsel. Premier shall have delivered to Central and ------------------ Southern an opinion of Womble Carlyle Sandridge & Rice, PLLC, counsel to Premier, dated as of the Effective Time, in form reasonably acceptable to Central and Southern, as to matters set forth in Exhibit 4 hereto. --------- (e) Premier Stock Split. Immediately prior to the Effective Time, ------------------- Premier shall have effected a 1.8055 for one split of the Premier Common Stock, so that Premier shall have 4,495,747 shares of common stock outstanding and issuable upon the exercise of outstanding stock options immediately prior to the Effective Time. (f) Central and Southern Fairness Opinion. Central and Southern shall ------------------------------------- have received from Alex Sheshunoff & Co. Investment Banking a letter, dated not more than five (5) business days prior to the date of the Proxy Statement, to the effect that, in the opinion of such firm, the consideration to be paid to Central and Southern shareholders in connection with the Merger is fair, from a financial point of view, to the shareholders of Central and Southern. (g) Litigation. No preliminary or permanent injunction or other order ---------- by any federal or state court which prevents the consummation of the Merger shall have been issued and shall remain in effect, nor any action therefor initiated which, in the good faith judgment of the Board of Directors of Central and Southern, it is not in the best interests of the shareholders of Central and Southern to contest; and there shall not have been instituted or be pending any action or proceeding by any United States federal or state government or governmental agency or instrumentality (i) challenging or seeking to restrain or prohibit the consummation of the Merger or seeking material damages in connection with the Merger; or (ii) seeking to prohibit Premier's or the Surviving Corporation's ownership or operation of all or a material portion of Premier's or Central and Southern's business or assets, or compel Premier or the Surviving Corporation to dispose of or hold separate all or a material portion of Premier's or Central and Southern's business or assets as a result of the Merger, which, in any case, in the reasonable judgment of Central and Southern based upon a legal opinion from legal counsel, could result in the relief sought being obtained. ARTICLE 10 TERMINATION ----------- 10.1 TERMINATION. Notwithstanding any other provision of this ----------- Agreement, and notwithstanding the approval of this Agreement by the shareholders of Premier and Central and Southern, this Agreement may be terminated and the Merger abandoned at any time prior to the Effective Time: (a) By mutual consent of the Board of Directors of Central and Southern and the Board of Directors of Premier; or A-44 (b) By the Board of Directors of either Party (provided that the terminating Party is not then in breach of any representation or warranty contained in this Agreement under the applicable standard set forth in Section 9.2(a) of this Agreement in the case of Central and Southern and Section 9.3(a) in the case of Premier or in the material breach of any covenant or agreement contained in this Agreement) in the event of a material breach by the other Party of any representation or warranty contained in this Agreement which cannot be or has not been cured within thirty (30) days after the giving of written notice to the breaching Party of such breach and which breach would provide the non-breaching Party the ability to refuse to consummate the Merger under the standard set forth in Section 9.2(a) of this Agreement in the case of Premier and Section 9.3(a) of this Agreement in the case of Central and Southern; or (c) By the Board of Directors of either Party (provided that the terminating Party is not then in breach of any representation or warranty contained in this Agreement under the applicable standard set forth in Section 9.2(a) of this Agreement in the case of Central and Southern and Section 9.3(a) in the case of Premier or in the material breach of any covenant or other agreement contained in this Agreement) in the event of a material breach by the other Party of any covenant or agreement contained in this Agreement which cannot be or has not been cured within thirty (30) days after the giving of written notice to the breaching Party of such breach; or (d) By the Board of Directors of either Party in the event (provided that the terminating Party is not then in breach of any representation or warranty contained in this Agreement under the applicable standard set forth in Section 9.2(a) of this Agreement in the case of Central and Southern and Section 9.3(a) in the case of Premier or in the material breach of any covenant or agreement contained in this Agreement) (i) any Consent of any Regulatory Authority required for consummation of the Merger and the other transactions contemplated hereby shall have been denied by final nonappealable action of such authority or if any action taken by such authority is not appealed within the time limit for appeal, or (ii) if the shareholders of Central and Southern fail to vote their approval of this Agreement and the transactions contemplated hereby as required by the GBCC at the Shareholders' Meeting where the transactions were presented to such shareholders for approval and voted upon; or (iii) if the shareholders of Premier fail to vote their approval of this Agreement and the transactions contemplated hereby as required by the GBCC at the Shareholders' Meeting where the transactions were presented to such shareholders for approval and voted upon; or (e) By the Board of Directors of either Party in the event that both parties are in breach of any representation or warranty contained in the Agreement under the applicable standard set forth in Section 9.2(a) or 9.3(a) and only in the case of an event described in 10.1(d)(i)-(iii) above; (f) By the Board of Directors of either Party in the event that the Merger shall not have been consummated on or before June 30, 1997, but only if the failure to consummate the transactions contemplated hereby on or before such date is not caused by any breach of this Agreement by the Party electing to terminate pursuant to this Section 10.1(f); or A-45 (g) By the Board of Directors of either Party (provided that the terminating Party is not then in breach of any representation or warranty contained in this Agreement under the applicable standard set forth in Section 9.2(a) of this Agreement in the case of Central and Southern and Section 9.3(a) in the case of Premier or in the material breach of any covenant or other agreement contained in this Agreement) in the event that any of the conditions precedent to the obligations of such Party to consummate the Merger (other than as contemplated by Section 10.1(d) of this Agreement) cannot be satisfied or fulfilled by the date specified in Section 10.1(f) of this Agreement; or (h) By the Board of Directors of either Party, at any time prior to the 15th day after execution of this Agreement without any Liability in the event that the review of the Assets, business, financial condition, results of operations, and prospects of the other Party undertaken by it or any of the disclosures contained in the other Party's Disclosure Memorandum causes its --------------------- Board of Directors to determine, in its reasonable good faith judgment, that a fact or circumstance exists or is likely to exist or result which materially and adversely impacts one or more of the economic benefits to it of the transactions contemplated by this Agreement so as to render inadvisable the consummation of the Merger. 10.2 EFFECT OF TERMINATION. In the event of the termination and --------------------- abandonment of this Agreement pursuant to Section 10.1 of this Agreement, this Agreement shall become void and have no effect, except that the provisions of this Section 10.2 and Article 11 and Section 8.6(b) of this Agreement shall survive any such termination and abandonment. 10.3 NON-SURVIVAL OF REPRESENTATIONS AND COVENANTS. The respective --------------------------------------------- representations, warranties, obligations, covenants, and agreements of the Parties shall not survive the Effective Time except for this Section 10.3 and Articles 2, 3, 4 and 11 and Section 8.10 of this Agreement. ARTICLE 11 MISCELLANEOUS ------------- 11.1 DEFINITIONS. Except as otherwise provided herein, the ----------- capitalized terms set forth below (in their singular and plural forms as applicable) shall have the following meanings: "1933 ACT" shall mean the Securities Act of 1933, as amended. "1934 ACT" shall mean the Securities Exchange Act of 1934, as amended. "ACQUISITION PROPOSAL" with respect to a Party shall mean any tender offer or exchange offer or any proposal for a merger (other than the Merger), acquisition of all of the stock or Assets of, or other business combination involving such Party or any of its Subsidiaries or the acquisition A-46 of a substantial equity interest in, or a substantial portion of the Assets of such Party or any of its Subsidiaries. "AFFILIATE" of a Person shall mean: (i) any other Person directly, or indirectly through one or more intermediaries, controlling, controlled by or under common control with such Person; (ii) any officer, director, partner, employer, or direct or indirect beneficial owner of any 10% or greater equity or voting interest of such Person; or (iii) any other Person for which a Person described in clause (ii) acts in such capacity. "AGREEMENT" shall mean this Agreement and Plan of Merger, including the Exhibits delivered pursuant hereto and incorporated herein by reference. "ALLOWANCE" shall have the meaning provided in Section 5.9 of this Agreement. "ASSETS" of a Person shall mean all of the assets, properties, businesses and rights of such Person of every kind, nature, character and description, whether real, personal or mixed, tangible or intangible, accrued or contingent, or otherwise relating to or utilized in such Person's business, directly or indirectly, in whole or in part, whether or not carried on the books and records of such Person, and whether or not owned in the name of such Person or any Affiliate of such Person and wherever located. "BHC ACT" shall mean the federal Bank Holding Company Act of 1956, as amended. "CENTRAL AND SOUTHERN BENEFIT PLANS" shall have the meaning set forth in Section 5.14 of this Agreement. "CENTRAL AND SOUTHERN COMMON STOCK" shall mean the $1.00 par value common stock of Central and Southern. "CENTRAL AND SOUTHERN COMPANIES" shall mean, collectively, Central and Southern and all Central and Southern Subsidiaries. "CENTRAL AND SOUTHERN DISCLOSURE MEMORANDUM" shall mean the written --------------------- information entitled "Central and Southern Disclosure Memorandum" delivered on --------------------- or prior to the date of this Agreement to Premier describing in reasonable detail the matters contained therein, specifically referencing each Section of this Agreement under which such disclosure is being made. "CENTRAL AND SOUTHERN FINANCIAL STATEMENTS" shall mean (a) the consolidated balance sheets (including related notes and schedules, if any) of Central and Southern as of September 30, 1996 and December 31, 1996, and as of December 31, 1995 and 1994, and the related statements of income, changes in shareholders' equity, and cash flows (including related notes and schedules, if any) for the nine months ended September 30, 1996, and for each of the two fiscal years ended December 31, 1995 and 1994, included in the Central and Southern Disclosure Memorandum, and --------------------- A-47 (b) the consolidated balance sheets (including related notes and schedules, if any) of Central and Southern and related statements of income, changes in shareholders' equity, and cash flows (including related notes and schedules, if any) included in any SEC Documents filed with respect to periods ended subsequent to September 30, 1996. "CENTRAL AND SOUTHERN OPTIONS" shall have the meaning set forth in Section 3.4 of this Agreement. "CENTRAL AND SOUTHERN STOCK PLANS" shall mean the existing stock option and other stock-based compensation plans of Central and Southern disclosed in Section 5.14 of the Central and Southern Disclosure Memorandum. --------------------- "CENTRAL AND SOUTHERN SUBSIDIARIES" shall mean the subsidiaries of Central and Southern. "CLOSING" shall mean the closing of the transactions contemplated hereby, as described in Section 1.2 of this Agreement. "CLOSING DATE" shall mean the date on which the Closing occurs. "CONSENT" shall mean any consent, approval, authorization, clearance, exemption, waiver, or similar affirmation by any Person pursuant to any Contract, Law, Order, or Permit. "CONTRACT" shall mean any written or oral agreement, arrangement, authorization, commitment, contract, indenture, instrument, lease, obligation, plan, practice, restriction, understanding or undertaking of any kind or character, or other document to which any Person is a party or that is binding on any Person or its capital stock, Assets or business. "DEFAULT" shall mean (a) any breach or violation of or default under any Contract, Order or Permit, (b) any occurrence of any event that with the passage of time or the giving of notice or both would constitute a breach or violation of or default under any Contract, Order or Permit, or (c) any occurrence of any event that with or without the passage of time or the giving of notice would give rise to a right to terminate or revoke, change the current terms of, or renegotiate, or to accelerate, increase, or impose any Liability under, any Contract, Order or Permit. "EFFECTIVE TIME" shall mean the date and time at which the Merger becomes effective as defined in Section 1.3 of this Agreement. "ENVIRONMENT" shall have the meaning specified in the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. (S) 9601(8). "ENVIRONMENTAL LAWS" shall mean all Laws pertaining to pollution or protection of the environment and which are administered, interpreted or enforced by the United States Environmental Protection Agency and state and local agencies with primary jurisdiction over pollution or protection A-48 of the environment, including, without limitation, the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. (S) 9601 et. seq., the Resource, Conservation and Recovery Act, 42 U.S.C. (S) 6901 - ------- et. seq., the Toxic Substance Control Act, 15 U.S.C. (S) 2601, et. seq., and all - ------- ------- implementing regulations and state counterparts of such acts. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended. "ERISA AFFILIATE" shall refer to a relationship between entities such that the entities would, now or at any time in the past, constitute a "single employer" within the meaning of Section 414 of the Internal Revenue Code. "ERISA PLAN" shall have the meaning provided in Section 5.14 of this Agreement. "EXCHANGE RATIO" shall have the meaning provided in Section 3.1 of this Agreement. "EXHIBITS" 1 through 5, inclusive, shall mean the Exhibits so marked, copies of which are attached to this Agreement. Such Exhibits are hereby incorporated by reference herein and made a part hereof and may be referred to in this Agreement and any other related instrument or document without being attached hereto. "GAAP" shall mean generally accepted accounting principles, consistently applied during the periods involved. "GBCC" shall mean the Georgia Business Corporation Code. "GEORGIA CERTIFICATE OF MERGER" shall mean the Certificate of Merger to be executed by the Surviving Corporation and filed with the Secretary of State of the State of Georgia relating to the Merger as contemplated by Section 1.1 of this Agreement. "HAZARDOUS MATERIAL" shall mean any substance which is a "hazardous substance"or "toxic substance" as defined in the Comprehensive Environment Response, Compensation, and Liability Act, 42 U.S.C. (S)9601 et seq., or any ------ other substance or material defined, designated, classified or regulated as hazardous or toxic under any Environmental Law, specifically including asbestos requiring abatement, removal or encapsulation pursuant to the requirements of Environmental Laws of polychlorinated biphenyls, and petroleum and petroleum products). "HOLA" shall mean the Home Owners Loan Act of 1933, as amended. "INTERNAL REVENUE CODE" shall mean the Internal Revenue Code of 1986, as amended, and the rules and regulations promulgated thereunder. "KNOWLEDGE" as used with respect to a Person shall mean the knowledge after due inquiry of the Chairman, President, Chief Financial Officer, Chief Accounting Officer, Chief Credit Officer, A-49 or any Senior or Executive Vice President of such Person, Steven S. Dunlevie, G. Leighton Stradtman and Elizabeth O. Derrick with regard to Premier and Richard R. Cheatham, F. Sheffield Hale and Neil D. Falis with regard to Central and Southern. "LAW" shall mean any code, law, ordinance, regulation, reporting or licensing requirement, rule, or statute applicable to a Person or its Assets, Liabilities or business, including, without limitation, those promulgated, interpreted or enforced by any of the Regulatory Authorities. "LIABILITY" shall mean any direct or indirect, primary or secondary, liability, indebtedness, obligation, penalty, cost or expense (including, without limitation, costs of investigation, collection and defense), claim, deficiency, guaranty or endorsement of or by any Person (other than endorsements of notes, bills, checks, and drafts presented for collection or deposit in the ordinary course of business) of any type, whether accrued, absolute or contingent, liquidated or unliquidated, matured or unmatured, or otherwise. "LIEN" shall mean any conditional sale agreement, easement, encroachment, encumbrance, hypothecation, infringement, lien, mortgage, pledge, reservation, restriction, security interest, title retention or other security arrangement, or any adverse right or interest, charge, or claim of any nature whatsoever on, or with respect to, any property or property interest, other than (i) Liens for current property Taxes not yet due and payable; (ii) for depository institution Subsidiaries of a Party, pledges to secure deposits and (iii) other Liens incurred in the ordinary course of the banking business. "LITIGATION" shall mean any action, arbitration, cause of action, claim, complaint, criminal prosecution, demand letter, governmental or other examination or investigation, hearing, inquiry, administrative or other proceeding, or notice (written or oral) by any Person alleging potential Liability or requesting information relating to or affecting a Party, its business, its Assets (including, without limitation, Contracts related to it), or the transactions contemplated by this Agreement, but shall not include regular, periodic examinations of depository institutions and their Affiliates by Regulatory Authorities other than the violations of law section from such reports. "LOAN PROPERTY" shall mean any property owned by the Party in question or by any of its Subsidiaries or in which such Party or Subsidiary holds a security interest, and, where required by the context, includes the owner or operator of such property, but only with respect to such property. "MATERIAL" for purposes of this Agreement shall be determined in light of the facts and circumstances of the matter in question; provided that any specific monetary amount stated in this Agreement shall determine materiality in that instance. "MATERIAL ADVERSE EFFECT" on a Party shall mean an event, change or occurrence which has a material adverse impact on (a) the financial position, business, or results of operations of such Party and its Subsidiaries, taken as a whole, or (b) the ability of such Party to perform its obligations under this Agreement or to consummate the Merger or the other transactions contemplated by this A-50 Agreement, provided that "material adverse impact" shall not be deemed to include the impact of (w) changes in banking and similar Laws of general applicability or interpretations thereof by courts or governmental authorities, (x) changes in GAAP or regulatory accounting principles generally applicable to banks and their holding companies, (y) actions and omissions of a Party (or any of its Subsidiaries) taken with the prior informed consent of the other Party in contemplation of the transactions contemplated hereby, or (z) the Merger and compliance with the provisions of this Agreement on the operating performance of the Parties. "MERGER" shall mean the merger of Central and Southern with and into Premier referred to in Section 1.1 of this Agreement. "NASD" shall mean the National Association of Securities Dealers, Inc. "ORDER" shall mean any administrative decision or award, decree, injunction, judgment, order, quasi-judicial decision or award, ruling, or writ of any federal, state, local or foreign or other court, arbitrator, mediator, tribunal, administrative agency or Regulatory Authority. "PARTICIPATION FACILITY" shall mean any facility or property in which the Party in question or any of its Subsidiaries participates in the management (including any property or facility held in a joint venture) and, where required by the context, said term means the owner or operator of such facility or property, but only with respect to such facility or property. "PARTY" shall mean either Premier or Central and Southern, and "Parties" shall mean both Premier and Central and Southern. "PERMIT" shall mean any federal, state, local, and foreign governmental approval, authorization, certificate, easement, filing, franchise, license, notice, permit, or right to which any Person is a party or that is or may be binding upon or inure to the benefit of any Person or its securities, Assets, Liabilities, or business. "PERSON" shall mean a natural person or any legal, commercial or governmental entity, such as, but not limited to, a corporation, general partnership, joint venture, limited partnership, limited liability company, trust, business association, group acting in concert, or any person acting in a representative capacity. "PREMIER BANK" shall mean First Alliance Bank, a Georgia state- chartered bank and a Premier Subsidiary. "PREMIER BENEFIT PLANS" shall have the meaning set forth in Section 6.14 of this Agreement. "PREMIER COMMON STOCK" shall mean the $1.00 par value common stock of Premier. "PREMIER COMPANIES" shall mean, collectively, Premier and all Premier Subsidiaries. A-51 "PREMIER DISCLOSURE MEMORANDUM" shall mean the written information --------------------- entitled "Premier Disclosure Memorandum" delivered on or prior to the date of --------------------- this Agreement to Central and Southern describing in reasonable detail the matters contained therein and, with respect to each disclosure made therein, specifically referencing each Section of this Agreement under which such disclosure is being made. "PREMIER FINANCIAL STATEMENTS" shall mean (a) the consolidated balance sheets (including related notes and schedules, if any) of Premier as of September 30, 1996, and as of December 31, 1995 and 1994, and the related statements of income, changes in shareholders' equity, and cash flows (including related notes and schedules, if any) for the nine months ended September 30, 1996, and for each of the two years ended December 31, 1995 and 1994, as filed by Premier in SEC Documents and (b) the consolidated balance sheets (including related notes and schedules, if any) of Premier and related statements of income, changes in shareholders' equity, and cash flows (including related notes and schedules, if any) included in SEC Documents filed with respect to periods ended subsequent to September 30, 1996. "PREMIER STOCK PLANS" shall mean the existing stock option and other stock-based compensation plans. "PREMIER SUBSIDIARIES" shall mean the Subsidiaries of Premier at the Effective Time. "PROXY STATEMENT" shall mean (a) the proxy statement used by Central and Southern to solicit the approval of its shareholders of the transactions contemplated by this Agreement and (b) the proxy statement used by Premier to solicit the approval of its shareholders of the transactions contemplated by this Agreement, both of which shall be included in the prospectus of the Surviving Corporation relating to shares of Surviving Corporation Common Stock to be issued to the shareholders of Central and Southern. "REGISTRATION STATEMENT" shall mean the Registration Statement on Form S-4, or other appropriate form, filed with the SEC by Premier under the 1933 Act with respect to the shares of Surviving Corporation Common Stock to be issued to the shareholders of Central and Southern in connection with the transactions contemplated by this Agreement and which shall include the Proxy Statements. "REGULATORY AUTHORITIES" shall mean, collectively, the Federal Trade Commission, the United States Department of Justice, the Board of the Governors of the Federal Reserve System, the Office of Thrift Supervision (including its predecessor, the Federal Home Loan Bank Board), the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, all state regulatory agencies having jurisdiction over the Parties and their respective Subsidiaries, the NASD and the SEC. "RIGHTS" shall mean all arrangements, calls, commitments, Contracts, options, rights to subscribe to, scrip, understandings, warrants or other binding obligations of any character A-52 whatsoever relating to, or securities or rights convertible into or exchangeable for, shares of the capital stock of a Person or by which a Person is or may be bound to issue additional shares of its capital stock or other Rights. "SEC" shall mean the United States Securities and Exchange Commission. "SEC DOCUMENTS" shall mean all forms, proxy statements, registration statements, reports, schedules and other documents filed, or required to be filed, by a Party or any of its Subsidiaries with any Regulatory Authority pursuant to the Securities Laws. "SECURITIES LAWS" shall mean the 1933 Act, the 1934 Act, the Investment Company Act of 1940, as amended, the Investment Advisors Act of 1940, as amended, the Trust Indenture Act of 1939, as amended, and the rules and regulations of any Regulatory Authority promulgated thereunder. "SHAREHOLDERS' MEETING" shall mean the meeting of the shareholders of Central and Southern or the meeting of the shareholders of Premier to be held pursuant to Section 8.1 of this Agreement, including any adjournment or adjournments thereof. "SUBSIDIARIES" shall mean all those corporations, banks, associations or other entities of which the entity in question owns or controls 50% or more of the outstanding equity securities either directly or through an unbroken chain of entities as to each of which 50% or more of the outstanding equity securities is owned directly or indirectly by its parent; provided, however, there shall not be included any such entity acquired through foreclosure or any such entity the equity securities of which are owned or controlled in a fiduciary capacity. "SURVIVING CORPORATION" shall mean Premier as the surviving corporation resulting from the Merger to be known as Premier Bancshares, Inc. "SURVIVING CORPORATION COMMON STOCK" shall mean the $1.00 par value common stock of the Surviving Corporation. "TAX" OR "TAXES" shall mean any federal, state, county, local or foreign income, profits, franchise, gross receipts, payroll, sales, employment, use, property, withholding, excise, occupancy and other taxes, assessments, charges, fares or impositions, including interest, penalties and additions imposed thereon or with respect thereto. Any singular term in this Agreement shall be deemed to include the plural, and any plural term the singular. Whenever the words "include," "includes," or "including" are used in this Agreement, they shall be deemed followed by the words "without limitation." A-53 11.2 EXPENSES. -------- (a) Except as otherwise provided in this Section 11.2, each of the Parties shall bear and pay all direct costs and expenses incurred by it or on its behalf in connection with the transactions contemplated hereunder, including filing, registration and application fees, printing fees, and fees and expenses of its own financial or other consultants, investment bankers, accountants and counsel, except that each of the Parties shall bear and pay (i) one-half of the filing fees payable in connection with the Registration Statement and the applications filed with other Regulatory Authorities, and (ii) one-half of the costs incurred in connection with the printing or copying of the Proxy Statements. (b) Notwithstanding the provisions of Section 11.2(a) of this Agreement, if for any reason this Agreement is terminated pursuant to Sections 10.1(b) or 10.1(c) of this Agreement, the breaching Party agrees to pay the non- breaching Party (i) an amount equal to the reasonable and documented fees and expenses incurred by such non-breaching Party in connection with the examination and investigation of the breaching Party, the preparation and negotiation of this Agreement and related agreements, regulatory filings and other documents related to the transactions contemplated hereunder, including, without limitation, fees and expenses of investment banking consultants, accountants, attorneys and other agents and (ii) (x) $50,000 if the breach is not willful or (y) $150,000 if the breach is willful or this Agreement is terminated in contemplation of an Acquisition Proposal, which sums represent compensation for the non-breaching Party's loss as a result of the transaction contemplated by this Agreement not being consummated. Final settlement with respect to payment of such fees and expenses shall be made within thirty (30) days after the termination of this Agreement. This Section 11.2(b) shall be the non-breaching Party's sole and exclusive remedy for actionable breach by the breaching Party under this Agreement. 11.3 BROKERS AND FINDERS. Each of the Parties represents and ------------------- warrants that neither it nor any of its officers, directors, employees or Affiliates has employed any broker or finder or incurred any Liability for any financial advisory fees, investment bankers' fees, brokerage fees, commissions, or finders' fees in connection with this Agreement or the transactions contemplated hereby, other than Brown, Burke Capital Partners, Inc. employed by Premier. In the event of a claim by any broker or finder based upon his or its representing or being retained by or allegedly representing or being retained by Premier or Central and Southern, each of Premier and Central and Southern, as the case may be, agrees to indemnify and hold the other Party harmless of and from any Liability in respect of any such claim. 11.4 ENTIRE AGREEMENT. Except as otherwise expressly provided ---------------- herein, this Agreement (including the documents and instruments referred to herein) constitutes the entire agreement between the Parties with respect to the transactions contemplated hereunder and supersedes all prior arrangements or understandings with respect thereto, written or oral. Nothing in this Agreement expressed or implied, is intended to confer upon any Person, other than the Parties or their respective successors, any rights, remedies, obligations, or liabilities under or by reason of this Agreement, other than as provided in Section 8.10 and Section 8.13 of this Agreement. A-54 11.5 AMENDMENTS. To the extent permitted by Law, this Agreement may ---------- amended by a subsequent writing signed by each of the Parties upon the approval of the Boards of Directors of each of the Parties; provided, however, that after any such approval by the holders of Premier Common Stock or Central and Southern Common Stock, there shall be made no amendment that pursuant to the GBCC requires further approval by such shareholders without the further approval of such shareholders. 11.6 WAIVERS. ------- (a) Prior to or at the Effective Time, Premier, acting through its Board of Directors, chief executive officer or other authorized officer, shall have the right to waive any Default in the performance of any term of this Agreement by Central and Southern, to waive or extend the time for the compliance or fulfillment by Central and Southern of any and all of its obligations under this Agreement, and to waive any or all of the conditions precedent to the obligations of Premier under this Agreement, except any condition which, if not satisfied, would result in the violation of any Law. No such waiver shall be effective unless in writing signed by a duly authorized officer of Premier. (b) Prior to or at the Effective Time, Central and Southern, acting through its Board of Directors, chief executive officer or other authorized officer, shall have the right to waive any Default in the performance of any term of this Agreement by Premier, to waive or extend the time for the compliance or fulfillment by Premier of any and all of its obligations under this Agreement, and to waive any or all of the conditions precedent to the obligations of Central and Southern under this Agreement, except any condition which, if not satisfied, would result in the violation of any Law. No such waiver shall be effective unless in writing signed by a duly authorized officer of Central and Southern. (c) The failure of any Party at any time or times to require performance of any provision hereof shall in no manner affect the right of such Party at a later time to enforce the same or any other provision of this Agreement. No waiver of any condition or of the breach of any term contained in this Agreement in one or more instances shall be deemed to be or construed as a further or continuing waiver of such condition or breach or a waiver of any other condition or of the breach of any other term of this Agreement. 11.7 ASSIGNMENT. Except as expressly contemplated hereby, neither ---------- this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any Party hereto (whether by operation of Law or otherwise) without the prior written consent of the other Party. Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of and be enforceable by the Parties and their respective successors and assigns. 11.8 NOTICES. All notices or other communications which are ------- required or permitted hereunder shall be in writing and sufficient if delivered by hand, by facsimile transmission, or by A-55 courier or overnight carrier, to the persons at the addresses set forth below (or at such other address as may be provided hereunder), and shall be deemed to have been delivered as of the date so delivered: Premier: First Alliance/Premier Bancshares, Inc. 2180 Atlanta Plaza 950 East Paces Ferry Road Atlanta, Georgia 30326 Telecopy Number: (404) 814-3672 Attention: Darrell D. Pittard Chairman and CEO Copy to Counsel: Womble Carlyle Sandridge & Rice, PLLC Suite 700 1275 Peachtree Street, N.E. Atlanta, Georgia 30309 Telecopy Number: (404) 888-7490 Attention: Steven S. Dunlevie, Esq. Central & Southern: Central and Southern Holding Company 150 West Greene Street Milledgeville, Georgia 31061 Telecopy Number: (912) 452-3532 Attention: Robert C. Oliver President and CEO Copy to Counsel: Kilpatrick & Cody, LLC 1100 Peachtree Street, Suite 2800 Atlanta, Georgia 30309-4530 Telecopy Number: (404) 815-6555 Attention: Richard R. Cheatham, Esq. 11.9 GOVERNING LAW. This Agreement shall be governed by and ------------- construed in accordance with the Laws of the State of Georgia, without regard to any applicable conflicts of Laws, except to the extent that the federal laws of the United States may apply to the Merger. 11.10 COUNTERPARTS. This Agreement may be executed in one or more ------------ counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same instrument. A-56 11.11 CAPTIONS. The captions contained in this Agreement are for -------- reference purposes only and are not part of this Agreement. 11.12 ENFORCEMENT OF AGREEMENT. The Parties hereto agree that ------------------------ irreparable damage would occur in the event that any of the provisions of this Agreement was not performed in accordance with its specific terms or was otherwise breached. It is accordingly agreed that the Parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions hereof in any court of the United States or any state having jurisdiction, this being in addition to any other remedy to which they are entitled at law or in equity. 11.13 SEVERABILITY. Any term or provision of this Agreement which ------------ is invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent of such invalidity or unenforceability without rendering invalid or unenforceable the remaining terms and provisions of this Agreement or affecting the validity or enforceability of any of the terms or provisions of this Agreement in any other jurisdiction. If any provision of this Agreement is so broad as to be unenforceable, the provision shall be interpreted to be only so broad as is enforceable. [SIGNATURES ON NEXT PAGE] A-57 IN WITNESS WHEREOF, each of the Parties has caused this Agreement to be executed on its behalf and its corporate seal to be hereunto affixed and attested by officers thereunto as of the day and year first above written. ATTEST: FIRST ALLIANCE/PREMIER BANCSHARES, INC. /s/ By: /s/ Darrell D. Pittard - -------------------------- ---------------------------------------- Secretary Darrell D. Pittard Chairman and CEO [CORPORATE SEAL] ATTEST: CENTRAL AND SOUTHERN HOLDING COMPANY /s/ By: /s/ Robert C. Oliver - -------------------------- ---------------------------------------- Secretary Robert C. Oliver President and CEO [CORPORATE SEAL] A-58 EXHIBIT 1 --------- AFFILIATE AGREEMENT First Alliance/Premier Bancshares, Inc. 2180 Atlanta Plaza 950 East Paces Ferry Road Atlanta, Georgia 30326 Central and Southern Holding Company Post Office Box 748 Milledgeville, Georgia 31061 Gentlemen: The undersigned is a shareholder of Central and Southern Holding Company ("Central and Southern"), a corporation organized and existing under the laws of the State of Georgia, and will become a shareholder of First Alliance/Premier Bancshares, Inc. ("Premier" or the "Surviving Corporation") pursuant to the transactions described in the Agreement and Plan of Reorganization, dated as of February 3, 1997 (the "Agreement"), by and between Central and Southern and Premier. Under the terms of the Agreement, Premier and Central and Southern will be merged (the "Merger") and the shares of common stock of Central and Southern ("Central and Southern Common Stock") will be converted into shares of common stock of the Surviving Corporation ("Surviving Corporation Common Stock"). This Affiliate Agreement represents an agreement between the undersigned and the Surviving Corporation regarding certain rights and obligations of the undersigned in connection with the shares of the Surviving Corporation to be received by the undersigned as a result of the Merger. In consideration of the Merger and the mutual covenants contained herein, the undersigned and the Surviving Corporation hereby agree as follows: Affiliate Status. The undersigned understands and agrees that as to ---------------- Central and Southern the undersigned is an "affiliate" under Rule 145(c) as defined in Rule 405 of the Rules and Regulations of the Securities and Exchange Commission ("SEC") under the Securities Act of 1933, as amended ("1933 Act"), and the undersigned anticipates that the undersigned will be such an "affiliate" at the time of the Merger. Initial Restriction on Disposition. The undersigned agrees that the ---------------------------------- undersigned will not, except by operation of law, by will or under the laws of descent and distribution, sell, transfer, or otherwise dispose of the undersigned's interests in, or reduce the undersigned's risk relative to, A-59 any of the shares of the Surviving Corporation Common Stock into which the undersigned's shares of Central and Southern Common Stock are converted upon consummation of the Merger until such time as the Surviving Corporation notifies the undersigned that the requirements of SEC Accounting Series Release Nos. 130 and 135 ("ASR 130 and 135") have been met. The undersigned understands that ASR 130 and 135 relate to publication of financial results of post-Merger combined operations of the Surviving Corporation and Central and Southern. The Surviving Corporation agrees that it will publish such results within 45 days after the end of the first fiscal quarter of the Surviving Corporation containing the required period of post-Merger combined operations and that it will notify the undersigned promptly following such publication. Covenants and Warranties of Undersigned. The undersigned represents, --------------------------------------- warrants and agrees that: (a) During the 30 days immediately preceding the effective time of the Merger, the undersigned will not, except by operation of law, by will, or under the laws of descent and distribution, sell, transfer, or otherwise dispose of the undersigned's interests in, or reduce the undersigned's risk relative to, any of the shares of Central and Southern Common Stock beneficially owned by the undersigned as of the date of the shareholders' meeting of Central and Southern held to approve the merger. (b) The Surviving Corporation Common Stock received by the undersigned as a result of the Merger will be taken for the undersigned's own account and not for others, directly or indirectly, in whole or in part. (c) The undersigned understands that any distribution by the undersigned of the Surviving Corporation Common Stock has not been registered under the 1933 Act and that shares of the Surviving Corporation Common Stock received pursuant to the Merger can only be sold by the undersigned (1) following registration under the 1933 Act, or (2) in conformity with the volume and other requirements of Rule 145(d) promulgated by the SEC as the same now exist or may hereafter be amended, or (3) to the extent some other exemption from registration under the 1933 Act might be available. The undersigned --------------- understands that the Surviving Corporation is under no obligation to file a - --------------------------------------------------------------------------- registration statement with the SEC covering the disposition of the - ------------------------------------------------------------------- undersigned's shares of the Surviving Corporation Common Stock. - --------------------------------------------------------------- (d) The undersigned is aware that the Merger is to be treated as a tax-free reorganization under Section 368 of the Internal Revenue Code ("Code") for federal income tax purposes. The undersigned agrees to treat the transaction in the same manner for federal income tax purposes. The undersigned acknowledges that Section 1.368-1(b) of the Income Tax Regulations requires "continuity of interest" in order for the Merger to be treated as tax-free under Section 368 of the Code. This requirement is satisfied if, taking into account those who dissent from the Merger, there is no plan or intention on the part of the Central and Southern shareholders to sell or otherwise dispose of the Surviving Corporation A-60 Common Stock to be received in the Merger that will reduce such shareholders' ownership to a number of shares having, in the aggregate, a value at the time of the Merger of less than 50% of the total fair market value of the Central and Southern Common Stock outstanding immediately prior to the Merger. The undersigned has no prearrangement, plan or intention to sell or otherwise dispose of an amount of the undersigned's Surviving Corporation Common Stock to be received in the Merger which would cause the foregoing requirement not to be satisfied. 4. Restrictions on Transfer. The undersigned understands and agrees ------------------------ that stop transfer instructions with respect to the shares of the Surviving Corporation Common Stock received by the undersigned pursuant to the Merger will be given to the Surviving Corporation's transfer agent and that there will be placed on the certificates for such shares, or shares issued in substitution thereof, a legend stating in substance: "The shares represented by this certificate were issued pursuant to a business combination which is accounted for as a "pooling of interests" and may not be sold, nor may the owner thereof reduce his risks relative thereto in any way, until such time as the Surviving Corporation has published the financial results covering at least 30 days of combined operations after the effective date of the merger through which the business combination was effected. In addition, the shares represented by this certificate may not be sold, transferred or otherwise disposed of except or unless (a) covered by an effective registration statement under the Securities Act of 1933, as amended, (b) in accordance with (i) Rule 145(d) (in the case of shares issued to an individual who is not an affiliate of the Surviving Corporation) or (ii) Rule 144 (in the case of shares issued to an individual who is an affiliate of the Surviving Corporation) of the Rules and Regulations of such Act, or (c) in accordance with a legal opinion satisfactory to counsel for the Surviving Corporation that such sale or transfer is otherwise exempt from the registration requirements of such Act." Such legend will also be placed on any certificate representing the Surviving Corporation securities issued subsequent to the original issuance of the Surviving Corporation Common Stock pursuant to the Merger as a result of any stock dividend, stock split or other recapitalization as long as the Surviving Corporation Common Stock issued to the undersigned pursuant to the Merger has not been transferred in such manner to justify the removal of the legend therefrom. If the provisions of Rules 144 and 145 are amended to eliminate restrictions applicable to the Surviving Corporation Common Stock received by the undersigned pursuant to the Merger, or at the expiration of the restrictive period set forth in Rule 145(d), the Surviving Corporation, upon the request of the undersigned, will cause the certificates representing the shares of the Surviving Corporation Common Stock issued to the undersigned in connection with the Merger to be reissued free of any legend relating to the restrictions set forth in Rules 144 and 145(d) upon receipt by the Surviving Corporation of an opinion of its counsel to the effect that such legend may be removed. A-61 5. Understanding of Restrictions on Dispositions. The undersigned --------------------------------------------- has carefully read the Agreement and this Affiliate Agreement and discussed their requirements and impact upon his or her ability to sell, transfer or otherwise dispose of the shares of the Surviving Corporation Common Stock received by the undersigned, to the extent the undersigned believes necessary, with the undersigned's counsel or counsel for Central and Southern. 6. Filing of Reports by the Surviving Corporation. The Surviving ---------------------------------------------- Corporation agrees, for a period of three years after the effective date of the Merger, to file on a timely basis all reports required to be filed by it pursuant to Section 13 of the Securities Exchange Act of 1934, as amended, so that the public information provisions of Rule 145(d) promulgated by the SEC as the same are presently in effect will be available to the undersigned in the event the undersigned desires to transfer any shares of the Surviving Corporation Common Stock issued to the undersigned pursuant to the Merger. 7. Transfer Under Rule 145(d). If the undersigned desires to sell or -------------------------- otherwise transfer the shares of the Surviving Corporation Common Stock received by the undersigned in connection with the Merger at any time during the restrictive period set forth in Rule 145(d), the undersigned will provide the necessary representation letter to the transfer agent for the Surviving Corporation Common Stock together with such additional information as the transfer agent may reasonably request. If the Surviving Corporation's counsel concludes that such proposed sale or transfer complies with the requirements of Rule 145(d), the Surviving Corporation shall cause such counsel to provide such opinions as may be necessary to the Surviving Corporation's transfer agent so that the undersigned may complete the proposed sale or transfer. 8. Acknowledgments. The undersigned recognizes and agrees that the --------------- foregoing provisions also apply to (a) the undersigned's spouse, (b) any relative of the undersigned or of the undersigned's spouse who has the same home as the undersigned, (c) any trust or estate in which the undersigned, the undersigned's spouse, and any such relative collectively own at least a 10% beneficial interest or of which any of the foregoing serves as trustee, executor or in any similar capacity and (d) any corporation or other organization in which the undersigned, the undersigned's spouse and any such relative collectively own at least 10% of any class of equity securities or of the equity interest. The undersigned further recognizes that, in the event that the undersigned is a director or officer of the Surviving Corporation or becomes a director or officer of the Surviving Corporation upon consummation of the Merger, among other things, any sale of the Surviving Corporation Common Stock by the undersigned within a period of less than six months following the effective time of the Merger may subject the undersigned to liability pursuant to Section 16(b) of the Securities Exchange Act of 1934, as amended. 9. Miscellaneous. This Affiliate Agreement is the complete agreement ------------- between the Surviving Corporation and the undersigned concerning the subject matter hereof. Any notice required to be sent to any party hereunder shall be sent by registered or certified mail, return receipt requested, using the addresses set forth herein or such other address as shall be furnished in writing by the parties. This Affiliate Agreement shall be governed by the laws of the State of Georgia. A-62 This Affiliate Agreement is executed as of the _____ day of _______________, 1997. Very truly yours, ___________________________________ Signature ___________________________________ Print Name AGREED TO AND ACCEPTED as of ______________________, 1997 FIRST ALLIANCE/PREMIER BANCSHARES, INC. By:_____________________________ AGREED TO AND ACCEPTED as of ______________________, 1997 CENTRAL AND SOUTHERN HOLDING COMPANY By:_____________________________ A-63 EXHIBIT 2 --------- MATTERS AS TO WHICH COUNSEL TO CENTRAL AND SOUTHERN WILL OPINE* 1. Central and Southern is a corporation duly organized, existing and in good standing under the laws of the State of Georgia with corporate power and authority to conduct its business as now conducted and to own and use its Assets. 2. Central and Southern's authorized capital stock consists of ____________ shares of Central and Southern Common Stock, of which ____________ shares were outstanding as of the date hereof. The outstanding shares of Central and Southern Common Stock are duly authorized, validly issued, fully paid and nonassessable. None of the outstanding shares of Central and Southern Common Stock has been issued in violation of any statutory preemptive rights. Except as disclosed in Central and Southern's Disclosure Memorandum dated ____________________, 1997, to our knowledge, there are no options, subscriptions, warrants, calls, rights or commitments obligating Central and Southern to issue equity securities or acquire its equity securities. 3. The execution and delivery by Central and Southern of the Agreement do not, and if Central and Southern were now to perform its obligations under the Agreement such performance would not, result in any violation of the Articles of Incorporation or Bylaws of any Central and Southern Company, or, to our knowledge, result in any breach of, or default or acceleration under, any material Contract or Order to which a Central and Southern Company is a party or by which a Central and Southern Company is bound. 4. Central and Southern has duly authorized the execution and delivery of the Agreement and all performance by Central and Southern thereunder and has duly executed and delivered the Agreement. 5. The Agreement is enforceable against Central and Southern. ______________________________ *Pursuant to the January 1, 1992 edition of the Interpretive Standards Applicable to Legal Opinions to Third Parties in Corporate Transactions adopted by the Legal Opinion Committee of the Corporate and Banking Law Section of the State Bar of Georgia. A-64 EXHIBIT 3 --------- CLAIMS/INDEMNIFICATION LETTER _______________________, 1997 First Alliance/Premier Bancshares, Inc. 2180 Atlanta Plaza 950 East Paces Ferry Road Atlanta, Georgia 30326 Ladies and Gentlemen: This letter is delivered pursuant to Section 9.2(e) of the Agreement and Plan of Merger (the "Agreement"), dated as of February 3, 1997, by and between Central and Southern Holding Company ("Central and Southern ") and First Alliance/Premier Bancshares, Inc. ("Premier") which provides for the merger (the "Merger") of Central and Southern and Premier. Concerning claims which I may have against Central and Southern or its wholly-owned subsidiaries, The Central and Southern Bank of Georgia and The Central and Southern Bank of North Georgia, F.S.B., in my capacity as an officer or director: (a) Premier shall assume all liability (to the extent Central and Southern was so liable) for claims for indemnification arising under Central and Southern's Articles of Incorporation or Bylaws or under any indemnification contract disclosed to Premier, as existing on February 3, 1997, and for claims for salaries, wages or other compensation, employee benefits, reimbursement of expenses, or worker's compensation arising out of employment through the effective time of the Merger; (b) The Central and Southern Bank of Georgia and The Central and Southern Bank of North Georgia, F.S.B., shall retain all liability (to the extent they were so liable) for claims for indemnification arising under their respective Articles of Incorporation or Bylaws as existing on February 3, 1997, and for claims for salaries, wages, or other compensation, employee benefits, reimbursement of expenses, or worker's compensation arising out of employment through the effective time of the Merger; (c) In my capacity as an officer or a director, I am not aware that I have any claims (other than those referred to in paragraphs (a) or (b) above) against Central and Southern, The Central and Southern Bank of Georgia or The Central and Southern Bank of North Georgia, F.S.B. (other than routine deposit, loan and other banking services conducted in the ordinary course of business with Central and Southern, The Central and Southern Bank of Georgia or The Central and Southern Bank of North Georgia, F.S.B.; and A-65 (d) I hereby release Central and Southern, The Central and Southern Bank of Georgia and The Central and Southern Bank of North Georgia, F.S.B., from any and all claims which I am aware that I have against any of them in my capacity as an officer or a director, other than those referred to in paragraphs (a) or (b) above. By executing this letter on behalf of Premier, you shall acknowledge the assumption by Premier of the liabilities described in paragraphs (a) and (b) above. Sincerely, __________________________________ Signature of Officer or Director __________________________________ Printed Name of Officer or Director On behalf of Premier, I hereby acknowledge receipt of this letter and affirm the assumption by Premier of the liabilities described in paragraph (a) and (b) above, as of this _____ day of _______________, 1997. FIRST ALLIANCE/PREMIER BANCSHARES, INC. By: ______________________________________ Darrell D. Pittard, Chairman and CEO A-66 EXHIBIT 4 --------- MATTERS AS TO WHICH COUNSEL TO PREMIER WILL OPINE* 1. Premier is a corporation duly organized, existing and in good standing under the laws of the State of Georgia with corporate power and authority to conduct its business as now conducted and to own and use its Assets. 2. Premier's authorized capital stock consists of 20,000,000 shares of Premier Common Stock, of which ______ shares were outstanding as of the date hereof. The outstanding shares of Premier Common Stock are, and all of the shares of Surviving Corporation Common Stock to be issued in exchange for Central and Southern Common Stock upon consummation of the Merger, when issued in accordance with the terms of the Agreement, will be, duly authorized, validly issued, fully paid and nonassessable. None of the outstanding shares of Premier Common Stock has been, and none of the shares of Surviving Corporation Common Stock to be issued in exchange for shares of Central and Southern Common Stock upon consummation of the Merger will be, issued in violation of any statutory preemptive rights. Except as disclosed in Premier's Disclosure Memorandum dated _______________, 1997, to our knowledge, there are no options, subscriptions, warrants, calls, rights or commitments obligating Premier to issue equity securities or acquire its equity securities. 3. The execution and delivery by Premier of the Agreement do not, and if Premier were now to perform its obligations under the Agreement such performance would not, result in any violation of the Articles of Incorporation or Bylaws of any Premier Company, or, to our knowledge, result in any breach of, or default or acceleration under, any material Contract or Order to which a Premier Company is a party or by which a Premier Company is bound. 4. Premier has duly authorized the execution and delivery of the Agreement and all performance by Premier thereunder and has duly executed and delivered the Agreement. 5. The Agreement is enforceable against Premier. ______________________________ *Pursuant to the January 1, 1992 edition of the Interpretive Standards Applicable to Legal Opinions to Third Parties in Corporate Transactions adopted by the Legal Opinion Committee of the Corporate and Banking Law Section of the State Bar of Georgia. A-67 EX-2.1 3 FIRST AMENDMENT TO AGREEMENT AND PLAN OF REORG. FIRST AMENDMENT TO AGREEMENT AND PLAN OF REORGANIZATION This First Amendment (the "Amendment") to Agreement and Plan of Reorganization (the "Agreement") dated February 3, 1997, between Premier Bancshares, Inc. ("Premier") and The Central and Southern Holding Company ("Central and Southern") is made and entered into as of the 26th day of March 1997. Unless otherwise defined herein, all capitalized terms used herein shall have the meanings ascribed to them in the Agreement. WHEREAS, the parties desire to amend the Agreement to reflect that the Central and Southern Options which are outstanding as of the Effective Date may be substituted for Premier stock options under the Premier Bancshares, Inc. 1997 Stock Option Plan. NOW, THEREFORE, in consideration of the premises, mutual covenants and agreements herein contained, and for the purpose of amending the Agreement, Premier and Central and Southern agree as follows, subject to ratification of this Amendment by their respective Board of Directors: 1. That the following paragraph (c) shall be added to the end of Section 3.4 of the Agreement: "(c) Notwithstanding the foregoing provisions of this Section 3.4, Premier may at its election substitute as of the Effective Time stock options under the Premier Bancshares, Inc. 1997 Stock Option Plan or a predecessor plan (the "Premier Stock Option Plan") for all or a part of the Central and Southern Options, subject to the following conditions: (i) the requirements of 3.4(a) and (b) shall be met; (ii) such substitution shall not constitute a modification, extension or renewal of any of the Central and Southern Options which are incentive stock options; (iii) the substituted options shall continue in effect on substantially the same terms and conditions as contained in the Central and Southern Stock Option Plan or other document granting the Central and Southern Options; and (iv) each grant of a substitute option to any individual who shall be deemed subject to Section 16 of the Securities Exchange Act of 1934 shall have been specifically approved in advance by the full Board of Directors of Premier or by a committee consisting solely of "non-employee" directors as defined in Rule 16b-3. As soon as practicable following the Effective Time, Premier shall deliver to the participants receiving substitute options under the Premier Stock Option Plan an appropriate notice setting forth such participant's rights pursuant thereto. Premier has reserved under the Premier Stock Option Plan adequate shares of Premier Common Stock for delivery upon exercise of any such substituted options." Except as specifically amended herein the Agreement shall remain in full force and effect. In witness whereof, the parties have caused this Amendment to be signed by their duly authorized officers as of the date first shown above. Attest: PREMIER BANCSHARES, INC. /s/ Darrell D. Pittard - -------------------------------------- --------------------------------- Secretary Darrell D. Pittard, Chairman [CORPORATE SEAL] Attest: THE CENTRAL AND SOUTHERN HOLDING COMPANY /s/ Robert C. Oliver - -------------------------------------- --------------------------------- Secretary Robert C. Oliver, President [CORPORATE SEAL] EX-3.2 4 ARTICLES OF AMENDMENT ARTICLES OF AMENDMENT TO THE ARTICLES OF INCORPORATION OF FIRST ALLIANCE/PREMIER BANCSHARES, INC. I. The name of the Corporation is FIRST ALLIANCE/PREMIER BANCSHARES, INC. II. The Amendment adopted by the Corporation is as follows: The Corporation's Articles of Incorporation are hereby amended by deleting Article 1 thereof in its entirety and substituting therefor the following: "The name of the corporation is PREMIER BANCSHARES, INC." III. The aforesaid Amendment was adopted by the Board of Directors on January 13, 1997. IV. The aforesaid Amendment was duly adopted by the Board of Directors of the Corporation in accordance with the provisions of the Official Code of Georgia Annotated, Section 14-2-1002 and did not require shareholder approval. V. The Amendment does not provide for an exchange, reclassification or cancellation of issued shares. IN WITNESS WHEREOF, FIRST ALLIANCE/PREMIER BANCSHARES, INC. has caused these Articles of Amendment to be executed and its corporate seal to be affixed and has caused the foregoing to be attested as of the 13th day of January, 1997. FIRST ALLIANCE/PREMIER BANCSHARES, INC. ATTEST: By: /s/ Darrell D. Pittard ----------------------------------------- Darrell D. Pittard, Chairman of the Board /s/ Barbara J. Burtt - --------------------------- Barbara J. Burtt, Secretary (CORPORATE SEAL) EX-4.1 5 FORM OF COMMON STOCK CERTIFICATE [LOGO OF PREMIER BANCSHARES APPEARS HERE] NUMBER SHARES PMB $1.00 PAR VALUE COMMON STOCK PREMIER BANCSHARES, INC. INCORPORATED UNDER THE LAWS OF THE STATE OF GEORGIA THIS CERTIFICATE IS TRANSFERABLE CUSIP 739909 10 9 IN THE CITY OF ATLANTA, GEORGIA SEE REVERSE SIDE FOR OR NEW YORK, NEW YORK CERTAIN DEFINITIONS This certifies that is the owner of FULLY PAID AND NON-ASSESSABLE SHARES OF COMMON CAPITAL STOCK OF PREMIER BANCSHARES, INC. transferable only on the books of the Corporation by the holder hereof in person or by attorney upon surrender of this Certificate properly endorsed. This Certificate is not valid until countersigned and registered by the Transfer Agent and Registrar. Witness the facsimile seal of the Corporation and the facsimile signatures of its duly authorized officers. Dated: PREMIERE BANCSHARES, INC. CORPORATE SEAL GEORGIA /s/ Darrell D. Pittard /s/ Barbara J. Burtt - ---------------------- -------------------- CHAIRMAN AND CEO SECRETARY Countersigned and Registered: SunTrust Bank, Atlanta Atlanta, Georgia Transfer Agent and Registrar By AUTHORIZED SIGNATURE PREMIER BANCSHARES, INC. The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations: TEN COM - as tenants in common TEN ENT - as tenants by the entireties JT TEN - as joint tenants with right of survivorship and not as tenants in common UNIF TRAN MIN ACT - Custodian ---------- ---------- (Cust) (Minor) under Uniform Transfers to Minors Act ------------------------------- (State) UNIF GIFT MIN ACT - Custodian ---------- ---------- (Cust) (Minor) under Uniform Gifts to Minors Act ------------------------------- (State) Additional abbreviations may also be used though not in the above list. For Value Received, hereby sell, assign and transfer unto ---------------------- PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE - ------------------------------------ [ ] [ ] - ------------------------------------------------------------------------------- (PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE OF ASSIGNEE) - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- Shares - ------------------------------------------------------------------------ of common capital stock represented by the within Certificate, and do hereby irrevocably constitute and appoint ------------------------------------- Attorney - ----------------------------------------------------------------------- to transfer the said stock on the books of the within named Corporation with full power of substitution in the premises. Dated: ------------------------------------- ---------------------------------------- NOTICE: The signature to this assignment must correspond with the name as written upon the face of this certificate in every particular, without alteration or enlargement or any change whatever. SIGNATURE(S) GUARANTEED: By ----------------------------------- THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION (Banks, Stockbrokers, Savings and Loan Associations and Credit Unions) WITH MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM PURSUANT TO S.E.C. RULE 17Ad-15. EX-10.4 6 EMPLOYMENT AGREEMENT--GEORGE S. PHELPS EMPLOYMENT AGREEMENT -------------------- THIS AGREEMENT ("Agreement") is made and entered into effective as of the 1st day of January, 1997 (the "Effective Date"), by and among PREMIER LENDING CORPORATION ("Employer"); and GEORGE S. PHELPS ("Employee"). W I T N E S S E T H: WHEREAS, Employer is a wholly owned subsidiary of FIRST ALLIANCE/ PREMIER BANCSHARES, INC. (the "Holding Company"); WHEREAS, the Board of Directors of Employer consider the establishment and maintenance of highly competent and skilled management personnel for Employer to be essential to protecting and enhancing the best interests of Employer; WHEREAS, the Board of Directors of Employer is desirous of inducing Employee to remain in the employ of Employer, subject to the terms and conditions hereof; WHEREAS, Employee is desirous of remaining in the employ of Employer, subject to the terms and conditions hereof; and WHEREAS, the parties agree that the provisions of this Agreement shall control with respect to the rights and obligations of the parties resulting from the employment of Employee by Employer; NOW, THEREFORE, for and in consideration of the mutual covenants herein contained, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto do hereby agree as follows: 1. Definitions. The following terms used in this Agreement shall have the ----------- following meanings: (a) "Base Salary" shall mean the annual compensation (excluding Incentive Compensation as defined in (e) of this paragraph and other benefits) payable or paid to Employee pursuant to paragraph 4(a) of this Agreement. (b) "Change of Control" shall be deemed to have occurred if: (i) After any transaction any person (or persons acting in concert), partnership, corporation, or other organization shall own, control, or hold with the power to vote more than fifty percent (50%) of any class of voting -- securities of the Holding Company; or (ii) The Holding Company, or substantially all of the assets of the Holding Company, shall be sold or transferred to, or consolidated or merged with, another corporation; or (iii) Employer, or substantially all of the assets of Employer, shall be sold or transferred to, or consolidated or merged with, another corporation which is not a majority owned subsidiary of the Holding Company; Provided, however, if Employer shall become a subsidiary of another corporation or shall be merged or consolidated into another corporation and a majority of the outstanding voting shares of the parent or surviving corporation are owned immediately after such acquisition, merger, or consolidation by the owners of a majority of the voting shares of Employer immediately before such acquisition, merger, or consolidation. (c) "Disability" shall mean the complete inability of Employee to perform his duties for Employer under this Agreement on a full-time basis, as determined by an independent physician selected with the approval of Employer and Employee. -2- (d) "Event of Termination" shall mean the termination by Employer of Employee's employment under this Agreement by written notice delivered to Employee for any reason other than Termination for Cause as defined in (f) of this paragraph or termination following a continuous period of disability exceeding six (6) calendar months pursuant to paragraph 6(a) of this Agreement. -- (e) "Incentive Compensation" shall mean that compensation payable or paid to Employee pursuant to paragraph 4(b) of this Agreement. (f) "Termination for Cause" shall have the meaning provided in paragraph 7(a) of this Agreement. 2. Employment. Employer agrees to continue Employee in its employ, and ---------- Employee agrees to remain in the employ of Employer, as its President, for the period stated in paragraph 3(a) hereof and upon the other terms and conditions herein provided. Employee agrees to perform faithfully such services as are reasonably consistent with his positions and shall from time to time be assigned to him by the Board of Directors of Employer in a trustworthy and businesslike manner for the purpose of advancing the interests of Employer. The Board of Directors of Employer may also from time to time change Employee's position or alter his duties and responsibilities and assign a new position or new duties and responsibilities that are similar in scope and nature to Employee's existing position, duties and responsibilities without invalidating this Agreement or effecting the termination of Employee. At all times, Employee shall manage and conduct the business of Employer in accordance with the policies established by the Board of Directors of Employer, and in compliance with applicable regulations promulgated by governing regulatory agencies. Responsibility for the supervision of Employee shall rest with the Board of Directors of Employer, which shall review -3- Employee's performance at least annually. The Board of Directors of Employer shall also have the authority to terminate Employee, subject to the provisions outlined in paragraph 7 of this Agreement. 3. Term and Duties. --------------- (a) Term of Employment. This Agreement and the period of Employee's ------------------ employment under this Agreement shall be deemed to have commenced as of the Effective Date and shall continue for a period of twelve (12) full calendar -- months thereafter, unless earlier terminated pursuant to this Agreement or unless Employee dies before the end of such twelve (12) months, in which case -- the period of employment shall be deemed to continue until the end of the month of such death. On each anniversary of the Effective Date, this Agreement and Employee's term of employment shall be extended for an additional twelve (12) -- month period provided that the Board of Directors of Employer determines that the performance of Employee has met said Boards' requirements and standards and further that this Agreement shall be extended. (b) Performance of Duties. During the period of employment hereunder, --------------------- except for periods of illness, disability, reasonable vacation periods, and reasonable leaves of absence, Employee shall devote substantially all of his business time, attention, skill, and efforts to the faithful performance of his duties hereunder. Employee shall be entitled to reasonable participation as a member in community, civic, or similar organizations and the pursuit of personal investments which do not present any material conflict of interest with Employer, or otherwise unfavorably affect the performance of Employee's duties pursuant to this Agreement. -4- (c) Office of Employee. The office of Employee shall be located at the ------------------ principal office of Employer in Atlanta, Georgia, or at such other location within the State of Georgia as Employer may from time to time designate; provided, however, that, in the event such relocation required Employee to move his principal residence, Employer shall reimburse Employee for all his reasonable moving expenses. (d) No Other Agreement. The Employee shall have no employment contract or ------------------ other written or oral agreement concerning employment with any entity or person other than Employer during the term of his employment under this Agreement. (e) Uniqueness of Employee's Services. Employee hereby represents that the --------------------------------- services to be performed by him under the terms of this Agreement are of a special, unique, unusual, extraordinary, and intellectual character which gives them a peculiar value, the loss of which cannot be reasonably or adequately compensated in damages and in an action at law. Accordingly, Employee expressly agrees that Employer, in addition to any rights or remedies which Employer may possess, shall be entitled to injunctive and other equitable relief to prevent the breach of this Agreement by Employee. 4. Compensation. ------------ (a) Salary. Subject to the provisions of paragraph 7 hereof, Employer ------ shall pay Employee, as compensation for serving as President of Employer, an initial Base Salary of $100,800; such initial Base Salary, or any increased Base -------- Salary, shall be payable in substantially equal installments in accordance with the Employer's normal pay practices, but not less frequently than monthly. The Board of Directors of Employer, if warranted in its discretion, may increase Employee's Base Salary to reflect Employee's performance. -5- (b) Incentive Compensation. During the Term of Employment and in addition ---------------------- to the aforesaid Base Salary, Employee shall be entitled to such additional Incentive Compensation as may be awarded from time to time by the Board of Directors of Employer or any committee(s) designated thereby in its discretion. Notwithstanding anything contained in this Agreement to the contrary, any increase to Employee's Base Salary and any Incentive Compensation paid to Employee shall be (i) in compliance with regulations, thrift bulletins, pronouncements, directives, or orders issued or promulgated by any governing regulatory agency and with any agreements by and between Employer and such regulatory agencies, (ii) consistent with the safe and sound operation of Employer, (iii) closely monitored by the Board of Directors of Employer and (iv) comparable to such compensation paid to persons of similar responsibilities and duties in other insured institutions of similar size, in similar locations, and under similar circumstances including financial condition and profitability. (c) "Golden Parachute" Provision. Notwithstanding anything contained in ---------------------------- this Agreement to the contrary, any payments made to Employee pursuant to this Agreement, or otherwise to Employee, are subject to and conditioned upon their compliance with 12 U.S.C. (S) 1828(k) and any regulations promulgated thereunder. 5. Participation in Benefit Plans. The payments provided in paragraph 4, ------------------------------ 6, and 7 hereof are in addition to any benefits to which Employee may be, or may become, entitled to, under any group hospitalization, health, dental care, or sick leave plan; life insurance or death benefit plan; travel or accident insurance; pension or retirement plan; stock option or ownership plan; or other present or future group employee benefit plan or program for which senior executive officers of Employer -6- shall be or shall become eligible. Said benefit shall include, without limitation, major medical/dental insurance for Employee and his dependents. 6. Benefits Payable Upon Disability. -------------------------------- (a) Disability Benefits. In the event of the Disability of Employee, ------------------- Employer shall continue to pay Employee 100% of Employee's then current Base ---- Salary pursuant to paragraph 4(a) during the first six (6) months of a - continuous period of disability. It is provided, however, that in the event Employee is disabled for a continuous period exceeding six (6) months, Employer - may, at its election, terminate this Agreement, in which event payment of Employee's Base Salary shall cease. (b) Disability Benefit Offset. Any amounts payable under paragraph 6(a) ------------------------- hereof shall be reduced by any amounts paid to Employee under any other disability program or policy of insurance maintained by Employer. 7. Payments to Employee Upon Termination of Employment. The Board of --------------------------------------------------- Directors of Employer may terminate Employee's employment under this Agreement at any time; but any termination other than Termination for Cause shall not prejudice Employee's right to compensation or other benefits under this Agreement. Employee may voluntarily terminate his employment under this Agreement. The rights and obligations of Employer and Employee in the event of such termination are set forth in this paragraph 7 as follows: (a) Termination for Cause. Employee shall have no right to compensation or --------------------- other benefits for any period after a Termination for Cause. Termination for Cause shall be determined by the Board of Directors of Employer in the reasonable exercise of its discretion and acting in good faith, and shall include termination because of Employee's personal -7- dishonesty, incompetence, willful misconduct, breach of fiduciary duties involving personal profit, intentional failure to perform stated duties, willful violation of any law, rule, or regulation (other than traffic violations or similar offenses), or a final cease-and-desist order, the regulatory suspension or removal of Employee as defined in paragraphs 8(a) and (b) hereof, the termination of this Agreement under paragraphs 8(c) and (d) hereof, the failure of Employee to follow reasonable written instructions of the Board of Directors of Employer, or a material breach of Employee of any provision of this Agreement. Termination for Cause from the Employer shall be determined by, and shall occur only upon the passage of a resolution by a vote of not less than a two-thirds of Employer's Board of Directors specifying Employee's Termination for Cause and the grounds therefor, after reasonable notice to Employee and an opportunity for him to be heard before a meeting of the Board of Directors called in accordance with the By-Laws of Employer. Thereafter, Employee shall be deemed to be in material breach of this Agreement and shall have no right to receive compensation or other benefits under this Agreement for any period following such Termination for Cause. This provision on Termination for Cause shall control over any and all other provisions relating to discharge or termination for cause contained in any and all other agreements between Employer and Employee. (b) Event of Termination Without Change of Control. Upon the occurrence of ---------------------------------------------- an Event of Termination, other than after a Change of Control as provided in paragraph 7(c) hereof, Employer shall pay to Employee, or in the event of his subsequent death, to his designated beneficiary or beneficiaries, or to his estate, as the case may be, as liquidated damages, in lieu of all other claims, a severance payment equal to Employee's then current -8- Base Salary plus any Incentive Compensation paid to Employee during the immediately preceding twelve (12) months, to be paid in full on the last day of -- the month following the date of said Event of Termination. (c) Event of Termination in Connection With a Change of Control. If during ----------------------------------------------------------- the term of this Agreement and within one (1) year immediately following a - Change of Control or within six (6) months immediately prior to such Change of - Control: (i) Employee's employment with Employer under this Agreement is terminated by an Event of Termination; or (ii) the status, character, capacity, and circumstances of Employee's employment as provided in paragraphs 2 and 3 of this Agreement have been materially altered by Employer whether by a reduction in salary, responsibilities, authority, or benefits, and Employee voluntary terminates the employment contemplated by this Agreement for that reason; then Employer shall pay to Employee, or in the event of his subsequent death, to his designated beneficiary or beneficiaries, or to his estate, as the case may be, as liquidated damages, in lieu of all other claims, a severance payment equal to Employee's then current Base Salary plus any Incentive Compensation paid to Employee during the immediately preceding twelve (12) months, to be paid -- in full on the last day of the month following the date of said Event of Termination or Employee's voluntary termination under (ii) above. In no event shall the total compensation paid to Employee upon the termination of his employment in connection with a Change of Control exceed the amount permitted by Section 280G of the Internal Revenue Code (as amended) or three times Employee's average annual -9- compensation. Employee's average annual compensation shall be based on the most recent five taxable years ending before the Change of Control (or the period during which Employee was employed by Employer if Employee has been employed by Employer for less than five years). (d) Voluntary Termination of Employment. Employee shall have no right to ----------------------------------- compensation or other benefits under this Agreement for any period following the voluntary termination of Employee's employment by Employee, except as provided in paragraph 7(b) and 7(c) hereof. 8. Regulatory Suspension. --------------------- (a) If Employee is suspended and/or temporarily prohibited from participating in the conduct of the affairs of Employer by a notice served under Sections 8(e)(3) or (g)(1) of the Federal Deposit Insurance Act, 12 U.S.C. (S) 1818(e)(3) or (g)(1), the obligations of Employer under this Agreement shall be suspended as of the date of service of such notice, unless stayed by appropriate proceedings. If the charges in the notice are dismissed, Employer may in its discretion (i) pay Employee all or part of the compensation withheld while its contract obligations were suspended and (ii) reinstate in whole or in part any of its obligations which were suspended. (b) If Employee is removed and/or permanently prohibited from participating in the conduct of the affairs of Employer by an order issued under Section 8(e)(4) or (g)(1) of the Federal Deposit Insurance Act, 12 U.S.C. (S) 1818(e)(4) or (g)(1), all obligations of Employer under this Agreement shall terminate as of the effective date of the order, but vested rights of the parties hereto shall not be affected. -10- (c) If Employer is in "default" as defined in Section 3(x)(1) of the Federal Deposit Insurance Act, all obligations under this Agreement shall terminate as of the date of default, but this paragraph shall not affect any vested rights of the parties hereto. (d) All obligations under this Agreement shall be terminated, except to the extent that it may be determined by any state or federal regulatory agency or body having authority over Employer that continuation of this Agreement is necessary for the continued operation of Employer, at any time the Federal Deposit Insurance Corporation (the "FDIC") enters into an agreement to provide assistance to or on behalf of Employer under the authority contained in Section 13(c) of the Federal Deposit Insurance Act, at any time the FDIC approves a supervisory merger to resolve problems related to the operation of Employer, or when Employer is determined by the Georgia Department of Banking and Finance, the Board of Governors of the Federal Reserve System (or the Federal Reserve Bank of Atlanta acting pursuant to delegated authority), or the FDIC to be in an unsafe and unsound condition. Any rights of the parties hereto that have already vested, however, shall not be affected by such action. 9. Nondisclosure of Confidential Information. Employee acknowledges that ----------------------------------------- he possesses confidential information of a special and unique nature and value affecting and relating to both Employer's and the Holding Company's business, including, without limitation, the identity of the customers, deposits business records, other trade secrets, and other similar confidential information relating to Employer and/or the Holding Company and the business of each (all the foregoing being hereinafter collectively referred to as "Confidential Information"). Employee recognizes and acknowledges that all Confidential Information is the exclusive property of Employer and/or the -11- Holding Company respectively, constitutes trade secrets of Employer and/or the Holding Company, is material and confidential, and greatly affects the goodwill and the effective and successful conduct of the business of Employer and/or the Holding Company. As a material inducement to Employer to enter into this Agreement and to employ Employee, Employee covenants and agrees that he will not at any time during the term of his employment under this Agreement, and for a period of one (1) year from the end of such employment, directly or indirectly, - divulge, reveal, or communicate any Confidential Information to any person, firm, corporation, or entity whatsoever, or use any Confidential Information for his own benefit or for the benefit of others. Employee further acknowledges that said Confidential Information has material commercial value to Employer and/or the Holding Company so long as it is not known by competitors of Employer and/or the Holding Company and that both Employer and the Holding Company have taken reasonable steps to keep all such information and trade secrets confidential. 10. Source of Payments. All payments provided in paragraphs 4, 6, and 7 ------------------ hereof shall be paid in cash from the general funds of Employer as provided herein, and no special or separate fund shall be established by Employer, and no other segregation of assets shall be made to assure payment. Employee shall have no right, title, or interest in or to any investments which Employer may make to meet the obligations hereunder. 11. Injunctions. In view of the irreparable harm and damage which ----------- Employer and/or the Holding Company would sustain as a result of a breach by Employee of the covenants or agreements under paragraph 9 hereof, and in view of the lack of an adequate remedy at law to protect the interests of Employer and/or the Holding Company, Employer and/or the Holding Company shall have the right to receive, and Employee hereby consents to the issuance of, a permanent injunction -12- of one (1) year in duration enjoining Employee from any violation of the covenants and agreements set forth in paragraph 9 hereof. The foregoing remedy shall be in addition to, and not in limitation of, any other rights or remedies to which Employer and/or the Holding Company is or may be entitled at law or in equity respecting this Agreement. It is expressly agreed by the parties hereto that the Holding Company is an intended third party beneficiary of paragraph 9 and 11 of this Agreement and may enforce same against Employee as if it were a party hereto. 12. Attorneys' Fees. In the event any party hereto is required to engage --------------- in legal action against any other party hereto, either as plaintiff or defendant, in order to enforce or defend any of its or his rights under this Agreement, and such action results in a final judgment in favor of one or more parties, then the party or parties against whom said final judgment is obtained shall reimburse the prevailing party or parties for all legal fees and expenses incurred by the prevailing party or parties in asserting or defending its or his rights hereunder. 13. Federal Income Tax Withholding. Employer may withhold from any ------------------------------ benefits payable under this Agreement all federal, state, city, or other taxes as shall be required pursuant to any law or governmental regulation or ruling. 14. Effect of Prior Agreements. This Agreement contains the entire -------------------------- understanding between the parties hereto and supersedes any prior employment agreement and any contemporaneous oral agreement or understanding by, between, or among the Employer and Employee. 15. General Provisions. ------------------ (a) Nonassignability. Neither this Agreement nor any right or interest ---------------- hereunder shall be assignable by Employee, his beneficiaries or legal representatives, without the written -13- consent of Employer; provided, however, that nothing in this paragraph 15(a) shall preclude (i) Employee from designating a beneficiary to receive any benefits payable hereunder upon his death, or (ii) the executors, administrators, or other legal representatives of Employee or his estate from assigning any rights hereunder to the person or persons entitled thereto. (b) No Attachment. Except as required by law, no right to receive payments ------------- under this Agreement shall be subject to anticipation, commutation, alienation, sale, assignment, encumbrance, charge, pledge, or hypothecation, or to execution, attachment, levy, and any attempt, voluntary or involuntary, to effect any such action shall be null, void, and of no effect. (c) Binding Agreement. This Agreement shall be binding upon, and inure to ----------------- the benefit of, Employer and Employee and their respective heirs, successors, assigns, and legal representatives. 16. Modification and Waiver. ----------------------- (a) Amendment of Agreement. This Agreement may not be modified or amended ---------------------- except by an instrument in writing, signed by the parties hereto, and which specifically refers to this Agreement. (b) Waiver. No term or condition of this Agreement shall be deemed to have ------ been waived, nor shall there be any estoppel against the enforcement of any provision of this Agreement, except by written instrument of the party charged with such waiver or estoppel. No such written waiver shall be deemed a continuing waiver unless specifically stated therein, and each waiver shall operate only as to the specific term or condition waived and shall not -14- constitute a waiver of such term or condition for the future or as to any act other than that specifically waived. 17. Severability. If for any reason any provision of this Agreement is ------------ held invalid, such invalidity shall not affect any other provision of this Agreement not held invalid, and each such other provision shall to the full extent consistent with law continue in full force and effect. If any provision of this Agreement shall be held invalid in part, such invalidity shall in no way affect the rest of such provision not held so invalid, and the rest of such provision, together with all other provisions of this Agreement, shall to the full extent consistent with law continue in full force and effect. 18. Headings. The headings of paragraphs herein are included solely for -------- convenience of reference and shall not control the meaning or interpretation of any of the provisions of this Agreement. 19. Governing Law. This Agreement has been executed and delivered in the ------------- State of Georgia, and its validity, interpretation, performance, and enforcement shall be governed by the laws of said State. 20. Rights of Third Parties. Nothing herein expressed or implied is ----------------------- intended to or shall be construed to confer upon or give to any person, firm, or other entity, other than the parties hereto and their permitted assigns, any rights or remedies under or by reason of this Agreement. 21. Notices. All notices, requests, demands, and other communications ------- provided for by this Agreement shall be in writing and shall be sufficiently given if and when mailed in the United States by registered or certified mail, or personally delivered, to the party entitled thereto at the address stated below or to such changed address as the addressee may have given by a similar notice: -15- To Employer: Chairman of the Board Premier Lending Corporation 2180 Atlanta Plaza 950 E. Paces Ferry Road Atlanta, Georgia 30326 Copied to: Chairman of the Board First Alliance/Premier Bancshares, Inc. 2180 Atlanta Plaza 950 E. Paces Ferry Road Atlanta, Georgia 30326 -and- Steven S. Dunlevie, Esq. Womble Carlyle Sandridge & Rice, PLLC Suite 700 1275 Peachtree Street Atlanta, Georgia 30309 To Employee: Mr. George S. Phelps 3083 Milledge Gate Court Marietta, Georgia 30067 IN WITNESS WHEREOF, Employer has caused this Agreement to be executed and its seal to be affixed hereunto by its duly authorized officer, and Employee has signed this Agreement, as of the Effective Date. ATTEST: PREMIER LENDING CORPORATION /s/ Barbara J. Burtt By: /s/ Darrell D. Pittard - ------------------------- ---------------------------------------- Secretary Darrell D. Pittard (CORPORATE SEAL) Chairman of the Board /s/ Cindy George /s/ George S. Phelps - ---------------------- -----------------------------------(SEAL) Witness GEORGE S. PHELPS -16- EX-10.5 7 EMPLOYMENT AGREEMENT--MICHAEL W. LANE EMPLOYMENT AGREEMENT -------------------- THIS AGREEMENT ("Agreement") is made and entered into effective as of the 1st day of January, 1997 (the "Effective Date"), by and among PREMIER LENDING CORPORATION ("Employer"); and MICHAEL W. LANE ("Employee"). W I T N E S S E T H: WHEREAS, Employer is a wholly owned subsidiary of FIRST ALLIANCE/ PREMIER BANCSHARES, INC. (the "Holding Company"); WHEREAS, the Board of Directors of Employer considers the establishment and maintenance of highly competent and skilled management personnel for Employer to be essential to protecting and enhancing the best interests of Employer; WHEREAS, the Board of Directors of Employer is desirous of inducing Employee to remain in the employ of Employer, subject to the terms and conditions hereof; WHEREAS, Employee is desirous of remaining in the employ of Employer, subject to the terms and conditions hereof; and WHEREAS, the parties agree that the provisions of this Agreement shall control with respect to the rights and obligations of the parties resulting from the employment of Employee by Employer; NOW, THEREFORE, for and in consideration of the mutual covenants herein contained, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto do hereby agree as follows: 1. Definitions. The following terms used in this Agreement shall have the ----------- following meanings: (a) "Base Salary" shall mean the annual compensation (excluding Incentive Compensation as defined in (e) of this paragraph and other benefits) payable or paid to Employee pursuant to paragraph 4(a) of this Agreement. (b) "Change of Control" shall be deemed to have occurred if: (i) After any transaction any person (or persons acting in concert), partnership, corporation, or other organization shall own, control, or hold with the power to vote more than fifty percent (50%) of any class of voting -- securities of the Holding Company; or (ii) The Holding Company, or substantially all of the assets of the Holding Company, shall be sold or transferred to, or consolidated or merged with, another corporation; or (iii) Employer, or substantially all of the assets of Employer, shall be sold or transferred to, or consolidated or merged with, another corporation which is not a majority owned subsidiary of the Holding Company; Provided, however, if Employer shall become a subsidiary of another corporation or shall be merged or consolidated into another corporation and a majority of the outstanding voting shares of the parent or surviving corporation are owned immediately after such acquisition, merger, or consolidation by the owners of a majority of the voting shares of Employer immediately before such acquisition, merger, or consolidation. (c) "Disability" shall mean the complete inability of Employee to perform his duties for Employer under this Agreement on a full-time basis, as determined by an independent physician selected with the approval of Employer and Employee. (d) "Event of Termination" shall mean the termination by Employer of Employee's employment under this Agreement by written notice delivered to Employee for any reason other than Termination for Cause as defined in (f) of this paragraph or termination following a continuous period of disability exceeding six (6) calendar months pursuant to paragraph 6(a) of this Agreement. -- (e) "Incentive Compensation" shall mean that compensation payable or paid to Employee pursuant to paragraph 4(b) of this Agreement. (f) "Termination for Cause" shall have the meaning provided in paragraph 7(a) of this Agreement. 2. Employment. Employer agrees to continue Employee in its employ, and ---------- Employee agrees to remain in the employ of Employer, as its Executive Vice President of Commercial Finance, for the period stated in paragraph 3(a) hereof and upon the other terms and conditions herein provided. Employee agrees to perform faithfully such services as are reasonably consistent with his positions and shall from time to time be assigned to him by the Board of Directors of Employer in a trustworthy and businesslike manner for the purpose of advancing the interests of Employer. The Board of Directors of Employer may also from time to time change Employee's position or alter his duties and responsibilities and assign a new position or new duties and responsibilities that are similar in scope and nature to Employee's existing position, duties and responsibilities without invalidating this Agreement or effecting the termination of Employee. At all times, Employee shall manage and conduct the business of Employer in accordance with the policies established by the Board of Directors of Employer, and in compliance with applicable regulations promulgated by governing regulatory agencies. Responsibility for the supervision of Employee shall rest with the Board of Directors of Employer, which shall review Employee's performance at least annually. The Board of Directors of Employer shall also have the authority to terminate Employee, subject to the provisions outlined in paragraph 7 of this Agreement. 3. Term and Duties. --------------- (a) Term of Employment. This Agreement and the period of Employee's ------------------ employment under this Agreement shall be deemed to have commenced as of the Effective Date and shall continue for a period of twelve (12) full calendar -- months thereafter, unless earlier terminated pursuant to this Agreement or unless Employee dies before the end of such twelve (12) months, in which case -- the period of employment shall be deemed to continue until the end of the month of such death. On each anniversary of the Effective Date, this Agreement and Employee's term of employment shall be extended for an additional twelve (12) -- month period provided that the Boards of Directors of Employer determines that the performance of Employee has met said Boards' requirements and standards and further that this Agreement shall be extended. (b) Performance of Duties. During the period of employment hereunder, --------------------- except for periods of illness, disability, reasonable vacation periods, and reasonable leaves of absence, Employee shall devote substantially all of his business time, attention, skill, and efforts to the faithful performance of his duties hereunder. Employee shall be entitled to reasonable participation as a member in community, civic, or similar organizations and the pursuit of personal investments which do not present any material conflict of interest with Employer, or otherwise unfavorably affect the performance of Employee's duties pursuant to this Agreement. (c) Office of Employee. The office of Employee shall be located at the ------------------ principal office of Employer in Atlanta, Georgia, or at such other location within the State of Georgia as Employer may from time to time designate; provided, however, that, in the event such relocation required Employee to move his principal residence, Employer shall reimburse Employee for all his reasonable moving expenses. (d) No Other Agreement. The Employee shall have no employment contract or ------------------ other written or oral agreement concerning employment with any entity or person other than Employer during the term of his employment under this Agreement. (e) Uniqueness of Employee's Services. Employee hereby represents that the --------------------------------- services to be performed by him under the terms of this Agreement are of a special, unique, unusual, extraordinary, and intellectual character which gives them a peculiar value, the loss of which cannot be reasonably or adequately compensated in damages and in an action at law. Accordingly, Employee expressly agrees that Employer, in addition to any rights or remedies which Employer may possess, shall be entitled to injunctive and other equitable relief to prevent the breach of this Agreement by Employee. 4. Compensation. ------------ (a) Salary. Subject to the provisions of paragraph 7 hereof, Employer ------ shall pay Employee, as compensation for serving as Executive Vice President of Commercial Finance of Employer, an initial Base Salary of $115,500; such initial -------- Base Salary, or any increased Base Salary, shall be payable in substantially equal installments in accordance with the Employer's normal pay practices, but not less frequently than monthly. The Board of Directors of Employer, if warranted in its discretion, may increase Employee's Base Salary to reflect Employee's performance. (b) Incentive Compensation. During the Term of Employment and in addition ---------------------- to the aforesaid Base Salary, Employee shall be entitled to such additional Incentive Compensation as may be awarded from time to time by the Board of Directors of Employer or any committee(s) designated thereby in its discretion. Notwithstanding anything contained in this Agreement to the contrary, any increase to Employee's Base Salary and any Incentive Compensation paid to Employee shall be (i) in compliance with regulations, thrift bulletins, pronouncements, directives, or orders issued or promulgated by any governing regulatory agency and with any agreements by and between Employer and such regulatory agencies, (ii) consistent with the safe and sound operation of Employer, (iii) closely monitored by the Board of Directors of Employer and (iv) comparable to such compensation paid to persons of similar responsibilities and duties in other insured institutions of similar size, in similar locations, and under similar circumstances including financial condition and profitability. (c) "Golden Parachute" Provision. Notwithstanding anything contained in ---------------------------- this Agreement to the contrary, any payments made to Employee pursuant to this Agreement, or otherwise to Employee, are subject to and conditioned upon their compliance with 12 U.S.C. (S) 1828(k) and any regulations promulgated thereunder. 5. Participation in Benefit Plans. The payments provided in paragraph 4, ------------------------------ 6, and 7 hereof are in addition to any benefits to which Employee may be, or may become, entitled to, under any group hospitalization, health, dental care, or sick leave plan; life insurance or death benefit plan; travel or accident insurance; pension or retirement plan; stock option or ownership plan; or other present or future group employee benefit plan or program for which senior executive officers of Employer shall be or shall become eligible. Said benefit shall include, without limitation, major medical/dental insurance for Employee and his dependents. 6. Benefits Payable Upon Disability. -------------------------------- (a) Disability Benefits. In the event of the Disability of Employee, ------------------- Employer shall continue to pay Employee 100% of Employee's then current Base ---- Salary pursuant to paragraph 4(a) during the first six (6) months of a - continuous period of disability. It is provided, however, that in the event Employee is disabled for a continuous period exceeding six (6) months, Employer - may, at its election, terminate this Agreement, in which event payment of Employee's Base Salary shall cease. (b) Disability Benefit Offset. Any amounts payable under paragraph 6(a) ------------------------- hereof shall be reduced by any amounts paid to Employee under any other disability program or policy of insurance maintained by Employer. 7. Payments to Employee Upon Termination of Employment. The Boards of --------------------------------------------------- Directors of Employer may terminate Employee's employment under this Agreement at any time; but any termination other than Termination for Cause shall not prejudice Employee's right to compensation or other benefits under this Agreement. Employee may voluntarily terminate his employment under this Agreement. The rights and obligations of Employer and Employee in the event of such termination are set forth in this paragraph 7 as follows: (a) Termination for Cause. Employee shall have no right to compensation or --------------------- other benefits for any period after a Termination for Cause. Termination for Cause shall be determined by the Boards of Directors of Employer in the reasonable exercise of its discretion and acting in good faith, and shall include termination because of Employee's personal dishonesty, incompetence, willful misconduct, breach of fiduciary duties involving personal profit, intentional failure to perform stated duties, willful violation of any law, rule, or regulation (other than traffic violations or similar offenses), or a final cease-and-desist order, the regulatory suspension or removal of Employee as defined in paragraphs 8(a) and (b) hereof, the termination of this Agreement under paragraphs 8(c) and (d) hereof, the failure of Employee to follow reasonable written instructions of the Boards of Directors of Employer, or a material breach of Employee of any provision of this Agreement. Termination for Cause from the Employer shall be determined by, and shall occur only upon the passage of a resolution by a vote of not less than a two-thirds of Employer's Board of Director specifying Employee's Termination for Cause and the grounds therefor, after reasonable notice to Employee and an opportunity for him to be heard before a meeting of the Board of Directors called in accordance with the By-Laws of Employer. Thereafter, Employee shall be deemed to be in material breach of this Agreement and shall have no right to receive compensation or other benefits under this Agreement for any period following such Termination for Cause. This provision on Termination for Cause shall control over any and all other provisions relating to discharge or termination for cause contained in any and all other agreements between Employer and Employee. (b) Event of Termination Without Change of Control. Upon the occurrence of ---------------------------------------------- an Event of Termination, other than after a Change of Control as provided in paragraph 7(c) hereof, Employer shall pay to Employee, or in the event of his subsequent death, to his designated beneficiary or beneficiaries, or to his estate, as the case may be, as liquidated damages, in lieu of all other claims, a severance payment equal to Employee's then current Base Salary plus any Incentive Compensation paid to Employee during the immediately preceding twelve (12) months, to be paid in full -- on the last day of the month following the date of said Event of Termination. (c) Event of Termination in Connection With a Change of Control. If during ----------------------------------------------------------- the term of this Agreement and within one (1) year immediately following a - Change of Control or within six (6) months immediately prior to such Change of - Control: (i) Employee's employment with Employer under this Agreement is terminated by an Event of Termination; or (ii) the status, character, capacity, and circumstances of Employee's employment as provided in paragraphs 2 and 3 of this Agreement have been materially altered by Employer whether by a reduction in salary, responsibilities, authority, or benefits, and Employee voluntary terminates the employment contemplated by this Agreement for that reason; then Employer shall pay to Employee, or in the event of his subsequent death, to his designated beneficiary or beneficiaries, or to his estate, as the case may be, as liquidated damages, in lieu of all other claims, a severance payment equal to Employee's then current Base Salary plus any Incentive Compensation paid to Employee during the immediately preceding twelve (12) months, to be paid -- in full on the last day of the month following the date of said Event of Termination or Employee's voluntary termination under (ii) above. In no event shall the total compensation paid to Employee upon the termination of his employment in connection with a Change of Control exceed the amount permitted by Section 280G of the Internal Revenue Code (as amended) or three times Employee's average annual compensation. Employee's average annual compensation shall be based on the most recent five taxable years ending before the Change of Control (or the period during which Employee was employed by Employer if Employee has been employed by Employer for less than five years). (d) Voluntary Termination of Employment. Employee shall have no right to ----------------------------------- compensation or other benefits under this Agreement for any period following the voluntary termination of Employee's employment by Employee, except as provided in paragraph 7(b) and 7(c) hereof. 8. Regulatory Suspension. --------------------- (a) If Employee is suspended and/or temporarily prohibited from participating in the conduct of the affairs of Employer by a notice served under Sections 8(e)(3) or (g)(1) of the Federal Deposit Insurance Act, 12 U.S.C. (S) 1818(e)(3) or (g)(1), the obligations of Employer under this Agreement shall be suspended as of the date of service of such notice, unless stayed by appropriate proceedings. If the charges in the notice are dismissed, Employer may in its discretion (i) pay Employee all or part of the compensation withheld while its contract obligations were suspended and (ii) reinstate in whole or in part any of its obligations which were suspended. (b) If Employee is removed and/or permanently prohibited from participating in the conduct of the affairs of Employer by an order issued under Section 8(e)(4) or (g)(1) of the Federal Deposit Insurance Act, 12 U.S.C. (S) 1818(e)(4) or (g)(1), all obligations of Employer under this Agreement shall terminate as of the effective date of the order, but vested rights of the parties hereto shall not be affected. (c) If Employer is in "default" as defined in Section 3(x)(1) of the Federal Deposit Insurance Act, all obligations under this Agreement shall terminate as of the date of default, but this paragraph shall not affect any vested rights of the parties hereto. (d) All obligations under this Agreement shall be terminated, except to the extent that it may be determined by any state or federal regulatory agency or body having authority over Employer that continuation of this Agreement is necessary for the continued operation of Employer, at any time the Federal Deposit Insurance Corporation (the "FDIC") enters into an agreement to provide assistance to or on behalf of Employer under the authority contained in Section 13(c) of the Federal Deposit Insurance Act, at any time the FDIC approves a supervisory merger to resolve problems related to the operation of Employer, or when Employer is determined by the Georgia Department of Banking and Finance, the Board of Governors of the Federal Reserve System (or the Federal Reserve Bank of Atlanta acting pursuant to delegated authority), or the FDIC to be in an unsafe and unsound condition. Any rights of the parties hereto that have already vested, however, shall not be affected by such action. 9. Nondisclosure of Confidential Information. Employee acknowledges that ----------------------------------------- he possesses confidential information of a special and unique nature and value affecting and relating to both Employer's and the Holding Company's business, including, without limitation, the identity of the customers, deposits business records, other trade secrets, and other similar confidential information relating to Employer and/or the Holding Company and the business of each (all the foregoing being hereinafter collectively referred to as "Confidential Information"). Employee recognizes and acknowledges that all Confidential Information is the exclusive property of Employer and/or the Holding Company respectively, constitutes trade secrets of Employer and/or the Holding Company, is material and confidential, and greatly affects the goodwill and the effective and successful conduct of the business of Employer and/or the Holding Company. As a material inducement to Employer to enter into this Agreement and to employ Employee, Employee covenants and agrees that he will not at any time during the term of his employment under this Agreement, and for a period of one (1) year - from the end of such employment, directly or indirectly, divulge, reveal, or communicate any Confidential Information to any person, firm, corporation, or entity whatsoever, or use any Confidential Information for his own benefit or for the benefit of others. Employee further acknowledges that said Confidential Information has material commercial value to Employer and/or the Holding Company so long as it is not known by competitors of Employer and/or the Holding Company and that both Employer and the Holding Company have taken reasonable steps to keep all such information and trade secrets confidential. 10. Source of Payments. All payments provided in paragraphs 4, 6, and 7 ------------------ hereof shall be paid in cash from the general funds of Employer as provided herein, and no special or separate fund shall be established by Employer, and no other segregation of assets shall be made to assure payment. Employee shall have no right, title, or interest in or to any investments which Employer may make to meet the obligations hereunder. 11. Injunctions. In view of the irreparable harm and damage which ----------- Employer and/or the Holding Company would sustain as a result of a breach by Employee of the covenants or agreements under paragraph 9 hereof, and in view of the lack of an adequate remedy at law to protect the interests of Employer and/or the Holding Company, Employer and/or the Holding Company shall have the right to receive, and Employee hereby consents to the issuance of, a permanent injunction of one (1) year in duration enjoining Employee from any violation of the covenants and agreements set forth in paragraph 9 hereof. The foregoing remedy shall be in addition to, and not in limitation of, any other rights or remedies to which Employer and/or the Holding Company is or may be entitled at law or in equity respecting this Agreement. It is expressly agreed by the parties hereto that the Holding Company is an intended third party beneficiary of paragraph 9 and 11 of this Agreement and may enforce same against Employee as if it were a party hereto. 12. Attorneys' Fees. In the event any party hereto is required to engage --------------- in legal action against any other party hereto, either as plaintiff or defendant, in order to enforce or defend any of its or his rights under this Agreement, and such action results in a final judgment in favor of one or more parties, then the party or parties against whom said final judgment is obtained shall reimburse the prevailing party or parties for all legal fees and expenses incurred by the prevailing party or parties in asserting or defending its or his rights hereunder. 13. Federal Income Tax Withholding. Employer may withhold from any ------------------------------ benefits payable under this Agreement all federal, state, city, or other taxes as shall be required pursuant to any law or governmental regulation or ruling. 14. Effect of Prior Agreements. This Agreement contains the entire -------------------------- understanding between the parties hereto and supersedes any prior employment agreement and any contemporaneous oral agreement or understanding by, between, or among the Employer and Employee. 15. General Provisions. ------------------ (a) Nonassignability. Neither this Agreement nor any right or interest ---------------- hereunder shall be assignable by Employee, his beneficiaries or legal representatives, without the written consent of Employer; provided, however, that nothing in this paragraph 15(a) shall preclude (i) Employee from designating a beneficiary to receive any benefits payable hereunder upon his death, or (ii) the executors, administrators, or other legal representatives of Employee or his estate from assigning any rights hereunder to the person or persons entitled thereto. (b) No Attachment. Except as required by law, no right to receive payments ------------- under this Agreement shall be subject to anticipation, commutation, alienation, sale, assignment, encumbrance, charge, pledge, or hypothecation, or to execution, attachment, levy, and any attempt, voluntary or involuntary, to effect any such action shall be null, void, and of no effect. (c) Binding Agreement. This Agreement shall be binding upon, and inure to ----------------- the benefit of, Employer and Employee and their respective heirs, successors, assigns, and legal representatives. 16. Modification and Waiver. ----------------------- (a) Amendment of Agreement. This Agreement may not be modified or amended ---------------------- except by an instrument in writing, signed by the parties hereto, and which specifically refers to this Agreement. (b) Waiver. No term or condition of this Agreement shall be deemed to have ------ been waived, nor shall there be any estoppel against the enforcement of any provision of this Agreement, except by written instrument of the party charged with such waiver or estoppel. No such written waiver shall be deemed a continuing waiver unless specifically stated therein, and each waiver shall operate only as to the specific term or condition waived and shall not constitute a waiver of such term or condition for the future or as to any act other than that specifically waived. 17. Severability. If for any reason any provision of this Agreement is ------------ held invalid, such invalidity shall not affect any other provision of this Agreement not held invalid, and each such other provision shall to the full extent consistent with law continue in full force and effect. If any provision of this Agreement shall be held invalid in part, such invalidity shall in no way affect the rest of such provision not held so invalid, and the rest of such provision, together with all other provisions of this Agreement, shall to the full extent consistent with law continue in full force and effect. 18. Headings. The headings of paragraphs herein are included solely for -------- convenience of reference and shall not control the meaning or interpretation of any of the provisions of this Agreement. 19. Governing Law. This Agreement has been executed and delivered in the ------------- State of Georgia, and its validity, interpretation, performance, and enforcement shall be governed by the laws of said State. 20. Rights of Third Parties. Nothing herein expressed or implied is ----------------------- intended to or shall be construed to confer upon or give to any person, firm, or other entity, other than the parties hereto and their permitted assigns, any rights or remedies under or by reason of this Agreement. 21. Notices. All notices, requests, demands, and other communications ------- provided for by this Agreement shall be in writing and shall be sufficiently given if and when mailed in the United States by registered or certified mail, or personally delivered, to the party entitled thereto at the address stated below or to such changed address as the addressee may have given by a similar notice: To Employer: Chairman of the Board Premier Lending Corporation 2180 Atlanta Plaza 950 E. Paces Ferry Road Atlanta, Georgia 30326 Copied to: Chairman of the Board First Alliance/Premier Bancshares, Inc. 2180 Atlanta Plaza 950 E. Paces Ferry Road Atlanta, Georgia 30326 -and- Steven S. Dunlevie, Esq. Womble Carlyle Sandridge & Rice, PLLC Suite 700 1275 Peachtree Street Atlanta, Georgia 30309 To Employee: Mr. Michael W. Lane 659 Peachtree Street, #1502 Atlanta, Georgia 30308 IN WITNESS WHEREOF, Employer has caused this Agreement to be executed and its seal to be affixed hereunto by its duly authorized officer, and Employee has signed this Agreement, as of the Effective Date. [SIGNATURES ON NEXT PAGE] ATTEST: PREMIER LENDING CORPORATION /s/ Barbara J. Burtt By: /s/ Darrell D. Pittard - ----------------------- --------------------------------------- Secretary Darrell D. Pittard (CORPORATE SEAL) Chairman of the Board /s/ Cindy George /s/ Michael W. Lane - ---------------------- -----------------------------------(SEAL) Witness MICHAEL W. LANE EX-10.6 8 EMPLOYMENT AGREEMENT--BRIAN SCHMITT EMPLOYMENT AGREEMENT -------------------- THIS AGREEMENT ("Agreement") is made and entered into effective as of the 1st day of January, 1997 (the "Effective Date"), by and among PREMIER LENDING CORPORATION ("Employer"); and BRIAN D. SCHMITT ("Employee"). W I T N E S S E T H: WHEREAS, Employer is a wholly owned subsidiary of FIRST ALLIANCE/ PREMIER BANCSHARES, INC. (the "Holding Company"); WHEREAS, the Board of Directors of Employer consider the establishment and maintenance of highly competent and skilled management personnel for Employer to be essential to protecting and enhancing the best interests of Employer; WHEREAS, the Board of Directors of Employer is desirous of inducing Employee to remain in the employ of Employer, subject to the terms and conditions hereof; WHEREAS, Employee is desirous of remaining in the employ of Employer, subject to the terms and conditions hereof; and WHEREAS, the parties agree that the provisions of this Agreement shall control with respect to the rights and obligations of the parties resulting from the employment of Employee by Employer; NOW, THEREFORE, for and in consideration of the mutual covenants herein contained, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto do hereby agree as follows: 1. Definitions. The following terms used in this Agreement shall have the ----------- following meanings: (a) "Base Salary" shall mean the annual compensation (excluding Incentive Compensation as defined in (e) of this paragraph and other benefits) payable or paid to Employee pursuant to paragraph 4(a) of this Agreement. (b) "Change of Control" shall be deemed to have occurred if: (i) transaction any person (or persons acting in concert), partnership, corporation, or other organization shall own, control, or hold with the power to vote more than fifty percent (50%) of any class of voting securities of the -- Holding Company; or (ii) The Holding Company, or substantially all of the assets of the Holding Company, shall be sold or transferred to, or consolidated or merged with, another corporation; or (iii) Employer, or substantially all of the assets of Employer, shall be sold or transferred to, or consolidated or merged with, another corporation which is not a majority owned subsidiary of the Holding Company; Provided, however, if Employer shall become a subsidiary of another corporation or shall be merged or consolidated into another corporation and a majority of the outstanding voting shares of the parent or surviving corporation are owned immediately after such acquisition, merger, or consolidation by the owners of a majority of the voting shares of Employer immediately before such acquisition, merger, or consolidation. (c) "Disability" shall mean the complete inability of Employee to perform his duties for Employer under this Agreement on a full-time basis, as determined by an independent physician selected with the approval of Employer and Employee. -2- (d) "Event of Termination" shall mean the termination by Employer of Employee's employment under this Agreement by written notice delivered to Employee for any reason other than Termination for Cause as defined in (f) of this paragraph or termination following a continuous period of disability exceeding six (6) calendar months pursuant to paragraph 6(a) of this Agreement. -- (e) "Incentive Compensation" shall mean that compensation payable or paid to Employee pursuant to paragraph 4(b) of this Agreement. (f) "Termination for Cause" shall have the meaning provided in paragraph 7(a) of this Agreement. 2. Employment. Employer agrees to continue Employee in its employ, and ---------- Employee agrees to remain in the employ of Employer, as its Senior Vice President of Commercial Real Estate Lending, for the period stated in paragraph 3(a) hereof and upon the other terms and conditions herein provided. Employee agrees to perform faithfully such services as are reasonably consistent with his positions and shall from time to time be assigned to him by the Board of Directors of Employer in a trustworthy and businesslike manner for the purpose of advancing the interests of Employer. The Board of Directors of Employer may also from time to time change Employee's position or alter his duties and responsibilities and assign a new position or new duties and responsibilities that are similar in scope and nature to Employee's existing position, duties and responsibilities without invalidating this Agreement or effecting the termination of Employee. At all times, Employee shall manage and conduct the business of Employer in accordance with the policies established by the Board of Directors of Employer, and in compliance with applicable regulations promulgated by governing regulatory agencies. Responsibility for the supervision of -3- Employee shall rest with the Board of Directors of Employer, which shall review Employee's performance at least annually. The Board of Directors of Employer shall also have the authority to terminate Employee, subject to the provisions outlined in paragraph 7 of this Agreement. 3. Term and Duties. --------------- (a) Term of Employment. This Agreement and the period of Employee's ------------------ employment under this Agreement shall be deemed to have commenced as of the Effective Date and shall continue for a period of twelve (12) full calendar -- months thereafter, unless earlier terminated pursuant to this Agreement or unless Employee dies before the end of such twelve (12) months, in which case -- the period of employment shall be deemed to continue until the end of the month of such death. On each anniversary of the Effective Date, this Agreement and Employee's term of employment shall be extended for an additional twelve (12) -- month period provided that the Board of Directors of Employer determines that the performance of Employee has met said Boards' requirements and standards and further that this Agreement shall be extended. (b) Performance of Duties. During the period of employment hereunder, --------------------- except for periods of illness, disability, reasonable vacation periods, and reasonable leaves of absence, Employee shall devote substantially all of his business time, attention, skill, and efforts to the faithful performance of his duties hereunder. Employee shall be entitled to reasonable participation as a member in community, civic, or similar organizations and the pursuit of personal investments which do not present any material conflict of interest with Employer, or otherwise unfavorably affect the performance of Employee's duties pursuant to this Agreement. -4- (c) Office of Employee. The office of Employee shall be located at the ------------------ principal office of Employer in Atlanta, Georgia, or at such other location within the State of Georgia as Employer may from time to time designate; provided, however, that, in the event such relocation required Employee to move his principal residence, Employer shall reimburse Employee for all his reasonable moving expenses. (d) No Other Agreement. The Employee shall have no employment contract or ------------------ other written or oral agreement concerning employment with any entity or person other than Employer during the term of his employment under this Agreement. (e) Uniqueness of Employee's Services. Employee hereby represents that the --------------------------------- services to be performed by him under the terms of this Agreement are of a special, unique, unusual, extraordinary, and intellectual character which gives them a peculiar value, the loss of which cannot be reasonably or adequately compensated in damages and in an action at law. Accordingly, Employee expressly agrees that Employer, in addition to any rights or remedies which Employer may possess, shall be entitled to injunctive and other equitable relief to prevent the breach of this Agreement by Employee. 4. Compensation. ------------ (a) Salary. Subject to the provisions of paragraph 7 hereof, Employer ------ shall pay Employee, as compensation for serving as Senior Vice President of Commercial Real Estate Lending of Employer, an initial Base Salary of $90,000; ------- such initial Base Salary, or any increased Base Salary, shall be payable in substantially equal installments in accordance with the Employer's normal pay practices, but not less frequently than monthly. The Board of -5- Directors of Employer, if warranted in its discretion, may increase Employee's Base Salary to reflect Employee's performance. (b) Incentive Compensation. During the Term of Employment and in addition ---------------------- to the aforesaid Base Salary, Employee shall be entitled to such additional Incentive Compensation as may be awarded from time to time by the Board of Directors of Employer or any committee(s) designated thereby in its discretion. Notwithstanding anything contained in this Agreement to the contrary, any increase to Employee's Base Salary and any Incentive Compensation paid to Employee shall be (i) in compliance with regulations, thrift bulletins, pronouncements, directives, or orders issued or promulgated by any governing regulatory agency and with any agreements by and between Employer and such regulatory agencies, (ii) consistent with the safe and sound operation of Employer, (iii) closely monitored by the Board of Directors of Employer and (iv) comparable to such compensation paid to persons of similar responsibilities and duties in other insured institutions of similar size, in similar locations, and under similar circumstances including financial condition and profitability. (c) "Golden Parachute" Provision. Notwithstanding anything contained in ---------------------------- this Agreement to the contrary, any payments made to Employee pursuant to this Agreement, or otherwise to Employee, are subject to and conditioned upon their compliance with 12 U.S.C. (S) 1828(k) and any regulations promulgated thereunder. 5. Participation in Benefit Plans. The payments provided in paragraph 4, ------------------------------ 6, and 7 hereof are in addition to any benefits to which Employee may be, or may become, entitled to, under any group hospitalization, health, dental care, or sick leave plan; life insurance or death benefit plan; -6- travel or accident insurance; pension or retirement plan; stock option or ownership plan; or other present or future group employee benefit plan or program for which senior executive officers of Employer shall be or shall become eligible. Said benefit shall include, without limitation, major medical/dental insurance for Employee and his dependents. 6. Benefits Payable Upon Disability. -------------------------------- (a) Disability Benefits. In the event of the Disability of Employee, ------------------- Employer shall continue to pay Employee 100% of Employee's then current Base ---- Salary pursuant to paragraph 4(a) during the first six (6) months of a - continuous period of disability. It is provided, however, that in the event Employee is disabled for a continuous period exceeding six (6) months, Employer - may, at its election, terminate this Agreement, in which event payment of Employee's Base Salary shall cease. (b) Disability Benefit Offset. Any amounts payable under paragraph 6(a) ------------------------- hereof shall be reduced by any amounts paid to Employee under any other disability program or policy of insurance maintained by Employer. 7. Payments to Employee Upon Termination of Employment. The Board of --------------------------------------------------- Directors of Employer may terminate Employee's employment under this Agreement at any time; but any termination other than Termination for Cause shall not prejudice Employee's right to compensation or other benefits under this Agreement. Employee may voluntarily terminate his employment under this Agreement. The rights and obligations of Employer and Employee in the event of such termination are set forth in this paragraph 7 as follows: (a) Termination for Cause. Employee shall have no right to compensation or --------------------- other benefits for any period after a Termination for Cause. Termination for Cause shall be -7- determined by the Board of Directors of Employer in the reasonable exercise of its discretion and acting in good faith, and shall include termination because of Employee's personal dishonesty, incompetence, willful misconduct, breach of fiduciary duties involving personal profit, intentional failure to perform stated duties, willful violation of any law, rule, or regulation (other than traffic violations or similar offenses), or a final cease-and-desist order, the regulatory suspension or removal of Employee as defined in paragraphs 8(a) and (b) hereof, the termination of this Agreement under paragraphs 8(c) and (d) hereof, the failure of Employee to follow reasonable written instructions of the Board of Directors of Employer, or a material breach of Employee of any provision of this Agreement. Termination for Cause from the Employer shall be determined by, and shall occur only upon the passage of a resolution by a vote of not less than a two-thirds of Employer's Board of Directors specifying Employee's Termination for Cause and the grounds therefor, after reasonable notice to Employee and an opportunity for him to be heard before a meeting of the Board of Directors called in accordance with the By-Laws of Employer. Thereafter, Employee shall be deemed to be in material breach of this Agreement and shall have no right to receive compensation or other benefits under this Agreement for any period following such Termination for Cause. This provision on Termination for Cause shall control over any and all other provisions relating to discharge or termination for cause contained in any and all other agreements between Employer and Employee. (b) Event of Termination Without Change of Control. Upon the occurrence of ---------------------------------------------- an Event of Termination, other than after a Change of Control as provided in paragraph 7(c) hereof, Employer shall pay to Employee, or in the event of his subsequent death, to his -8- designated beneficiary or beneficiaries, or to his estate, as the case may be, as liquidated damages, in lieu of all other claims, a severance payment equal to Employee's then current Base Salary plus any Incentive Compensation paid to Employee during the immediately preceding twelve (12) months, to be paid in full -- on the last day of the month following the date of said Event of Termination. (c) Event of Termination in Connection With a Change of Control. If during ----------------------------------------------------------- the term of this Agreement and within one (1) year immediately following a - Change of Control or within six (6) months immediately prior to such Change of - Control: (i) Employee's employment with Employer under this Agreement is terminated by an Event of Termination; or (ii) the status, character, capacity, and circumstances of Employee's employment as provided in paragraphs 2 and 3 of this Agreement have been materially altered by Employer whether by a reduction in salary, responsibilities, authority, or benefits, and Employee voluntary terminates the employment contemplated by this Agreement for that reason; then Employer shall pay to Employee, or in the event of his subsequent death, to his designated beneficiary or beneficiaries, or to his estate, as the case may be, as liquidated damages, in lieu of all other claims, a severance payment equal to Employee's then current Base Salary plus any Incentive Compensation paid to Employee during the immediately preceding twelve (12) months, to be paid -- in full on the last day of the month following the date of said Event of Termination or Employee's voluntary termination under (ii) above. In no event shall the total compensation paid to Employee upon the termination of his -9- employment in connection with a Change of Control exceed the amount permitted by Section 280G of the Internal Revenue Code (as amended) or three times Employee's average annual compensation. Employee's average annual compensation shall be based on the most recent five taxable years ending before the Change of Control (or the period during which Employee was employed by Employer if Employee has been employed by Employer for less than five years). (d) Voluntary Termination of Employment. Employee shall have no right to ----------------------------------- compensation or other benefits under this Agreement for any period following the voluntary termination of Employee's employment by Employee, except as provided in paragraph 7(b) and 7(c) hereof. 8. Regulatory Suspension. --------------------- (a) If Employee is suspended and/or temporarily prohibited from participating in the conduct of the affairs of Employer by a notice served under Sections 8(e)(3) or (g)(1) of the Federal Deposit Insurance Act, 12 U.S.C. (S) 1818(e)(3) or (g)(1), the obligations of Employer under this Agreement shall be suspended as of the date of service of such notice, unless stayed by appropriate proceedings. If the charges in the notice are dismissed, Employer may in its discretion (i) pay Employee all or part of the compensation withheld while its contract obligations were suspended and (ii) reinstate in whole or in part any of its obligations which were suspended. (b) If Employee is removed and/or permanently prohibited from participating in the conduct of the affairs of Employer by an order issued under Section 8(e)(4) or (g)(1) of the Federal Deposit Insurance Act, 12 U.S.C. (S) 1818(e)(4) or (g)(1), all obligations of -10- Employer under this Agreement shall terminate as of the effective date of the order, but vested rights of the parties hereto shall not be affected. (c) If Employer is in "default" as defined in Section 3(x)(1) of the Federal Deposit Insurance Act, all obligations under this Agreement shall terminate as of the date of default, but this paragraph shall not affect any vested rights of the parties hereto. (d) All obligations under this Agreement shall be terminated, except to the extent that it may be determined by any state or federal regulatory agency or body having authority over Employer that continuation of this Agreement is necessary for the continued operation of Employer, at any time the Federal Deposit Insurance Corporation (the "FDIC") enters into an agreement to provide assistance to or on behalf of Employer under the authority contained in Section 13(c) of the Federal Deposit Insurance Act, at any time the FDIC approves a supervisory merger to resolve problems related to the operation of Employer, or when Employer is determined by the Georgia Department of Banking and Finance, the Board of Governors of the Federal Reserve System (or the Federal Reserve Bank of Atlanta acting pursuant to delegated authority), or the FDIC to be in an unsafe and unsound condition. Any rights of the parties hereto that have already vested, however, shall not be affected by such action. 9. Nondisclosure of Confidential Information. Employee acknowledges that ----------------------------------------- he possesses confidential information of a special and unique nature and value affecting and relating to both Employer's and the Holding Company's business, including, without limitation, the identity of the customers, deposits business records, other trade secrets, and other similar confidential information relating to Employer and/or the Holding Company and the business of each (all the -11- foregoing being hereinafter collectively referred to as "Confidential Information"). Employee recognizes and acknowledges that all Confidential Information is the exclusive property of Employer and/or the Holding Company respectively, constitutes trade secrets of Employer and/or the Holding Company, is material and confidential, and greatly affects the goodwill and the effective and successful conduct of the business of Employer and/or the Holding Company. As a material inducement to Employer to enter into this Agreement and to employ Employee, Employee covenants and agrees that he will not at any time during the term of his employment under this Agreement, and for a period of one (1) year - from the end of such employment, directly or indirectly, divulge, reveal, or communicate any Confidential Information to any person, firm, corporation, or entity whatsoever, or use any Confidential Information for his own benefit or for the benefit of others. Employee further acknowledges that said Confidential Information has material commercial value to Employer and/or the Holding Company so long as it is not known by competitors of Employer and/or the Holding Company and that both Employer and the Holding Company have taken reasonable steps to keep all such information and trade secrets confidential. 10. Source of Payments. All payments provided in paragraphs 4, 6, and 7 ------------------ hereof shall be paid in cash from the general funds of Employer as provided herein, and no special or separate fund shall be established by Employer, and no other segregation of assets shall be made to assure payment. Employee shall have no right, title, or interest in or to any investments which Employer may make to meet the obligations hereunder. 11. Injunctions. In view of the irreparable harm and damage which ----------- Employer and/or the Holding Company would sustain as a result of a breach by Employee of the covenants or agreements under paragraph 9 hereof, and in view of the lack of an adequate remedy at law to protect the -12- interests of Employer and/or the Holding Company, Employer and/or the Holding Company shall have the right to receive, and Employee hereby consents to the issuance of, a permanent injunction of one (1) year in duration enjoining - Employee from any violation of the covenants and agreements set forth in paragraph 9 hereof. The foregoing remedy shall be in addition to, and not in limitation of, any other rights or remedies to which Employer and/or the Holding Company is or may be entitled at law or in equity respecting this Agreement. It is expressly agreed by the parties hereto that the Holding Company is an intended third party beneficiary of paragraph 9 and 11 of this Agreement and may enforce same against Employee as if it were a party hereto. 12. Attorneys' Fees. In the event any party hereto is required to engage --------------- in legal action against any other party hereto, either as plaintiff or defendant, in order to enforce or defend any of its or his rights under this Agreement, and such action results in a final judgment in favor of one or more parties, then the party or parties against whom said final judgment is obtained shall reimburse the prevailing party or parties for all legal fees and expenses incurred by the prevailing party or parties in asserting or defending its or his rights hereunder. 13. Federal Income Tax Withholding. Employer may withhold from any ------------------------------ benefits payable under this Agreement all federal, state, city, or other taxes as shall be required pursuant to any law or governmental regulation or ruling. 14. Effect of Prior Agreements. This Agreement contains the entire -------------------------- understanding between the parties hereto and supersedes any prior employment agreement and any contemporaneous oral agreement or understanding by, between, or among the Employer and Employee. -13- 15. General Provisions. ------------------ (a) Nonassignability. Neither this Agreement nor any right or interest ---------------- hereunder shall be assignable by Employee, his beneficiaries or legal representatives, without the written consent of Employer; provided, however, that nothing in this paragraph 15(a) shall preclude (i) Employee from designating a beneficiary to receive any benefits payable hereunder upon his death, or (ii) the executors, administrators, or other legal representatives of Employee or his estate from assigning any rights hereunder to the person or persons entitled thereto. (b) No Attachment. Except as required by law, no right to receive payments ------------- under this Agreement shall be subject to anticipation, commutation, alienation, sale, assignment, encumbrance, charge, pledge, or hypothecation, or to execution, attachment, levy, and any attempt, voluntary or involuntary, to effect any such action shall be null, void, and of no effect. (c) Binding Agreement. This Agreement shall be binding upon, and inure to ----------------- the benefit of, Employer and Employee and their respective heirs, successors, assigns, and legal representatives. 16. Modification and Waiver. ----------------------- (a) Amendment of Agreement. This Agreement may not be modified or amended ---------------------- except by an instrument in writing, signed by the parties hereto, and which specifically refers to this Agreement. (b) Waiver. No term or condition of this Agreement shall be deemed to have ------ been waived, nor shall there be any estoppel against the enforcement of any provision of this -14- Agreement, except by written instrument of the party charged with such waiver or estoppel. No such written waiver shall be deemed a continuing waiver unless specifically stated therein, and each waiver shall operate only as to the specific term or condition waived and shall not constitute a waiver of such term or condition for the future or as to any act other than that specifically waived. 17. Severability. If for any reason any provision of this Agreement is ------------ held invalid, such invalidity shall not affect any other provision of this Agreement not held invalid, and each such other provision shall to the full extent consistent with law continue in full force and effect. If any provision of this Agreement shall be held invalid in part, such invalidity shall in no way affect the rest of such provision not held so invalid, and the rest of such provision, together with all other provisions of this Agreement, shall to the full extent consistent with law continue in full force and effect. 18. Headings. The headings of paragraphs herein are included solely for -------- convenience of reference and shall not control the meaning or interpretation of any of the provisions of this Agreement. 19. Governing Law. This Agreement has been executed and delivered in the ------------- State of Georgia, and its validity, interpretation, performance, and enforcement shall be governed by the laws of said State. 20. Rights of Third Parties. Nothing herein expressed or implied is ----------------------- intended to or shall be construed to confer upon or give to any person, firm, or other entity, other than the parties hereto and their permitted assigns, any rights or remedies under or by reason of this Agreement. -15- 21. Notices. All notices, requests, demands, and other communications ------- provided for by this Agreement shall be in writing and shall be sufficiently given if and when mailed in the United States by registered or certified mail, or personally delivered, to the party entitled thereto at the address stated below or to such changed address as the addressee may have given by a similar notice: To Employer: Chairman of the Board Premier Lending Corporation 2180 Atlanta Plaza 950 E. Paces Ferry Road Atlanta, Georgia 30326 Copied to: Chairman of the Board First Alliance/Premier Bancshares, Inc. 2180 Atlanta Plaza 950 E. Paces Ferry Road Atlanta, Georgia 30326 -and- Steven S. Dunlevie, Esq. Womble Carlyle Sandridge & Rice, PLLC Suite 700 1275 Peachtree Street Atlanta, Georgia 30309 To Employee: Mr. Brian D. Schmitt 710 Tuckahoe Trail Alpharetta, Georgia 30202 IN WITNESS WHEREOF, Employer has caused this Agreement to be executed and its seal to be affixed hereunto by its duly authorized officer, and Employee has signed this Agreement, as of the Effective Date. [SIGNATURES ON NEXT PAGE] -16- ATTEST: PREMIER LENDING CORPORATION /s/ Barbara J. Burtt By: /s/ Darrell D. Pittard - ---------------------- --------------------------------------- Secretary Darrell D. Pittard (CORPORATE SEAL) Chairman of the Board /s/ Cindy George /s/ Brian D. Schmitt - ---------------------- -----------------------------------(SEAL) Witness BRIAN D. SCHMITT -17- EX-10.7 9 AMENDMENT TO EMPLOYMENT AGREEMENT AMENDMENT TO EMPLOYMENT AGREEMENT -------------------- THIS AGREEMENT ("Agreement") is made and entered into effective as of the 1st day of January, 1997 (the "Effective Date"), by and among FIRST ALLIANCE/PREMIER BANCSHARES, INC. ("Employer"); and DARRELL D. PITTARD ("Employee"). W I T N E S S E T H: WHEREAS, Employer and employee previously entered into an employment agreement dated September 1, 1995 (the "Employment Agreement"), pursuant to which Employee is employed with Employer in the capacity of Chairman of the Board and Chief Executive Officer; WHEREAS, the Board of Directors of Employer considers the establishment and maintenance of highly competent and skilled management personnel for Employer to be essential to protecting and enhancing the best interests of Employer; WHEREAS, the Board of Directors of Employer is desirous of inducing Employee to remain in the employ of Employer, subject to the terms and conditions hereof; WHEREAS, Employee is desirous of remaining in the employ of Employer, subject to the terms and conditions hereof; and WHEREAS, the parties agree that an amendment of the Employment Agreement is appropriate; NOW, THEREFORE, for and in consideration of the mutual covenants herein contained, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto do hereby agree as follows: 1. Term. The provisions of paragraph 3(a) of the Employment Agreement are ---- hereby amended to reflect that the period of Employee's employment shall be extended to July 1, 1998. In order to effect any further extension, written notices regarding extension must be served by the Employer and Employee upon the other party on or before January 1, 1998. 2. Compensation. The provisions of paragraph 4(a) of the Employment ------------ Agreement are hereby amended to reflect that Employee's Base Salary shall be $200,000 effective as of January 1, 1997. - -------- 3. Effect of Prior Agreements. All other provisions of the Employment -------------------------- Agreement shall remain in full force and effect and the Employment Agreement and this Agreement contain the entire understanding between the parties hereto and supersede any prior employment agreement and any contemporaneous oral agreement or understanding by, between, or among the Employer and Employee. 4. Binding Agreement. This Agreement shall be binding upon, and inure to ----------------- the benefit of, Employer and Employee and their respective heirs, successors, assigns, and legal representatives. 5. Modification and Waiver. This Agreement may not be modified or amended ----------------------- except by an instrument in writing, signed by the parties hereto, and which specifically refers to this Agreement. 6. Headings. The headings of paragraphs herein are included solely for -------- convenience of reference and shall not control the meaning or interpretation of any of the provisions of this Agreement. 7. Governing Law. This Agreement has been executed and delivered in the ------------- State of Georgia, and its validity, interpretation, performance, and enforcement shall be governed by the laws of said State. -2- IN WITNESS WHEREOF, Employer has caused this Agreement to be executed and its seal to be affixed hereunto by its duly authorized officer, and Employee has signed this Agreement, as of the Effective Date. ATTEST: FIRST ALLIANCE/PREMIER BANCSHARES, INC. /s/ Barbara J. Burtt By: /s/ Darrell D. Pittard - ---------------------- --------------------------------------- Secretary Darrell D. Pittard (CORPORATE SEAL) Chairman of the Board /s/ Cindy George /s/ Darrell D. Pittard - ---------------------- -----------------------------------(SEAL) Witness DARRELL D. PITTARD -3- EX-10.8 10 FORM OF EMPLOYMENT AGREEMENT EMPLOYMENT AGREEMENT -------------------- THIS AGREEMENT ("Agreement") is made and entered into effective as of the ___ day of ___________, 1997 (the "Effective Date"), by and among PREMIER BANCSHARES, INC., a Georgia corporation ("the Company"); PREMIER LENDING CORPORATION, a wholly-owned Georgia banking subsidiary of the Company ("Employer"); and DARRELL D. PITTARD ("Employee"). W I T N E S S E T H: WHEREAS, as of the Effective Date, Employee continued as Chairman of the Board and Chief Executive Officer of the Company and continued as Chairman of the Board and Chief Executive Officer of Employer; WHEREAS, the Board of Directors of Employer and the Company consider the establishment and maintenance of highly competent and skilled management personnel for Employer and the Company to be essential to protecting and enhancing their best interests; WHEREAS, the Boards of Directors of Employer and the Company are desirous of inducing Employee to remain in the employ of Employer and the Company, subject to the terms and conditions hereof; WHEREAS, Employee is desirous of remaining in the employ of the Company and Employer, subject to the terms and conditions hereof; and WHEREAS, the parties agree that the provisions of this Agreement shall control with respect to the rights and obligations of the parties resulting from the employment of Employee by Employer and the Company; NOW, THEREFORE, for and in consideration of the mutual covenants herein contained, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto do hereby agree as follows: 1. Definitions. The following terms used in this Agreement shall have the ----------- following meanings: (a) "Base Salary" shall mean the annual compensation (excluding Incentive Compensation as defined in (e) of this paragraph and other benefits) payable or paid to Employee pursuant to paragraph 4(a) of this Agreement. (b) "Change of Control" shall be deemed to have occurred if: (i) After any transaction any person (or persons acting in concert), partnership, corporation, or other organization shall own, control, or hold with the power to vote more than fifty percent (50%) of any class of voting -- securities of the Company; (ii) the Company, or substantially all of the assets of the Company, shall be sold or transferred to, or consolidated or merged with, another corporation; or (iii) Employer, or substantially all of the assets of Employer, shall be sold or transferred to, or consolidated or merged with, another corporation which is not a majority owned subsidiary of the Company; Provided, however, if the Company shall become a subsidiary of another corporation or shall be merged or consolidated into another corporation and a majority of the outstanding voting shares of the parent or surviving corporation are owned immediately after such acquisition, -2- merger, or consolidation by the owners of a majority of the voting shares of the Company immediately before such acquisition, merger, or consolidation. (c) "Disability" shall mean the complete inability of Employee to perform his duties for Employer and/or the Company under this Agreement on a full-time basis, as determined by an independent physician selected with the approval of Employer and/or the Company and Employee. (d) "Event of Termination" shall mean the termination by Employer and/or the Company of Employee's employment under this Agreement by written notice delivered to Employee for any reason other than Termination for Cause as defined in (g) of this paragraph or termination following a continuous period of disability exceeding twelve (12) calendar months pursuant to paragraph 6(a) of -- this Agreement. (e) "Incentive Compensation" shall mean that compensation payable or paid to Employee pursuant to paragraph 4(b) of this Agreement. (f) "Severance Amount" shall have the same meaning as the term "parachute payment" defined in Section 280G(b)(2) of the Internal Revenue Code (as amended). (g) "Termination for Cause" shall have the meaning provided in paragraph 7(a) of this Agreement. 2. Employment. Employer and the Company agree to continue Employee in ---------- their employ, and Employee agrees to remain in the employ of Employer and the Company, as Chairman of the Board and Chief Executive Officer of the Company and as Chairman of the Board and Chief Executive Officer of Employer, for the period stated in paragraph 3(a) hereof and upon the other terms and conditions herein provided. Employee agrees to perform faithfully such services as are -3- reasonably consistent with his positions and shall from time to time be assigned to him by the Boards of Directors of Employer and the Company in a trustworthy and businesslike manner for the purpose of advancing the interests of Employer and the Company. At all times, Employee shall manage and conduct the business of Employer and the Company in accordance with the policies established by the Boards of Directors of Employer and the Company, and in compliance with applicable regulations promulgated by governing regulatory agencies. Responsibility for the supervision of Employee shall rest with the Boards of Directors of Employer and the Company, which shall review Employee's performance at least annually. The Boards of Directors of Employer and the Company shall also have the authority to terminate Employee, subject to the provisions outlined in paragraph 7 of this Agreement. 3. Term and Duties. --------------- (a) Term of Employment. This Agreement and the period of Employee's ------------------ employment under this Agreement shall be deemed to have commenced as of the Effective Date and shall continue for a period of thirty-six (36) full calendar -- months thereafter, unless earlier terminated pursuant to this Agreement or unless Employee dies before the end of such thirty-six (36) months, in which -- case the period of employment shall be deemed to continue until the end of the month of such death. On each anniversary of the Effective Date, this Agreement and Employee's term of employment shall be extended for an additional twelve (12) month period provided that the Boards of Directors of Employer and the -- Company determine that the performance of Employee has met said Boards' requirements and standards and further that this Agreement shall be extended. -4- (b) Performance of Duties. During the period of employment hereunder, --------------------- except for periods of illness, disability, reasonable vacation periods, and reasonable leaves of absence, Employee shall devote substantially all of his business time, attention, skill, and efforts to the faithful performance of his duties hereunder. Employee's duties shall be divided between Employer and the Company at the direction and in the discretion of the Boards of Directors of Employer and the Company as is commensurate with the division of salary set forth in paragraph 4(a) of this Agreement. Employee shall be entitled to reasonable participation as a member in community, civic, or similar organizations and the pursuit of personal investments which do not present any material conflict of interest with Employer or the Company, or otherwise unfavorably affect the performance of Employee's duties pursuant to this Agreement. (c) Office of Employee. The office of Employee shall be located at the ------------------ principal office of Employer in Milledgeville, Georgia, or at such other location within the State of Georgia as Employer and the Company may from time to time designate; provided, however, that, in the event such relocation required Employee to move his principal residence, the Company and/or Employer shall reimburse Employee for all his reasonable moving expenses. (d) No Other Agreement. The Employee shall have no employment contract or ------------------ other written or oral agreement concerning employment with any entity or person other than Employer and the Company during the term of his employment under this Agreement. (e) Uniqueness of Employee's Services. Employee hereby represents that the --------------------------------- services to be performed by him under the terms of this Agreement are of a special, unique, -5- unusual, extraordinary, and intellectual character which gives them a peculiar value, the loss of which cannot be reasonably or adequately compensated in damages and in an action at law. Accordingly, Employee expressly agrees that Employer and/or the Company, in addition to any rights or remedies which Employer and/or the Company may possess, shall be entitled to injunctive and other equitable relief to prevent the breach of this Agreement by Employee. 4. Compensation and Reimbursement of Expenses. ------------------------------------------ (a) Salary. Subject to the provisions of paragraph 7 hereof, Employer ------ shall pay Employee, as compensation for serving as Chairman of the Board and Chief Executive Officer of Employer, an initial Base Salary of $ ; -------------- such initial Base Salary, or any increased Base Salary, shall be payable in substantially equal installments in accordance with the Employer's normal pay practices, but not less frequently than monthly. For each twelve-month period, ______% of Employee's Base Salary shall be ascribed to and be reflected upon the books and records of the Company for services performed by Employee for the Company. Employee's Base Salary and any Incentive Compensation (as defined in paragraph 4(b) hereof) shall be reviewed and approved at least annually by the Boards of Directors of Employer and the Company, or any committee(s) designated thereby. Said Boards or Committee(s), if warranted in their discretion, may increase Employee's Base Salary to reflect Employee's performance. (b) Incentive Compensation. During the Term of Employment, Employee shall ---------------------- be eligible to participate in any incentive bonus plans maintained by Employer and/or the Company for its/their executive officers. It is contemplated that an annual incentive bonus -6- plan will be maintained by Employer and/or the Company which will establish individual performance goals for Employee each and every fiscal year during the Term of Employment, with Employee being awarded a bonus ("Incentive Compensation") of not less than twenty-five percent (25%) of his then current -- Base Salary upon the attainment, in the discretion of the Boards of Directors of Employer and/or the Company or any committee(s) designated thereby, of Employee's individual performance goals and certain specified corporate objectives. The payment to Employee of any Incentive Compensation as aforesaid shall be made by Employer and/or the Company in accordance with the policy or policies established by the Boards of Directors of Employer and/or the Company or any committee(s) designated thereby. Notwithstanding anything contained in this Agreement to the contrary, any increase to Employee's Base Salary and any Incentive Compensation paid to Employee shall be (i) in compliance with regulations, thrift bulletins, pronouncements, directives, or orders issued or promulgated by any governing regulatory agency and with any agreements by and between Employer and/or the Company and such regulatory agencies, (ii) consistent with the safe and sound operation of Employer and the Company, (iii) closely monitored by the Boards of Directors of Employer and the Company and (iv) comparable to such compensation paid to persons of similar responsibilities and duties in other insured institutions of similar size, in similar locations, and under similar circumstances including financial condition and profitability. (c) Reimbursement of Expenses. Employer and/or the Company shall pay or ------------------------- reimburse Employee for all reasonable travel and other expenses incurred by Employee in the performance of his obligations and duties under this Agreement as provided in the -7- applicable policies of Employer and/or the Company, as currently adopted or as may be adopted in the future by the Boards of Directors of Employer and/or the Company. (d) Provision for Business Development Expenses. In additional to the ------------------------------------------- forgoing, Employer and the Company believe that their best interests will be more fully served if Employee maintains active membership in or joins appropriate business or social clubs and other professional associations. Accordingly, Employer shall also reimburse Employee for the dues and business related expenditures associated with Employee's membership in such appropriate business or social clubs and such other professional associations which are commensurate with his positions and approved by the Boards of Directors of Employer and the Company. Additionally, to the extent that Employee is required to pay an initiation fee to join such appropriate business or social clubs, Employer will loan Employer an amount not to exceed twenty percent (20%) of --- employee's Base Salary (the "Business Development Loan"). The Business Development Loan shall be evidenced by an unsecured promissory note bearing interest at the lowest prime rate charged by any bank or thrift subsidiary of the Company, with all principal and interest due and payable in three (3) years - or upon the termination of Employee's employment, whichever shall first occur. In the event that Employee is still employed by Employer at the expiration of three (3) years, or, if no longer employed, was terminated as a result of either - an Event of Termination under paragraph 7(b) or an Event of Termination under Paragraph 7(c), then Employer will forgive the entire indebtedness represented by the Business Development Loan, including the principal and all accrued interest. -8- (e) Provision of Automobile. Employer and/or the Company shall provide ----------------------- Employee with an automobile commensurate with Employee's position(s) and shall reimburse Employee for all reasonable expenses (including, without limitation, the cost of insurance coverage) relating to the operation and maintenance of said automobile. Employer and/or the Company shall maintain, at its/their expense, automobile liability insurance to protect Employee and Employer and/or the Company, as their respective interest may appear, against claims arising out of the use of said automobile (or any other motor vehicle) in the course of Employee's employment hereunder. (f) "Golden Parachute" Provision. Notwithstanding anything contained in ---------------------------- this Agreement to the contrary, any payments made to Employee pursuant to this Agreement, or otherwise to Employee, are subject to and conditioned upon their compliance with 12 U.S.C. (S) 1828(k) and any regulations promulgated thereunder. 5. Participation in Benefit Plans. The payments provided in paragraph 4, ------------------------------ 6, and 7 hereof are in addition to any benefits to which Employee may be, or may become, entitled to, under any group hospitalization, health, dental care, or sick leave plan; life insurance or death benefit plan; travel or accident insurance; pension or retirement plan; stock option or ownership plan; or other present or future group employee benefit plan or program for which senior executive officers of Employer and/or the Company shall be or shall become eligible. Said benefit shall include, without limitation, major medical/dental insurance for Employee and his dependents. -9- 6. Benefits Payable Upon Disability. -------------------------------- (a) Disability Benefits. In the event of the Disability of Employee, ------------------- Employer and the Company shall continue to pay Employee 100% of Employee's then ---- current Base Salary pursuant to paragraph 4(a) during the first twelve (12) -- months of a continuous period of disability. It is provided, however, that in the event Employee is disabled for a continuous period exceeding twelve (12) -- months, Employer and/or the Company may, at its election, terminate this Agreement, in which event payment of Employee's Base Salary shall cease. (b) Disability Benefit Offset. Any amounts payable under paragraph 6(a) ------------------------- hereof shall be reduced by any amounts paid to Employee under any other disability program or policy of insurance maintained by Employer and/or the Company. 7. Payments to Employee Upon Termination of Employment. The Boards of --------------------------------------------------- Directors of Employer and the Company may terminate Employee's employment under this Agreement at any time; but any termination other than Termination for Cause shall not prejudice Employee's right to compensation or other benefits under this Agreement. Employee may voluntarily terminate his employment under this Agreement. The rights and obligations of Employer and/or the Company and Employee in the event of such termination are set forth in this paragraph 7 as follows: (a) Termination for Cause. Employee shall have no right to compensation or --------------------- other benefits for any period after a Termination for Cause. Termination for Cause shall be determined by the Boards of Directors of Employer and the Company in the reasonable exercise of its discretion and acting in good faith, and shall include termination because of Employee's personal dishonesty, incompetence, willful misconduct, breach of fiduciary duties involving personal profit, intentional failure to perform stated duties, willful violation -10- of any law, rule, or regulation (other than traffic violations or similar offenses), or a final cease-and-desist order, the regulatory suspension or removal of Employee as defined in paragraphs 8(a) and (b) hereof, the termination of this Agreement under paragraphs 8(c) and (d) hereof, the failure of Employee to follow reasonable written instructions of the Boards of Directors of Employer and/or the Company, or a material breach of Employee of any provision of this Agreement. Termination for Cause from the Employer and/or the Company shall be determined by, and shall occur only upon the passage of a resolution by a vote of not less than a two-thirds of Employer's Board of Directors and/or the Company's Board of Directors, respectively, specifying Employee's Termination for Cause and the grounds therefor, after reasonable notice to Employee and an opportunity for him to be heard before a meeting of the applicable Board(s) of Directors called in accordance with the By-Laws of Employer and/or the Company. Thereafter, Employee shall be deemed to be in material breach of this Agreement and shall have no right to receive compensation or other benefits under this Agreement for any period following such Termination for Cause. This provision on Termination for Cause shall control over any and all other provisions relating to discharge or termination for cause contained in any and all other agreements between Employer and/or the Company and Employee. (b) Event of Termination Without Change of Control. Upon the occurrence of ---------------------------------------------- an Event of Termination, other than after a Change of Control as provided in paragraph 7(c) hereof, Employer and/or the Company shall pay to Employee, or in the event of his subsequent death, to his designated beneficiary or beneficiaries, or to his estate, as the case may be, as liquidated damages, in lieu of all other claims, a severance payment equal to -11- three (3) times Employee's then current Base Salary plus any Incentive - Compensation paid to Employee during the immediately preceding twelve (12) -- months, to be paid in full on the last day of the month following the date of said Event of Termination. (c) Event of Termination in Connection With a Change of Control. If during ----------------------------------------------------------- the term of this Agreement and within one (1) year immediately following a - Change of Control or within six (6) months immediately prior to such Change of - Control: (i) Employee's employment with Employer under this Agreement is terminated by an Event of Termination; or (ii) the status, character, capacity, and circumstances of Employee's employment as provided in paragraphs 2 and 3 of this Agreement have been materially altered by Employer or the Company whether by a reduction in salary, responsibilities, authority, or benefits, and Employee voluntary terminates the employment contemplated by this Agreement for that reason; then Employer and/or the Company shall pay to Employee, or in the event of his subsequent death, to his designated beneficiary or beneficiaries, or to his estate, as the case may be, as liquidated damages, in lieu of all other claims, a severance payment equal to three (3) times Employee's then current Base Salary - plus any Incentive Compensation paid to Employee during the immediately preceding twelve (12) months, to be paid in full on the last day of the month -- following the date of said Event of Termination or Employee's voluntary termination under (ii) above. In no event shall the payment(s) described in this paragraph 7(c) exceed the amount permitted by Section 280G of the Internal Revenue Code (as amended). Therefore, if the aggregate present value (determined as of the date of the Change -12- of Control in accordance with the provisions of Section 280G of the Internal Revenue Code (as amended) or any successor thereof and the regulations and rulings thereunder ("Section 280G")) of both the Severance Amount and all other payments to Employee in the nature of compensation which are contingent on a change in ownership or effective control of the Employer or Company or in the ownership of a substantial portion of the assets of Employer or Company (the "Aggregate Severance") would result in a parachute payment (as determined under Section 280G) then the Aggregate Severance shall not be greater than an amount equal to 2.99 multiplied by Employee's base amount (as determined under Section 280G) for the base period (as determined under Section 280G). In the event the Aggregate Severance is required to be reduced pursuant to this paragraph 7(c), Employee shall be entitled to determine which portions of the Aggregate Severance are to be reduced so that the Aggregate Severance satisfies the limit set forth in the preceding sentence. Employee's average annual compensation shall be based on the most recent five taxable years ending before the Change of Control (or the period during which Employee was employed by Employer and/or the Company if Employee has been employed by Employer and/or the Company for less than five years). (d) Voluntary Termination of Employment. Employee shall have no right to ----------------------------------- compensation or other benefits under this Agreement for any period following the voluntary termination of Employee's employment by Employee, except as provided in paragraph 7(b) and 7(c) hereof. -13- 8. Vacation and Sick Leave. Employee shall be entitled, without loss of ----------------------- pay, to absent himself voluntarily from the performance of his duties under this Agreement in accordance with the terms set forth below, all such voluntary absences to count as vacation time, provided that: (a) Employee shall be entitled to an annual vacation in accordance with the policies that the Boards of Directors of Employer and/or the Company periodically establish(es) for senior management employees of Employer and/or the Company. (b) Employee shall not receive any additional compensation from Employer and/or the Company on account of his failure to take a vacation, and Employee shall not accumulate unused vacation from one fiscal year to the next, except in either case to the extent authorized by the Boards of Directors of Employer and/or the Company. (c) In addition to the aforesaid paid vacations, Employee shall be entitled, without loss of pay, to absent himself voluntarily from the performance of his employment obligations with Employer and the Company for such additional periods of time and for such valid and legitimate reasons as the Boards of Directors of Employer and/or the Company may in its/their discretion approve. It is also provided that the Boards of Directors of Employer and/or the Company may grant to Employee a leave or leaves of absence, with or without pay, at such time or times and upon such terms and conditions as the Boards of Directors of Employer and/or the Company may in its/their discretion determine. (d) Employee shall be further entitled to an annual sick leave benefit as may be established by the Boards of Directors of Employer and/or the Company. -14- 9. Regulatory Suspension. --------------------- (a) If Employee is suspended and/or temporarily prohibited from participating in the conduct of the affairs of Employer or the Company by a notice served under Sections 8(e)(3) or (g)(1) of the Federal Deposit Insurance Act, 12 U.S.C. (S) 1818(e)(3) or (g)(1), the obligations of Employer and the Company under this Agreement shall be suspended as of the date of service of such notice, unless stayed by appropriate proceedings. If the charges in the notice are dismissed, Employer and/or the Company may in their discretion (i) pay Employee all or part of the compensation withheld while its contract obligations were suspended and (ii) reinstate in whole or in part any of its obligations which were suspended. (b) If Employee is removed and/or permanently prohibited from participating in the conduct of the affairs of Employer or the Company by an order issued under Section 8(e)(4) or (g)(1) of the Federal Deposit Insurance Act, 12 U.S.C. (S) 1818(e)(4) or (g)(1), all obligations of Employer and the Company under this Agreement shall terminate as of the effective date of the order, but vested rights of the parties hereto shall not be affected. (c) If Employer and/or the Company is/are in "default" as defined in Section 3(x)(1) of the Federal Deposit Insurance Act, all obligations under this Agreement shall terminate as of the date of default, but this paragraph shall not affect any vested rights of the parties hereto. (d) All obligations under this Agreement shall be terminated, except to the extent that it may be determined by any state or federal regulatory agency or body having authority over Employer or the Company that continuation of this Agreement is necessary -15- for the continued operation of Employer or the Company, at any time the Federal Deposit Insurance Corporation ("FDIC") enters into an agreement to provide assistance to or on behalf of Employer or the Company under the authority contained in Section 13(c) of the Federal Deposit Insurance Act, at any time the FDIC approves a supervisory merger to resolve problems related to the operation of Employer and/or the Company, or when Employer and/or the Company is/are determined by the Georgia Department of Banking and Finance, the Board of Governors of the Federal Reserve System (or the Federal Reserve Bank of Atlanta acting pursuant to delegated authority), or the FDIC to be in an unsafe and unsound condition. Any rights of the parties hereto that have already vested, however, shall not be affected by such action. 10. Nondisclosure of Confidential Information. Employee acknowledges that ----------------------------------------- he possesses confidential information of a special and unique nature and value affecting and relating to Employer's and the Company's business, including, without limitation, the identity of the customers, deposits business records, other trade secrets, and other similar confidential information relating to Employer and the Company and the business of each (all the foregoing being hereinafter collectively referred to as "Confidential Information"). Employee recognizes and acknowledges that all Confidential Information is the exclusive property of Employer and the Company respectively, constitutes trade secrets of Employer and the Company, is material and confidential, and greatly affects the goodwill and the effective and successful conduct of the business of Employer and the Company. As a material inducement to Employer and the Company to enter into this Agreement and to employ Employee, Employee covenants and agrees that he will not at any time during the term of his employment under this Agreement, and for a period of one (1) year from the end of such - -16- employment, directly or indirectly, divulge, reveal, or communicate any Confidential Information to any person, firm, corporation, or entity whatsoever, or use any Confidential Information for his own benefit or for the benefit of others. Employee further acknowledges that said Confidential Information has material commercial value to Employer and the Company so long as it is not known by competitors of Employer and/or the Company and that Employer and the Company have taken reasonable steps to keep all such information and trade secrets confidential. 11. Source of Payments. All payments provided in paragraphs 4, 6, and 7 ------------------ hereof shall be paid in cash from the general funds of Employer and/or the Company as provided herein, and no special or separate fund shall be established by Employer or the Company, and no other segregation of assets shall be made to assure payment. Employee shall have no right, title, or interest in or to any investments which Employer and/or the Company may make to meet the obligations hereunder. 12. Injunctions. In view of the irreparable harm and damage which ----------- Employer and the Company would sustain as a result of a breach by Employee of the covenants or agreements under paragraph 10 hereof, and in view of the lack of an adequate remedy at law to protect Employer's and the Company's interests, Employer and the Company shall have the right to receive, and Employee hereby consents to the issuance of, a permanent injunction enjoining Employee from any violation of the covenants and agreements set forth in paragraph 10 hereof, which injunction shall be of a duration consistent with the provisions of paragraph 10 hereof. The foregoing remedy shall be in addition to, and not in limitation of, any other rights or remedies to which Employer and/or the Company are or may be entitled at law or in equity respecting this Agreement. -17- 13. Attorneys' Fees. In the event any party hereto is required to engage --------------- in legal action against any other party hereto, either as plaintiff or defendant, in order to enforce or defend any of its or his rights under this Agreement, and such action results in a final judgment in favor of one or more parties, then the party or parties against whom said final judgment is obtained shall reimburse the prevailing party or parties for all legal fees and expenses incurred by the prevailing party or parties in asserting or defending its or his rights hereunder. 14. Federal Income Tax Withholding. Employer and the Company may withhold ------------------------------ from any benefits payable under this Agreement all federal, state, city, or other taxes as shall be required pursuant to any law or governmental regulation or ruling. 15. Effect of Prior Agreements. This Agreement contains the entire -------------------------- understanding between the parties hereto and supersedes any prior employment agreement and any contemporaneous oral agreement or understanding by, between, or among the Employer and/or the Company and Employee. 16. General Provisions. ------------------ (a) Nonassignability. Neither this Agreement nor any right or interest ---------------- hereunder shall be assignable by Employee, his beneficiaries or legal representatives, without the written consent of Employer and the Company; provided, however, that nothing in this paragraph 16(a) shall preclude (i) Employee from designating a beneficiary to receive any benefits payable hereunder upon his death, or (ii) the executors, administrators, or other legal representatives of Employee or his estate from assigning any rights hereunder to the person or persons entitled thereto. -18- (b) No Attachment. Except as required by law, no right to receive payments ------------- under this Agreement shall be subject to anticipation, commutation, alienation, sale, assignment, encumbrance, charge, pledge, or hypothecation, or to execution, attachment, levy, and any attempt, voluntary or involuntary, to effect any such action shall be null, void, and of no effect. (c) Binding Agreement. This Agreement shall be binding upon, and inure to ----------------- the benefit of, Employer, the Company and Employee and their respective heirs, successors, assigns, and legal representatives. 17. Modification and Waiver. ----------------------- (a) Amendment of Agreement. This Agreement may not be modified or amended ---------------------- except by an instrument in writing, signed by the parties hereto, and which specifically refers to this Agreement. (b) Waiver. No term or condition of this Agreement shall be deemed to have ------ been waived, nor shall there be any estoppel against the enforcement of any provision of this Agreement, except by written instrument of the party charged with such waiver or estoppel. No such written waiver shall be deemed a continuing waiver unless specifically stated therein, and each waiver shall operate only as to the specific term or condition waived and shall not constitute a waiver of such term or condition for the future or as to any act other than that specifically waived. 18. Severability. If for any reason any provision of this Agreement is ------------ held invalid, such invalidity shall not affect any other provision of this Agreement not held invalid, and each such other provision shall to the full extent consistent with law continue in full force and effect. If any -19- provision of this Agreement shall be held invalid in part, such invalidity shall in no way affect the rest of such provision not held so invalid, and the rest of such provision, together with all other provisions of this Agreement, shall to the full extent consistent with law continue in full force and effect. 19. Headings. The headings of paragraphs herein are included solely for -------- convenience of reference and shall not control the meaning or interpretation of any of the provisions of this Agreement. 20. Governing Law. This Agreement has been executed and delivered in the ------------- State of Georgia, and its validity, interpretation, performance, and enforcement shall be governed by the laws of said State. 21. Rights of Third Parties. Nothing herein expressed or implied is ----------------------- intended to or shall be construed to confer upon or give to any person, firm, or other entity, other than the parties hereto and their permitted assigns, any rights or remedies under or by reason of this Agreement. 22. Notices. All notices, requests, demands, and other communications ------- provided for by this Agreement shall be in writing and shall be sufficiently given if and when mailed in the United States by registered or certified mail, or personally delivered, to the party entitled thereto at the address stated below or to such changed address as the addressee may have given by a similar notice: To Employer and the Company: Chairman, Compensation Committee Board of Directors Premier Bancshares, Inc. 2180 Atlanta Plaza 950 E. Paces Ferry Road Atlanta, Georgia 30326 -and- -20- Copied to: Steven S. Dunlevie, Esq. Womble Carlyle Sandridge & Rice, PLLC Suite 700 1275 Peachtree Street Atlanta, Georgia 30309 To Employee: Mr. Darrel D. Pittard 5385 Peachtree Dunwoody Road 503 Post Terrace Apartments Atlanta, Georgia 30342 IN WITNESS WHEREOF, Employer and the Company have caused this Agreement to be executed and their seal to be affixed hereunto by their duly authorized officers, and Employee has signed this Agreement, as of the Effective Date. ATTEST: PREMIER BANCSHARES, INC. By: - ---------------------- --------------------------------------- Secretary Darrell D. Pittard (CORPORATE SEAL) Chairman of the Board ATTEST: PREMIER LENDING CORPORATION By: - ---------------------- --------------------------------------- Secretary Darrell D. Pittard (CORPORATE SEAL) Chairman of the Board - ---------------------- -----------------------------------(SEAL) Witness DARRELL D. PITTARD -21- EX-10.9 11 AMENDED AND RESTATED STOCK PURCHASE AGREEMENT AMENDED AND RESTATED STOCK PURCHASE AGREEMENT BY AND BETWEEN NET.B@NK, INC. AND FIRST ALLIANCE/PREMIER BANCSHARES, INC. AMENDED AND RESTATED STOCK PURCHASE AGREEMENT THIS AMENDED AND RESTATED STOCK PURCHASE AGREEMENT ("Agreement") is made and entered into as of the ____ day of __________, 199__, by and between NET.B@NK, INC. (the "Company"), a corporation organized and existing under the laws of the State of Georgia and FIRST ALLIANCE/PREMIER BANCSHARES, INC., a corporation organized and existing under the laws of the State of Georgia ("Bancshares"). PREAMBLE WHEREAS, a majority of the entire Board of Directors of each of the Company and Bancshares have, respectively, approved and made this Agreement and authorized its execution; and WHEREAS, Bancshares is the sole shareholder of Premier Bank, F.S.B. ("Bank"); and WHEREAS, Bancshares anticipates that it will consolidate the operations of First Alliance Bank and Bank pursuant to a Purchase and Assumption Agreement; and WHEREAS, the Boards of Directors of the Company and Bancshares are of the opinion that the transactions described herein are in the best interests of the parties to this Agreement and their respective stockholders; and WHEREAS, the stock purchase described herein is subject to regulatory approval and the satisfaction of certain other conditions described in this Agreement. NOW, THEREFORE, in consideration of the above and the mutual warranties, representations, covenants and agreements set forth herein, the parties agree as follows: ARTICLE ONE DEFINITIONS Except as otherwise provided herein, the capitalized terms set forth below (in their singular and plural forms as applicable) shall have the following meanings: 1.1 "Agreement" shall mean this Stock Purchase Agreement. 1.2 "Bancshares" shall mean First Alliance/Premier Bancshares, Inc. 1.3 "Bank" shall mean Premier Bank, F.S.B. 1.4 "Bank Financial Statement" shall mean the financial statement of Bank described in Section 4.4 of this Agreement. 1.5 "BHC Act" shall mean the federal Bank Holding Company Act of 1956, as amended. 1.6 "Closing" shall mean the closing of the transactions contemplated hereunder which, unless the Parties otherwise agree, will take place on the Effective Date, as described in Section 3.1 of this Agreement. 1.7 "Common Stock" shall mean the $8.00 par value common stock of the Bank. 1.8 "Effective Date" shall mean the date and time on which the stock purchase contemplated by this Agreement becomes effective pursuant to the laws of the State of Georgia as defined in Section 3.2 of this Agreement. 1.9 "ERISA" shall mean Public Law No. 93406, the Employee Retirement Income Security Act of 1974, as amended. 1.10 Exhibits 1 and 2, inclusive, and the Schedules referenced herein, shall mean the respective Exhibits and Schedules so marked, each of which has been initialed for identification by an officer of the Company and an officer of the Bank, and bound sets of which have been delivered to the respective Parties. Such Exhibits and Schedules are hereby incorporated by reference herein and made a part hereof, and may be referred to in this Agreement and any other related instrument or document without being attached hereto. 1.11 "Federal Reserve Board" shall mean the Board of Governors of the Federal Reserve System. 1.12 "GAAP" shall mean generally accepted accounting principles. 1.13 "Internal Revenue Code" shall mean the Internal Revenue Code of 1986, as amended. 1.14 "OTS" shall mean the Office of Thrift Supervision. 1.15 "Party" shall mean either the Company or Bancshares and "Parties" shall mean collectively the Company and Bancshares. 1.16 "Previously Disclosed" shall mean information delivered prior to the date of this Agreement in the manner and to the counsel described in Section 11.7 of this Agreement and describing in reasonable detail the matters contained therein. 1.17 "Purchase and Assumption Transaction" shall mean the transaction described in Section 9.12 hereof pursuant to an agreement substantially in the form of Exhibit 1 attached hereto. -2- 1.18 "Regulatory Authorities" shall mean the applicable federal and state regulatory authorities. 1.19 "Subsidiaries" or "Subsidiary" shall mean those corporations, associations or other entities of which the entity in question owns or controls 80% or more of the outstanding equity securities either directly or through an unbroken chain of entities as to each of which 80% or more of the outstanding equity securities is owned directly or indirectly by its parent; provided, however, there shall not be included any such entity acquired through foreclosure, any such entity which owns or operates an automatic teller machine interchange network or any such entity the equity securities of which are owned or controlled in a fiduciary capacity. ARTICLE TWO PURCHASE OF STOCK 2.1 TRANSFER OF CERTIFICATES. Subject to the terms and conditions of this Agreement, on the Effective Date Bancshares agrees to sell, assign, transfer and deliver all of the $8.00 par value common stock of the Bank (the "Common Stock") to the Company, and the Company agrees to purchase the Common Stock from Bancshares. The certificates representing the Common Stock shall be duly endorsed in blank, or accompanied by a stock power duly executed in blank, by Bancshares, with all necessary transfer tax and other revenue stamps, acquired at Bancshares' expense, affixed and cancelled. Bancshares agrees to cure at any time after closing, without further compensation, any deficiencies with respect to the endorsement of the certificates representing the Common Stock or with respect to the stock power accompanying such certificate. 2.2 PURCHASE PRICE. In full consideration for the purchase by the Company of the Common Stock, the Company shall on the Effective Date (i) pay to Bancshares an amount in cash equal to the sum of the amount of the Bank's unimpaired capital at Closing plus $100,000, and (ii) transfer to Bancshares 833 shares of the common stock of the Company (the "Company Common Stock") valued at $120.00 per share which is the "agreed-upon" value of shares issued to certain of the Company's investors by the Company. For the purpose of this Agreement, the term "unimpaired capital" shall mean the sum of the Bank's paid in capital, capital surplus, retained earnings and allocation for loan and lease losses with respect to any loans and leases, immediately following consummation of the Purchase and Assumption Transaction. 2.3 ANTI-DILUTION PROVISIONS. In the event that the Company changes the number of shares of the Company Common Stock issued and outstanding prior to the Effective Date as a result of a stock split, stock dividend or similar recapitalization with respect to the Company Common Stock, the number of shares issued to Bancshares as described in Section 2.2 shall be proportionately adjusted. -3- 2.4 DIRECTOR AND OFFICERS OF THE BANK. Effective as of the Effective Date, Bancshares shall deliver to the Company the resignations of all directors and officers of the Bank. ARTICLE THREE CLOSING AND EFFECTIVE DATE 3.1 TIME AND PLACE OF CLOSING. A Closing will take place at 11:00 a.m. on the Effective Date, or at such other time as the Parties may mutually agree. The place of Closing shall be the offices of Bancshares at 2180 Atlanta Plaza, 950 East Paces Ferry Road, Atlanta, Georgia 30326, or at such other place as may be mutually agreed upon by the Parties. 3.2 EFFECTIVE DATE. Upon the terms and subject to the conditions hereof, as soon as practicable after receipt of the requisite regulatory approvals following consummation of the Purchase and Assumption Transaction, but not later than March 31, 1997, the parties shall designate an Effective Date on which the Closing shall take place. ARTICLE FOUR REPRESENTATIONS AND WARRANTIES OF BANCSHARES Bancshares hereby represents and warrants to the Company as follows: 4.1 ORGANIZATION, STANDING AND AUTHORITY. The Bank is a federal savings bank duly organized, validly existing and in good standing under the laws of the United States, is duly qualified to do business and is in good standing in the States of the United States and jurisdictions where its ownership or leasing of property or the conduct of its business requires it to be so qualified and in which the failure to be duly qualified could have a material adverse effect upon the Bank, and has corporate power and authority to carry on its business as now conducted and to own, lease and operate its assets, properties and businesses, and to execute and deliver this Agreement and perform its terms. The Bank is an "insured bank" as defined in the Federal Deposit Insurance Act and applicable regulations thereunder. The Bank has in effect all federal, state, local and foreign governmental authorization necessary for it to own or lease its properties and assets and to carry on its businesses as they are now being conducted, the absence of which, either individually or in the aggregate, would have a material adverse effect on the financial condition or operations of the Bank. 4.2 CAPITAL STOCK. (a) The authorized capital stock of the Bank consists of 1,000,000 shares of Common Stock, $8.00 par value, of which 320,550 shares are issued and outstanding as of the date of this Agreement. The Bank holds no shares of its Common Stock in its treasury. As of the date of -4- this Agreement, the Bank has reserved no shares of its Common Stock for issuance to directors, officers and employees subject to options. (b) All of the issued and outstanding shares of the Bank's Common Stock are duly and validly issued and outstanding and are fully paid and non-assessable. None of the outstanding shares of the Bank's Common Stock has been issued in violation of any preemptive rights of the current or past stockholders of the Bank. Except as set forth above, there are no shares of capital stock or other equity securities of the Bank outstanding and no outstanding options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into or exchangeable for, shares of the capital stock of the Bank, or contracts, commitments, understandings or arrangements by which the Bank was or may be bound to issue additional shares of its capital stock or options, warrants or rights to purchase or acquire any additional shares of its capital stock. 4.3 AUTHORITY. (a) The execution and delivery of this Agreement and the consummation of the transactions contemplated herein have been duly and validly authorized by all necessary corporate action in respect thereof on the part of Bancshares. This Agreement represents a legal, valid and binding obligation of Bancshares enforceable against Bancshares in accordance with its terms (except in all cases as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and except that the availability of the equitable remedy of specific performance or injunctive relief is subject to the discretion of the court before which any proceeding may be brought). (b) Neither the execution and delivery of this Agreement by Bancshares, nor the consummation by Bancshares of the transactions contemplated herein, nor compliance by Bancshares with any of the provisions hereof will (i) conflict with or result in a breach of any provision of Bancshares' or the Bank's Articles of Incorporation or Bylaws, or (ii) constitute or result in the breach of any term, condition or provision of, or constitute a default under, or give rise to any right of termination, cancellation, or acceleration with respect to, or result in the creation of any lien, charge or encumbrance upon, any property or assets of Bancshares or the Bank, pursuant to any note, bond, mortgage, indenture, license, agreement, lease, or other instrument or obligation to which they are a party or by which they or any of their properties or assets may be subject, and that would, in any such events, have a material adverse effect on the financial condition or operations of the Bank or the transactions contemplated hereby, or (iii) subject to receipt of the requisite approvals referred to in Section 9.5 of this Agreement, violate any order, writ, injunction, decree, statute, rule or regulation applicable to the Bank or any of its properties or assets. -5- (c) Other than (i) in connection or compliance with the provisions of applicable state corporate law, (ii) notices to, consents, authorizations, approvals, or exemptions required from the Regulatory Authorities and (iii) notices to or filings with the Internal Revenue Service or the Pension Benefit Guaranty Corporation with respect to any employee benefit plans, no notice to, filing with, authorization of, or exemption by, or consent or approval of any public body or authority is necessary for the consummation by the Bank of the transactions contemplated in this Agreement. 4.4 FINANCIAL STATEMENT. The Bank has delivered to the Company prior to the execution of this Agreement the following financial statement (a copy of which is attached hereto as Exhibit 2) of the Bank (referred to herein, together with the footnotes thereto, as the "Bank's Financial Statement"): A pro forma balance sheet giving effect to the asset purchase transaction pursuant to the Purchase and Assumption Transaction referred to in Section 9.12 hereof. The Bank's Financial Statement (as of the date thereof) is in accordance with the books and records of the Bank, which are complete and accurate in all material respects and which have been maintained in accordance with sound and prudent business practices. 4.5 ABSENCE OF UNDISCLOSED LIABILITIES. Giving effect to the Purchase and Assumption Transaction, the Bank has no obligation or liability (contingent or otherwise) that has not been fully assumed by First Alliance Bank, except as disclosed in the Bank's Financial Statement. 4.6 TAX MATTERS. All federal, state and local tax returns required to be filed by or on behalf of Bancshares, the Bank and any affiliated group (as defined in Section 1504 of the Internal Revenue Code) of which the Bank is a member have been timely filed or requests for extensions have been timely filed, granted and have not expired for periods ending on or before March 31, 1995, and all returns filed are complete and accurate to the best information and belief of Bancshares's management and the Bank's management. All taxes due on filed returns have been paid. As of the date of this Agreement, there is no audit examination, deficiency or refund litigation or matter in controversy with respect to any taxes that might result in a determination adverse to the Bank, except as reserved for in the Bank's Financial Statements. All taxes, interest, additions and penalties due with respect to completed and settled examinations or concluded litigation have been paid. No federal income tax returns for Bancshares, the Bank or any affiliated group (as defined in Section 1504 of the Internal Revenue Code) of which the Bank is a member have been audited by the Internal Revenue Service. 4.7 LOANS. To the best knowledge and belief of management of the Bank, as of the date of this Agreement, each loan reflected as an asset of the Bank in the Bank's Financial Statement is the legal, valid and binding obligation of the obligor named therein, and no loan, is subject to any asserted defense, offset or counterclaim known to the Bank, except as disclosed on Schedule 4.7. -6- 4.8 ALLOWANCE FOR POSSIBLE LOAN LOSSES. The allowance for possible loan losses shown on the Bank's Financial Statement is adequate in all material respects to provide for possible losses on the loans referred to in Section 4.7 (including accrued interest receivable) as of the date hereof. 4.9 EMPLOYEE BENEFIT PLANS. (a) The Company does not adopt or assume, and shall have no obligation to adopt or assume, and shall have no liability whatsoever to the Bank, employees of the Bank, or any other person, with respect to any Benefit Plan (as hereinafter defined) currently maintained by, or contributed to, by the Bank, or by which the Bank is or ever has been bound, for the benefit of the Bank's employees, retirees, dependents, spouses, directors, independent contractors, leased employees or the beneficiaries of all such persons, whether arrived at through collective bargaining or otherwise, including, without limitation: (i) any retirement, profit-sharing, deferred compensation, bonus, stock option, stock purchase, stock appreciation, pension, retainer, consulting, severance, welfare or incentive plan, agreement or arrangement, or (ii) any plan, agreement or arrangement providing for "fringe benefits" or perquisites, including but not limited to benefits relating to Bank automobiles, clubs, seminars, vacations, parking, financial planning, child care, parenting, sabbatical, sick leave, medical, dental, hospitalization, life insurance and other types of insurance, or (iii) any employment agreement written or otherwise, or (iv) any "multiemployer plan" within the meaning of ERISA (S) 3(37), or (v) any other "employee benefit plan" within the meaning of ERISA (S) 3(3). For purposes of this Section 4.9, the term "Bank" includes all employers (whether or not incorporated) which are treated, together with the Bank, as a single employer by reason of Sections 414(b), (c), (m) or (o) of the Internal Revenue Code. (b) First Alliance Bank or Bancshares shall furnish such notices and comply with such other requirements under the Bank's Benefit Plans regarding health continuation coverage for its employees as are imposed by state or federal law, including, without limitation, COBRA, ERISA, the Internal Revenue Code, and other statutes affecting health continuation coverage. (c) The Bank shall, prior to the Closing Date, take all actions necessary to properly terminate, as of the Closing Date, its participation in or sponsorship of the Bank's Benefit Plans, such action to include all necessary corporate authorizations, amendment of Benefit Plan documents, advance written notification to employee-participants (including, if applicable, a written notice under ERISA (S) 204(h)), and filings with regulatory agencies, all as required by law and by such Benefit Plans. Employees of the Bank shall accrue no additional benefits under the Bank's Benefit Plans on or after the Closing Date. All employee benefits accrued up to and including the Closing Date under the Bank's Benefit Plans shall be the obligation of First Alliance Bank (or be reflected on the Bank's Financial Statement as liabilities). -7- 4.10 MATERIAL CONTRACTS. Except as otherwise reflected in the Bank's Financial Statement, neither the Bank, nor any of its assets, businesses or operations is as of the date of this Agreement a party to, or is bound or affected by, or receives benefits under, (i) any agreement, arrangement or commitment not cancelable by it without penalty other than agreements, arrangements or commitments to be fully assumed by First Alliance Bank pursuant to the Purchase and Assumption Transaction, (ii) any agreement, arrangement or commitment relating to the employment, election or retention in office of any director or officer, or (iii) any contract, agreement or understanding with any labor union. 4.11 LEGAL PROCEEDINGS. Except as set forth below and except as related to normal foreclosure actions relating to collateral pledged to secure loans, there are no actions, suits or proceedings instituted or pending, or to the knowledge of the Bank's management, threatened (or unasserted but considered probable of assertion) against the Bank or against any properties, assets, interests, or rights of the Bank, that are reasonably expected to have either individually or in the aggregate a material adverse effect on the businesses, operations or financial condition of the Bank or that are reasonably expected to threaten or impede the consummation of the transactions contemplated by this Agreement. The Bank is not a party to any agreement or instrument or subject to any charter or other corporate restriction or any judgment, order, writ, injunction, decree, rule, regulation, code or ordinance that threatens or might impede the consummation of the transactions contemplated by this Agreement. 4.12 REPORTS. Since the date the Bank commenced business, the Bank has filed all reports and statements, together with any amendments required to be made with respect thereto, that it was required to file with the Regulatory Authorities and the Internal Revenue Service. Each of such reports and documents, including the financial statements, exhibits and schedules thereto, are responsive to applicable requirements and the instructions of the applicable form. 4.13 STATEMENTS TRUE AND CORRECT. No representation or warranty made by the Bank nor any statement or certificate or instrument furnished as information which is Previously Disclosed or included in an Exhibit or Schedule by Bancshares or the Bank in connection with this Agreement nor any statement or certificate to be furnished by Bancshares or the Bank to the Company pursuant to this Agreement or in connection with the transactions contemplated by this Agreement, contains or will contain any untrue statement of material fact or omits or will omit to state a material fact necessary to make the statements contained therein not misleading. None of the information supplied or to be supplied by Bancshares or the Bank for inclusion in any documents to be filed with any Regulatory Authority in connection with the transactions contemplated hereby, will, at the respective times such documents are filed, be false or misleading with respect to any material fact, or omit to state any material fact necessary in order to make the statements therein not misleading. All documents that Bancshares or the Bank is responsible for filing with any Regulatory Authority in connection with the transactions contemplated hereby will comply as to form in all material respects with the provisions of applicable law. -8- 4.14 REGULATORY APPROVALS. Bancshares knows of no reason why the regulatory approvals required to be obtained in order to consummate the transactions contemplated hereunder and referred to in Section 9.5 of this Agreement should not be obtained without imposition of a condition or restriction of the type referred to in the last sentence of such Section. ARTICLE FIVE COVENANTS AND AGREEMENTS OF BANCSHARES Bancshares hereby covenants and agrees with the Company as follows: 5.1 CONDUCT OF BUSINESS; NEGATIVE COVENANTS. Unless contemplated by this Agreement, from the date of this Agreement until the earlier of the Effective Date or until the termination of this Agreement, Bancshares covenants and agrees that it will not do or agree to commit to do, any of the following without the prior written consent of the Company, which consent shall not be unreasonably withheld: (a) Amend the Bank's Articles of Incorporation or Bylaws; or (b) Repurchase, redeem, or otherwise acquire or exchange, directly or indirectly, any shares of its capital stock or any securities convertible into any shares of the Bank's capital stock; or (c) Take any action whatsoever which would prevent it or the Bank from being able to consummate this Agreement in accordance with its terms and conditions. 5.2 CONDUCT OF BUSINESS; AFFIRMATIVE COVENANTS. Unless the prior written consent of the Company shall have been obtained and except as otherwise contemplated herein, the Bank will operate its business only in the usual, regular and ordinary course; and take no action which would (i) adversely affect the ability of the Bank to obtain any necessary approvals of governmental authorities required for the transactions contemplated hereby without imposition of a condition or restriction of the type referred to in Section 9.5 of this Agreement, or (ii) adversely affect the ability of the Bank to perform its covenants and agreements under this Agreement. 5.3 ADVERSE CHANGES IN CONDITION. Bancshares hereby agrees to give written notice promptly to the Company concerning any material adverse change in its condition from the date of this Agreement until the Effective Date that might adversely affect the consummation of the transactions contemplated hereby or upon becoming aware of the occurrence or impending occurrence of any event or circumstance which would cause or constitute a material breach of any of the representations, warranties or covenants contained herein. -9- 5.4 COOPERATION. Bancshares hereby covenants and agrees to cooperate fully with the Company to provide such support, assistance and information to the Company as may be reasonably requested by it in connection with its application for all necessary approvals by public authorities, federal, state or local, in connection with the transactions contemplated hereby. 5.5 INVESTIGATION AND CONFIDENTIALITY. Prior to the Effective Date, the Company may make or cause to be made such investigation, if any, of the business and properties of the Bank and of its financial and legal condition as the Company reasonably deems necessary or advisable to familiarize itself and its advisers with such business, properties, and other matters, provided that such investigation shall be reasonably related to the transactions contemplated hereby and shall not interfere unnecessarily with normal operations. Bancshares agrees to furnish the Company and the Company's advisers with such financial and operating data and other information with respect to its businesses, properties, and employees as the Company shall from time to time reasonably request. No investigation by the Company shall affect the representations and warranties of Bancshares, and subject to Section 10.3 of this Agreement, each such representation and warranty shall survive any such investigation. The Company shall, and shall cause its advisers and agents to, maintain the confidentiality of all confidential information furnished to it by Bancshares concerning the Bank's businesses, operations and financial condition and shall not use such information for any purpose except in furtherance of the transactions contemplated by this Agreement. If this Agreement is terminated prior to the Effective Date, the Company shall promptly return all documents and copies thereof and all work papers containing confidential information received from Bancshares. 5.6 REPORTS. Bancshares shall file and shall cause the Bank to file all reports required to be filed with the Regulatory Authorities by the Bank between the date of this Agreement and the Effective Date and shall deliver to the Company copies of all such reports promptly after the same are filed. The financial statements provided by the Bank will fairly present the financial position of the Bank as of the dates indicated and the results of operations and changes in financial position for the period then ended in accordance with GAAP applicable to banks applied on a consistent basis (subject in the case of interim financial statements to normal recurring year-end adjustments). 5.7 CURRENT INFORMATION. During the period from the date of this Agreement to the Effective Date, Bancshares shall cause one or more of its representatives to confer on a regular and frequent basis with representatives of the Company and to report on the general status of the Bank's ongoing operations. Bancshares shall promptly notify the Company of any material change in (a) the normal course of the Bank's business, or (b) in the operation of its properties, and of any material governmental complaints, investigations or hearings (or communications indicating that the same may be contemplated) or the institution or the threat of any material litigation involving the Bank, and will keep the Company fully informed with respect to such events. 5.8 CAPITAL STOCK. Without the prior written consent of the Company, from the date of this Agreement to the earlier of the Effective Date or the termination of this Agreement, -10- Bancshares shall not, and shall not enter into any agreement to, issue, sell, or otherwise permit to become outstanding any additional shares of Common Stock, or any other capital stock of the Bank, including any shares of capital stock held in the Bank's treasury, or any stock appreciation rights, or any option, warrant, conversion, or other right to purchase any such stock, or any security convertible into any such stock. 5.9 AGREEMENT AS TO EFFORTS TO CONSUMMATE. Subject to the terms and conditions of this Agreement, Bancshares hereby agrees to use all reasonable efforts to take, or cause to be taken, all actions, and to do, or cause to be done, all things necessary, proper, or advisable under applicable laws and regulations to consummate and make effective, as soon as practicable after the date of this Agreement, the transactions contemplated by this Agreement, including, but not limited to, the Purchase and Assumption Transaction referred to in Section 9.12 hereof. ARTICLE SIX REPRESENTATIONS AND WARRANTS OF THE COMPANY The Company hereby represents and warrants to Bancshares as follows: 6.1 ORGANIZATION, STANDING AND AUTHORITY OF THE COMPANY. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Georgia, is duly qualified to do business and is in good standing in the states of the United States and foreign jurisdictions where its ownership or leasing of property or the conduct of its business requires it to be so qualified and in which the failure to be duly qualified could have a material adverse effect upon the Company and its Subsidiaries on a consolidated basis, and has corporate power and authority to carry on its business as now conducted and to own, lease and operate its assets, properties and businesses, and to execute and deliver this Agreement and perform its terms. The Company has in effect all federal, state, local and foreign governmental authorization necessary for it to own or lease its properties and assets and to carry on its businesses as they are now being conducted, the absence of which, either individually or in the aggregate, would have a material adverse effect on the financial condition or operations of the Company and its Subsidiaries on a consolidated basis. -11- 6.2 AUTHORITY. (a) The execution and delivery of this Agreement and the consummation of the transactions contemplated herein have been duly and validly authorized by all necessary corporate action in respect thereof on the part of the Company. This Agreement represents a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms (except in all cases as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and except that the availability of the equitable remedy of specific performance or injunctive relief is subject to the discretion of the court before which any proceeding may be brought). (b) Neither the execution and delivery of this Agreement by the Company or its Subsidiaries, nor the consummation by the Company or its Subsidiaries of the transactions contemplated herein, nor compliance by the Company with any of the provisions hereof will (i) conflict with or result in a breach of any provision of the Company's Articles of Incorporation, Articles of Association or Bylaws, or (ii) constitute or result in the breach of any term, condition or provision of, or constitute a default under, or give rise to any right of termination, cancellation, or acceleration with respect to, or result in the creation of any lien, charge or encumbrance upon, any property or assets of the Company, pursuant to any note, bond, mortgage, indenture, license, agreement, lease, or other instrument or obligation to which it is a party or by which it or any of its properties or assets may be subject, and that would, in any such event, have a material adverse effect on the financial condition or operations of the Company and its Subsidiaries on a consolidated basis or the transactions contemplated hereby, or (iii) subject to receipt of the requisite approvals referred to in Section 9.5 of this Agreement, violate any order, writ, injunction, decree, statute, rule or regulation applicable to the Company or any of its Subsidiaries or any of their properties or assets. (c) Other than (i) in connection or compliance with the provisions of applicable state corporate law, (ii) consents, authorizations, approvals, or exemptions required from the Regulatory Authorities, and (iii) notices to or filings with the Internal Revenue Service or the Pension Benefit Guaranty Corporation with respect to any employee benefit plans, no notice to, filing with, authorization of, or exemption by, or consent or approval of any public body or authority is necessary for the consummation by the Company of the transactions contemplated in this Agreement. 6.3 STATEMENTS TRUE AND CORRECT. No representation or warranty made by the Company nor any statement or certificate or instrument furnished as information which is Previously Disclosed or included in an Exhibit or Schedule in connection with this Agreement nor any statement or certificate to be furnished by the Company to Bancshares pursuant to this Agreement or in connection with the transactions contemplated by this Agreement, contains or will contain any untrue statement of material fact or omits or will omit to state a material fact necessary to make the statements contained therein not misleading. None of the information supplied or to be supplied by the Company for inclusion in any documents to be filed with any -12- Regulatory Authority in connection with the transactions contemplated hereby, will, at the respective times such documents are filed, be false or misleading with respect to any material fact, or omit to state any material fact necessary in order to make the statements therein not misleading. All documents that the Company is responsible for filing with any Regulatory Authority in connection with the transactions contemplated hereby will comply as to form in all material respects with the provisions of applicable law. 6.4 REGULATORY APPROVALS. The Company knows of no reason why the regulatory approvals referred to in Section 9.5 of this Agreement should not be obtained without imposition of a condition or restriction of the type referred to in the last sentence of such Section. ARTICLE SEVEN COVENANTS AND AGREEMENTS OF THE COMPANY 7.1 APPLICATIONS. The Company shall prepare and file, or shall cause to be prepared and filed, applications with the Regulatory Authorities seeking the requisite approvals necessary to consummate the transactions contemplated by this Agreement, and shall take such other steps and actions in furtherance thereof as it deems appropriate in order to be able to secure such approvals. 7.2 AGREEMENT AS TO EFFORTS TO CONSUMMATE. Subject to the terms and conditions of this Agreement, the Company agrees to use all reasonable efforts to take, or cause to be taken, all actions, and to do, or cause to be done, all things necessary, proper, or advisable under applicable laws and regulations to consummate and make effective, as soon as practicable after the date of this Agreement, the transactions contemplated by this Agreement. The Company shall use all reasonable efforts to obtain consents of (and agreements with) all third parties and governmental bodies necessary or desirable for the consummation of the transactions contemplated by this Agreement. 7.3 ADVERSE CHANGES IN CONDITION. The Company hereby agrees to give written notice promptly to Bancshares concerning any material adverse change in its condition from the date of this Agreement until the Effective Date that might adversely affect the consummation of the transactions contemplated hereby, or upon becoming aware of the occurrence or impending occurrence of any event or circumstance which would cause or constitute a material breach of any of the representations, warranties or covenants contained herein. 7.4 COOPERATION. The Company hereby covenants and agrees to cooperate fully with Bancshares to provide such support, assistance and information to Bancshares as may be reasonably requested by it in connection with its application for all necessary approvals of the Regulatory Authorities in connection with the transactions contemplated hereby. 7.5 INVESTIGATION AND CONFIDENTIALITY. Prior to the Effective Date, Bancshares may make or cause to be made such investigation, if any, of the business and properties of the -13- Company and of its financial and legal condition as Bancshares reasonably deems necessary or advisable to familiarize itself and its advisors with such business, properties, and other matters, provided that such investigation shall be reasonably related to the transactions contemplated hereby and shall not interfere unnecessarily with normal operations. The Company agrees to furnish Bancshares and Bancshares' advisors with such financial and operating data and other information with respect to its businesses, properties, and employees as Bancshares shall, from time to time, reasonably request. No investigation by Bancshares shall affect the representations and warranties of the Company, and subject to Section 10.3 of this Agreement, each such representation and warranty shall survive any such investigation. Bancshares shall, and shall cause its advisors and agents to, maintain the confidentiality of all confidential information furnished to it by the Company concerning the Company's businesses, operations and financial condition and shall not use such information for any purpose except in furtherance of the transactions contemplated by this Agreement. If this Agreement is terminated prior to the Effective Date, Bancshares shall promptly return all documents and copies thereof and all work papers containing confidential information received from the Company. 7.6 REPORTS. The Company shall file all reports required to be filed with the Regulatory Authorities between the date of this Agreement and the Effective Date and shall deliver to Bancshares copies of all such reports promptly after the same are filed. 7.7 CURRENT INFORMATION. During the period from the date of this Agreement to the Effective Date, the Company shall cause one or more of its representatives to confer on a regular and frequent basis with representatives of Bancshares and to report on the general status of the Company's ongoing operations. The Company shall promptly notify Bancshares of any material change in (a) the normal course of the Company's business, or (b) any operations of its properties, and of any material governmental complaints, investigations or hearings (or communications indicating that the same may be contemplated) or the institution or the threat of any material litigation involving the Company, and will keep Bancshares fully informed with respect to such events. ARTICLE EIGHT ADDITIONAL AGREEMENTS 8.1 PRESS RELEASES. Prior to the Effective Date, the Company and Bancshares shall consult with each other as to the form and substance of any press release or other public disclosure related to this Agreement or any other transaction contemplated hereby. All such press releases, announcements and other public disclosures must be reviewed in advance by the other Party prior to distribution; provided, however, that nothing in this Section 8.1 shall be deemed to prohibit any Party from making any disclosure after such consultation which its counsel deems necessary or advisable in order to satisfy such Party's disclosure obligations imposed by law. -14- ARTICLE NINE CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE The obligations of the Company and Bancshares to perform this Agreement are subject to the satisfaction of the following conditions, unless waived in writing by the Party for whose benefit such condition exists pursuant to Section 11.5 of this Agreement: 9.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of each Party set forth or referred to in this Agreement shall be true and correct in all material respects as of the date of this Agreement and as of the Effective Date with the same effect as though all such representations and warranties had been made on and as of the Effective Date, except for any such representations and warranties confined to a specified date, which shall be true and correct in all material respects as of such date. 9.2 PERFORMANCE OF AGREEMENTS AND COVENANTS. Each and all of the covenants and agreements of each Party to be performed and complied with pursuant to this Agreement and the other agreements contemplated hereby prior to the Effective Date shall have been duly performed and complied with in all material respects. 9.3 CERTIFICATES. Each of the Parties shall have delivered to the other a certificate, dated as of the Effective Date and signed on its behalf by its Chairman of the Board, or its President, and its Treasurer, Cashier or other principal, to the effect that (i) the conditions of its obligations set forth in Section 9.1 and Section 9.2 of this Agreement have been satisfied, and (ii) with respect to each of the Parties, that there has been no material adverse change in the financial condition or results of operations of either Party from that reflected on the most recent financial statements referred to in Section 4.4, all in such reasonable detail as the other Party shall request. 9.4 CORPORATE AUTHORIZATION. All action necessary to authorize the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby shall have been duly and validly taken by the Parties. Each Party shall have furnished to the other certified copies of resolutions duly adopted by such Party's Board of Directors evidencing the same. 9.5 CONSENTS AND APPROVALS. All approvals and authorizations of, filings and registrations with, and notifications to, all federal and state authorities required for consummation of the transactions contemplated hereby and for the preventing of any termination of any right, privilege, license or agreement of either Party which, if not obtained or made, would have a material adverse impact on the financial condition or results of operation of such Party, shall have been obtained or made and shall be in full force and effect and all waiting periods required by law shall have expired. To the extent that any lease, license, loan or financing agreement or other contract or agreement to which the Bank is a party requires the consent of or waiver from the other party thereto as a result of the transactions contemplated by this Agreement, such consent or waiver shall have been obtained, unless waived by the Company in accordance with Section 11.5 of this Agreement. Any approval obtained from any Regulatory Authority which is -15- necessary to consummate the transactions contemplated hereby shall not be conditioned or restricted in a manner which in the judgment of the Board of Directors of all Parties would make it impractical to consummate the transactions contemplated hereby. 9.6 LEGAL PROCEEDINGS. No action, proceeding or any restrictive orders shall have been instituted or issued by any governmental authority or to the knowledge of the Parties threatened by any governmental authority seeking to restrain the consummation of the transactions contemplated by this Agreement which, in the opinion of the Board of Directors of the Company or Bancshares, render it impossible or inadvisable to consummate the transactions provided for in this Agreement. 9.7 MATERIAL ADVERSE CHANGE. There shall have been no determination by the Board of Directors of any Party that the transactions contemplated by this Agreement have become impractical because any state of war, national emergency, or banking moratorium shall have been declared in the United States or a general suspension of trading on the New York Stock Exchange shall have occurred. At the Effective Date, the Assets and Liabilities and unimpaired capital of the Bank shall be identical in nature and amount to the figures shown on the Bank's Financial Statement. 9.8 INDEMNIFICATION BY BANCSHARES. Bancshares shall indemnify and hold harmless the Company and each of their directors, officers, agents and successors and assigns against all losses, damages and expenses (including reasonable attorneys' fees), caused by or arising out of (i) any breach or default in the performance by Bancshares of any covenant or agreement of Bancshares contained in this Agreement, (ii) any breach of any warranty or material misrepresentation made by Bancshares herein or in any schedule attached hereto or in any certificate or other instrument delivered by or on behalf of Bancshares pursuant hereto which relates to a warranty which pursuant to Section 10.3 survives the Closing, (iii) any liability of the Bank for taxes attributable to any period or portion thereof that ends on or before the Effective Date, and (iv) any liability for taxes of any affiliated group (as defined in Section 1504 of the Internal Revenue Code) of which the Bank is a member that are assessed against the Bank (or any successor by merger thereof or any deemed purchaser of the assets of the Bank pursuant to Treas. Reg. (S)1.1502-6, by contract, as transferee or successor, or otherwise, and (v) any and all actions, suits, proceedings, claims, demands, judgments, costs and expenses (including reasonable legal and accounting fees) whatsoever not expressly included and identified by nature and amount in the liabilities section of the Bank's Financial Statement caused by or arising out of any business or activities of the Bank prior to the Effective Date. The party to be indemnified hereunder shall give to the indemnifying party prompt written notice of the assertion of any third-party claim which might give rise to an indemnification obligation hereunder and the indemnifying party may undertake the defense thereof by representatives chosen by it, but acceptable to the indemnified party, which acceptance shall not be unreasonably withheld. If the indemnifying party, within a reasonable time after notice of any such claim, fails to defend, the indemnified party will have the right to undertake the defense, and compromise or settle any such claim on behalf of and for the account and risk of the indemnifying party, subject to the right of the indemnifying party to assume the defense of such claim at any time prior to settlement, -16- compromise or final determination. Notwithstanding the foregoing, if there is a reasonable probability that a claim may materially and adversely affect the indemnified party, other than as a result of money damages or other payments, the indemnified party shall have the right, at the cost and expense of the indemnifying party, to defend, compromise or settle such claim. 9.9 INDEMNIFICATION BY COMPANY. The Company shall indemnify and hold harmless Bancshares and each of its directors, officers, agents and successors and assigns against all losses, damages and expenses (including reasonable attorneys' fees), caused by or arising out of (i) any breach or default in the performance by the Company of any covenant or agreement of the Company contained in this Agreement or (ii) any breach of any warranty or any material misrepresentation made by the Company herein or in any schedule attached hereto or in any certificate or other instrument delivered by or on behalf of the Company pursuant hereto which relates to a warranty which pursuant to Section 10.3 survives the Closing. The party to be indemnified hereunder shall give to the indemnifying party prompt written notice of the assertion of any third-party claim which might give rise to an indemnification obligation hereunder and the indemnifying party may undertake the defense thereof by representatives chosen by it, but acceptable to the indemnified party, which acceptance shall not be unreasonable withheld. If the indemnifying party, within a reasonable time after notice of any such claim, fails to defend, the indemnified party will have the right to undertake the defense, and compromise or settle any such claim on behalf of and for the account and risk of the indemnifying party, subject to the right of the indemnifying party to assume the defense of such claim at any time prior to settlement, compromise or final determination. Notwithstanding the foregoing, if there is a reasonable probability that a claim may materially or adversely affect the indemnified party, other than as a result of monetary damages or other payments, the indemnified party shall have the right, at the cost and expense of the indemnifying party, to defend, compromise or settle such claim. 9.10 RELOCATION OF BANK HEADQUARTERS. Receipt by the Bank of regulatory approval from the OTS for the relocation of its headquarters from Acworth, Georgia, to Columbia, South Carolina. 9.11 PURCHASE AND ASSUMPTION. The Bank and First Alliance Bank shall have entered into and shall, prior to or contemporaneously with the Closing hereof, consummate the Purchase and Assumption Transaction pursuant to an agreement substantially in the form of Exhibit 1 attached hereto, as a result of which the financial position of the Bank will conform to the Bank Financial Statement referred to in Section 4.4 hereof. 9.12 SUBSCRIPTION BY BANCSHARES. Bancshares shall have executed a subscription agreement for 833 shares of the Company Common Stock at the time of the Closing of this Agreement on terms and conditions mutually satisfactory to Bancshares and the Company. -17- ARTICLE TEN TERMINATION 10.1 TERMINATION. This Agreement may be terminated in any of the following ways: (a) By a vote of a majority of the Board of Directors of the Company or Bancshares in the event of a material breach by another Party of any representation, warranty, covenant or agreement contained herein which cannot be cured at or prior to the Effective Date; or (b) By a vote of a majority of the Board of Directors of the Company or Bancshares in the event that the stock purchase described herein shall not have been consummated by March 31, 1997, which date may be extended upon the mutual agreement of the Parties; or (c) By a vote of a majority of the Board of Directors of the Company or Bancshares in the event any approval of any governmental or other Regulatory Authority required for consummation of the transactions contemplated hereby shall have been denied by final non-appealable action of such authority or if any action taken by such authority is not appealed within the time limit for appeal. 10.2 EFFECT OF TERMINATION. In the event of the termination and abandonment of this Agreement pursuant to Section 10.1 of this Agreement, this Agreement shall become void and have no effect, except that the provisions of Sections 5.5, 7.5 and 11.1 of this Agreement shall survive any such termination and abandonment. 10.3 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. The respective representations, warranties, obligations, covenants and agreements of the Parties shall not survive the Effective Date except Sections 2.1, 4.1, 4.3, 4.13, 6.1, 6.2, 6.3, 9.8, 9.9, 11.1 and 11.2 of this Agreement. The representations, warranties, obligations, covenants and agreements of the Parties (a) under Sections 2.1, 11.1 and 11.2 of this Agreement shall survive only for a period of six months following the Closing, (b) under Sections 4.1 and 6.1 shall survive only for a period of three years following the Closing, and (c) under the remaining Sections shall survive only for the period during which a claim which serves as a basis for an asserted misrepresentation or, where applicable, a breach of warranty, obligation, covenant or agreement could be brought as an action under applicable law. ARTICLE ELEVEN MISCELLANEOUS 11.1 EXPENSES. Each of the Parties shall bear and pay all costs and expenses incurred by it or on its behalf in connection with the transactions contemplated hereunder, including fees and expenses of its own financial or other consultants, investment bankers, accountants and counsel. -18- 11.2 BROKERS AND FINDERS. Each of the Parties represents and warrants that neither it nor any of its officers, directors, employees or affiliates has employed any broker or finder or incurred any liability for any financial advisory fees, investment bankers' fees, brokerage fees, commissions, or finders' fees in connection with this Agreement or the transactions contemplated hereby. In the event of a claim by any broker or finder based upon his or its representing or being retained by or allegedly representing or being retained by either the Company or Bancshares, as the case may be, agrees to indemnify and hold the other Party harmless of and from any such claim. 11.3 ENTIRE AGREEMENT. Except as otherwise expressly provided herein, this Agreement contains the entire agreement between the Parties with respect to the transactions contemplated hereunder, and this Agreement supersedes all prior arrangements or understandings with respect thereto, written or oral. The terms and conditions of this Agreement shall inure to the benefit of and be binding upon the Parties and their respective successors. Nothing in this Agreement, expressed or implied, is intended to confer upon any party, other than the Parties or their respective successors, any rights, remedies, obligations or liabilities under or by reason of this Agreement, except as expressly provided herein. 11.4 AMENDMENTS. To the extent permitted by law, this Agreement may be amended by a subsequent writing signed by all of the Parties upon the approval of the Boards of Directors of each of the Parties. 11.5 WAIVERS. Prior to or on the Effective Date, the Company shall have the right to waive any default in the performance of any term of this Agreement by Bancshares, to waive or extend the time for the compliance or fulfillment by Bancshares of any and all of its obligations under this Agreement, and to waive any or all of the conditions precedent to the obligations of the Company under this Agreement, except any condition which, if not satisfied, would result in the violation of any law or applicable governmental regulation. Prior to or on the Effective Date Bancshares shall have the right to waive any default in the performance of any term of this Agreement by the Company, to waive or extend the time for the compliance or fulfillment by the Company of any and all of its obligations under this Agreement, and to waive any or all of the conditions precedent to the obligations of Bancshares under this Agreement, except any condition which, if not satisfied, would result in the violation of any law or applicable governmental regulation. 11.6 NO ASSIGNMENT. None of the Parties may assign any of its rights or obligations under this Agreement to any other person without the prior written consent of the other Party. 11.7 NOTICES. All notices or other communications which are required or permitted hereunder shall be in writing and sufficient if delivered personally or by facsimile transmission or by registered or certified mail, postage prepaid, to the persons at the addresses set forth below (or at such other address as may be provided hereunder), and shall be deemed to have been delivered as of the date so delivered: -19- COMPANY: Donald S. Shapleigh, Jr. President 7000 Peachtree Dunwoody Road Building 10, Suite 300 Atlanta, GA 30328 Copy to Counsel: Walter G. Moeling, IV, Esq. Powell, Goldstein, Frazer & Murphy Sixteenth Floor 191 Peachtree Street, N.E. Atlanta, GA 30303 BANCSHARES: Darrell D. Pittard Chairman of the Board and Chief Executive Officer 2180 Atlanta Plaza 950 East Paces Ferry Road Atlanta, GA 30326 Copy to Counsel: Steven S. Dunlevie, Esq. Womble Carlyle Sandridge & Rice, PLLC Suite 700 1275 Peachtree Street, N.E. Atlanta, GA 30309 11.8 GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of Georgia except to the extent federal law shall be applicable. 11.9 COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which shall constitute one and the same instrument. -20- IN WITNESS WHEREOF, each of the Parties has caused this Agreement to be executed on its behalf and its corporate seal to be hereunto affixed and attested by officers hereunto duly authorized, all as of the day and year first above written. COMPANY: NET.B@NK, INC. By: Donald S. Shapleigh, Jr. ------------------------ Print Name: /s/ Donald S. Shapleigh, Jr. ---------------------------- Attest: /s/ Mary E. Johnson - --------------------------------- Secretary [CORPORATE SEAL] FIRST ALLIANCE/PREMIER BANCSHARES, INC. By: Darrell D. Pittard ------------------ Print Name: /s/ Darrell D. Pittard ---------------------- Attest: /s/ Barbara J. Burtt - --------------------------------- Secretary [CORPORATE SEAL] -21- EX-10.10 12 FIRST AMENDMENT TO AMENDED AND RESTATED SPA FIRST AMENDMENT TO AMENDED AND RESTATED STOCK PURCHASE AGREEMENT This FIRST AMENDMENT (the "Amendment") to the Amended and Restated Stock Purchase Agreement (the "Agreement"), dated as of December 19, 1996, by and between NET.B@NK, INC. (the "Company") and PREMIER BANCSHARES, INC. (formerly known as First Alliance/Premier Bancshares, Inc., "Bancshares") is entered into and made effective as of February 25, 1997. Capitalized terms used herein and not otherwise defined shall have the meaning ascribed to them in the Agreement. WHEREAS, the parties hereto desire to amend the Agreement for the purpose of extending the termination date and modifying the amount of consideration the Company will pay to Bancshares. NOW, THEREFORE, in consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and Bancshares agree to amend the Agreement as follows: 1. Section 2.2 of the Agreement is hereby amended by deleting the existing Section 2.2 thereof in its entirety and substituting in lieu thereof the following new Section 2.2: 2.2 PURCHASE PRICE. In full consideration for the purchase by the Company of the Common Stock, the Company shall on the Effective Date (i) pay to Bancshares an amount in cash equal to the sum of the Bank's unimpaired capital at closing, and (ii) transfer to Bancshares 1,250 shares of the common stock of the Company (the "Company Common Stock") valued at $115.00 per share, which is the "agreed-upon" value of shares issued to certain of the Company's investors by the Company and is equal to not less than one and one-half percent (1.50%) of the Company Common Stock issued and outstanding as of February 25, 1997. For the purpose of this Agreement, the term "unimpaired capital" shall mean the sum of the Bank's paid in capital, capital surplus, retained earnings, and allocation for loan and lease losses with respect to any loans and leases, immediately following consummation of the Purchase and Assumption Transaction. 2. Section 3.2 of the Agreement is hereby amended to extend the expiration of the permissible Effective Date to May 31, 1997. 3. Section 9.12 of the Agreement is hereby amended to increase the number of shares referenced in the subscription agreement required of Bancshares to 1,250 shares of the Company Common Stock. 4. Section 10.1(b) of the Agreement is hereby amended to extend the termination date of the Agreement to May 31, 1997. 5. Section 11.1 is hereby amended to provide at the end of Section 11.1 an additional sentence which provides as follows: "Notwithstanding anything contained herein to the contrary, the Company shall pay to Bancshares an amount in cash equal to $150,000.00 for the purpose of reimbursing Bancshares for its expenses incurred in connection with the consummation of the transactions contemplated by this Agreement, $30,000.00 of which shall be non- refundable and due and payable upon execution hereof and the remaining $120,000.00 shall be due and payable on the Effective Date." 6. Except as hereinabove amended, the Agreement shall remain otherwise in full force and effect. 7. This Amendment may be executed in one or more counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same instrument. IN WITNESS WHEREOF, each of the parties has caused this Amendment to be executed on its behalf and its corporate seal to be hereunto affixed and attested by officers hereunto duly authorized all as of the day and year first above written. NET.B@NK, INC. Attest: By:_______________________________________ D. R. Grimes, Chief Executive Officer ______________________________ Secretary [CORPORATE SEAL] PREMIER BANCSHARES, INC. Attest: By:_______________________________________ Darrell D. Pittard, Chairman of the Board and ______________________________ Chief Executive Officer Secretary [CORPORATE SEAL] 2 EX-10.11 13 PURCHASE AND ASSUMPTION AGREEMENT PURCHASE AND ASSUMPTION AGREEMENT BETWEEN PREMIER BANK, F.S.B. AS SELLER AND FIRST ALLIANCE BANK AS PURCHASER PURCHASE AND ASSUMPTION AGREEMENT TABLE OF CONTENTS Page ---- SECTION 1 DEFINED TERMS 1.1 Defined Terms ........................................................ 1 SECTION 2 TRANSFER OF ASSETS 2.1 Assets Sold............................................................ 2 2.2 Documents of Transfer ................................................. 2 2.3 Breaches with Third Parties ........................................... 3 2.4 Payments Accepted After the Closing.................................... 3 SECTION 3 ASSUMPTION OF ACQUIRED DEPOSITS AND LIABILITIES 3.1 Acquired Deposits...................................................... 3 3.2 Overdrafts ............................................................ 3 3.3 Documentation of Assumption............................................ 3 3.4 Assumption Subject to Certain Terms ................................... 4 3.5 Payment of Items by the Seller After Closing .......................... 4 3.6 Payment of Items by the Purchaser After Closing........................ 4 3.7 Transfer of Credits by the Seller ..................................... 4 3.8 The Seller Not Liable to Pay........................................... 4 3.9 The Purchaser Responsible for Returned Items........................... 4 3.10 Acquired Liabilities................................................... 4 SECTION 4 ASSUMPTION OF RISKS 4.1 Insurance Policies..................................................... 4 4.2 Persons and Property................................................... 4 SECTION 4 PURCHASE PRICE AND SETTLEMENT 5.1 Purchase Price ........................................................ 5 5.2 Payment of Acquired Deposits and Assumption of Acquired Liabilities by the Seller.................................. 5 5.3 Preliminary Settlement................................................. 5 5.4 Final Settlement....................................................... 5 5.5 Interest Paid and Earned as of the Closing Date ....................... 5 i SECTION 6 ACCESS TO THE BRANCHES' PROPERTIES AND RECORDS AND DUE DILIGENCE 6.1 Access and Confidential Treatment ..................................... 6 6.2 The Purchaser's Due Diligence ......................................... 6 6.3 Recordkeeping and Access Following the Closing......................... 6 SECTION 7 REPRESENTATIONS AND WARRANTIES OF SELLER 7.1 Corporate Organization ................................................ 6 7.2 Corporate Authority to Carry On Business .............................. 6 7.3 Corporate Authority to Enter into this Agreement ...................... 6 7.4 Execution and Delivery; Enforceability ............................... 6 7.5 Status of the Acquired Deposits ....................................... 7 7.6 Status of the Purchased Loans ......................................... 7 7.7 Status of the Purchased Securities .................................... 7 7.8 No Violations ......................................................... 7 7.9 No Adverse Litigation.................................................. 7 7.10 Limitations of Warranties.............................................. 8 SECTION 8 REPRESENTATIONS AND WARRANTIES OF PURCHASER 8.1 Corporate Organization ................................................ 8 8.2 Corporate Authority to Carry On Business............................... 8 8.3 Corporate Authority to Enter this Agreement ........................... 8 8.4 Execution and Delivery; Enforceability................................. 8 8.5 No Violations ......................................................... 8 8.6 No Adverse Litigation ................................................. 8 SECTION 9 ADDITIONAL UNDERTAKINGS OF THE SELLER 9.1 Conduct of Business Pending Closing ................................... 9 9.2 Documentation at the Closing and Further Assurances.................... 9 SECTION 10 ADDITIONAL UNDERTAKINGS OF THE PURCHASER 10.1 The Purchaser's Contact with Customers ............................... 9 10.2 Regulatory Filings ................................................... 10 SECTION 11 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE PURCHASER 11.1 Representations and Warranties True................................... 10 11.2 Obligations Performed ................................................ 10 ii 11.3 Certificate of Compliance ............................................ 10 11.4 No Adverse Litigation ................................................ 10 11.5 Regulatory Approvals ................................................. 10 SECTION 12 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE SELLER 12.1 Representations and Warranties True .................................. 10 12.2 Obligations Performed ................................................ 11 12.3 Certificate of Compliance ........................................... 11 12.4 No Adverse Litigation ................................................ 11 12.5 Regulatory Approvals ................................................ 11 SECTION 13 THE CLOSING 13.1 Time and Place ....................................................... 11 SECTION 14 TERMINATION 14.1 Methods of Termination .............................................. 11 14.2 Procedure Upon Termination ........................................... 12 14.3 Automatic Termination ................................................ 12 SECTION 15 MISCELLANEOUS 15.1 Entire Agreement ..................................................... 12 15.2 Modifications and Waivers ............................................ 12 15.3 No Broker or Finder .................................................. 12 15.4 No Survival of Representations and Warranties......................... 12 15.5 Binding Effect........................................................ 12 15.6 Counterparts.......................................................... 12 15.7 Expenses.............................................................. 12 15.8 Notices............................................................... 12 15.9 Time of the Essence .................................................. 13 15.10 Governing Law ........................................................ 13 15.11 Headings.............................................................. 13 15.12 Severability.......................................................... 13 15.13 Public Announcements ................................................. 13 15.14 Assignability ........................................................ 13 iii Schedule A - Loans to be Acquired by Net.B@nk (Whereas Clause) Schedule B - Other Assets to be Acquired by Net.B@nk (Whereas Clause) Schedule C - Deposits and Other Liabilities to be Acquired by Net.B@nk (Whereas Clause) Exhibit A - Assumption of Liabilities (Section 3.3) Exhibit B-1 - Preliminary Settlement Statements (Section 5.3) Exhibit B-2 - Final Settlement Statement (Section 5.4) Exhibit C - Seller's Compliance Certificate (Section 11.3) Exhibit D - Purchaser's Compliance Certificate (Section 12.3) Exhibit E - Notices (Section 15.8) iv PURCHASE AND ASSUMPTION AGREEMENT This Purchase and Assumption Agreement (the "Agreement") is made and entered into as of the 19th day of December, 1996 between PREMIER BANK, F.S.B. (the "Seller" or "Premier"), a federal savings bank organized under the laws of the United States, and FIRST ALLIANCE BANK (the "Purchaser" or the "Bank"), a commercial bank organized under the laws of the State of Georgia: WHEREAS, pursuant to that certain Amended and Restated Stock Purchase Agreement, of even date herewith, between Net.B@nk, Inc. ("Net.B@nk") and First Alliance/Premier Bancshares, Inc. ("Bancshares"), the sole shareholder of the Seller, Net.B@nk has agreed to purchase all of the outstanding common stock of Seller now owned by Bancshares; WHEREAS, the (a) loans, (b) other assets and (c) deposits and other liabilities which will be owned by Seller when it is acquired by Net.B@nk are set forth on Schedules A, B and C, respectively; -------------------- WHEREAS, the Bank, as Purchaser, has agreed to purchase and assume, and the Seller has agreed to sell, all of Premier's assets and liabilities which are not being acquired by Net.B@nk as a result of its acquisition of the stock of Premier; NOW, THEREFORE, in consideration of the premises and the mutual agreements, covenants and provisions herein contained, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: SECTION 1 DEFINED TERMS 1.1 DEFINED TERMS. The following terms used in this Agreement shall have the meanings specified below: (a) "Acquired Deposits" means all of the deposit liabilities of Seller which are not to be acquired by Net.B@nk and which the Purchaser shall assume at the Closing and shall also include Seller's routing and transit number which is #261191363. (b) "Acquired Liabilities" means all of the liabilities, contingent or otherwise, of Seller, however created or arising, other than the Acquired Deposits and the liabilities to be owned by Net.B@nk which are set forth on Exhibit C. (c) "Branches" shall mean the offices of Seller. (d) "Closing" means the closing of the purchase of the assets and assumption of liabilities of the Branches, and "Closing Date" means the date on which the Closing takes place. (e) "Fixed Assets" means the Furniture, Fixtures and Equipment (as defined below) and the Real Property (as defined below) which the Purchaser shall purchase at Closing. (f) "Furniture, Fixtures and Equipment" means the furniture, fixtures and equipment in the Branches and elsewhere (including safe deposit boxes), together with any manufacturers' warranties which are assignable and are in effect, none of which are to be acquired by Net.B@nk, and all of which the Purchaser shall purchase at the Closing. (g) "Purchased Assets" shall have the meaning set forth in Section 2. 1. (h) "Purchased Loans" means all of the loans of Seller which are not to be acquired by Net.B@nk and which the Purchaser shall purchase at the Closing. (i) "Purchased Securities" means all of the securities of Seller, which are not to be acquired by Net.B@nk and which the Purchaser shall purchase at the Closing. (j) "Real Property" means the real property and improvements located thereon at the Branches, together with all easements and appurtenances belonging thereto, and all intangible rights, licenses and permits pertaining thereto or to the use thereof, which the Purchaser shall purchase at the Closing. (k) "Schedules" referenced herein shall mean the Schedules so marked, each of which has been initialed for identification by an officer of the Purchaser, the Seller and Net.B@nk, and bound sets of which have been delivered to the Seller, the Purchaser and Net.B@nk. Such Schedules are hereby incorporated by reference herein and made a part hereof, and may be referred to in this Agreement and in any other related instrument or document without being attached hereto. SECTION 2 TRANSFER OF ASSETS 2.1 ASSETS SOLD. On the terms and subject to the conditions of this Agreement, at the Closing, the Seller shall transfer, convey, assign and deliver to the Purchaser (without recourse, except as specifically provided in Section 3 and otherwise herein) the following assets (the Purchased Assets): (a) The Purchased Loans and the Purchased Securities; (b) All of the Seller's right, title and interest in the Fixed Assets; (c) All of the cash on hand at the Branches as of the Closing Date; and (d) All intangible assets, including, without limitation, all rights to the name "Premier" and to the Premier Bank routing and transit number. 2.2 DOCUMENTS OF TRANSFER. The sale, transfer, assignment and delivery of the Purchased Assets shall be effected by the execution and delivery by the Seller to the Purchaser of general warranty deeds, bills of sale, endorsements, assignments and other instruments of transfer and conveyance reasonably satisfactory in form and substance to counsel for the Seller and the Purchaser. At the Closing, the Seller shall take steps necessary to put the Purchaser in possession and operating control of the Purchased Assets, and shall deliver keys, combinations, codes and other necessary access devices and information relating to the Branches. Good and marketable fee simple title to 2 the Real Property shall be conveyed. The Seller shall cause all deeds to secure debt and other liens encumbering title to the Real Property to be paid in full and cancelled of record at or before the Closing; in the event the Seller fails to do so, the Purchaser may, at its option (without obligation) cause the same to be paid and released of record, and the Purchaser shall receive a credit against the Purchase Price for all amounts expended in connection therewith. 2.3 BREACHES WITH THIRD PARTIES. Nothing in this Agreement shall constitute an agreement to assign any claim, contract, license, lease, commitment, sales order or purchase order or any claim or right or any benefit arising thereunder or resulting therefrom if an attempted assignment thereof, without the consent of a third party thereto, would constitute a breach thereof or in any way affect the rights of the Purchaser or the Seller thereunder. If such consent is not obtained, or if an attempted assignment thereof would be ineffective or would affect the rights of the Seller thereunder so that the Purchaser would not in fact receive all such rights, the Seller shall cooperate with the Purchaser in any arrangement desired to provide for the benefits under any such claims, contracts, licenses, leases, commitments, sales orders or purchase orders, including enforcement at the cost and for the benefit of the Purchaser of any and all rights of the Seller against a third party thereto arising out of the breach or cancellation by such third party or otherwise. Any transfer or assignment to the Purchaser or the Seller of any property or property rights or any contract or agreement which shall require the consent or approval of any third party, shall be made subject to such consent or approval being obtained. 2.4 PAYMENTS ACCEPTED AFTER THE CLOSING. The Seller shall forward promptly to the Purchaser: (a) Any payments (properly endorsed without recourse as necessary) which are accepted by it on or after the Closing Date that relate in any way to the Purchased Loans and to provide sufficient information so that any such payments may be properly applied; and (b) Any notices or other correspondence which are received on or after the Closing Date that relate in any way to the Purchased Loans. SECTION 3 ASSUMPTION OF ACQUIRED DEPOSITS AND LIABILITIES 3.1 ACQUIRED DEPOSITS. At the Closing, the Purchaser shall assume and agree to pay and discharge the Acquired Deposits. No assurance can be given by the Seller that the present deposit customers of the Branches shall become or continue to be customers of the Purchaser, the same being at the sole discretion of the customers. 3.2 OVERDRAFTS. If any of the accounts which comprise the Acquired Deposits are overdrawn as of the Closing, the Purchaser shall assume such accounts without recourse to the Seller and shall pay the Seller the amount of the overdrafts for those overdrawn accounts assumed. 3 3.3 DOCUMENTATION OF ASSUMPTION. At the Closing, the Purchaser shall deliver to the Seller an undertaking substantially in the form of Exhibit A, --------- attached hereto and made a part hereof, under which the Purchaser shall assume and agree to discharge and pay the Acquired Deposits and the Acquired Liabilities. 3.4 ASSUMPTION SUBJECT TO CERTAIN TERMS. The Acquired Deposits being assumed by the Purchaser pursuant to this Section shall be assumed in accordance with the terms and conditions of the contracts of deposit and the laws, rules and regulations applicable thereto. 3.5 PAYMENT OF ITEMS BY THE SELLER AFTER CLOSING. If, subsequent to the assumption of Acquired Deposits pursuant to this Section, the Seller shall honor any properly drawn check or withdrawal from a transferred account, the Purchaser shall pay to the Seller any moneys so paid by the Seller to or for the benefit or account of the said depositor but not in excess of collected funds in the depositor's account. 3.6 PAYMENT OF ITEMS BY THE PURCHASER AFTER CLOSING. The Purchaser agrees that it shall pay all properly drawn checks, drafts and withdrawal orders drawn by the account holders of the depository accounts of customers of the Seller assumed hereunder, to the extent that the collected balance of the account is sufficient to permit payment thereof. The Purchaser will promptly forward to the Seller (or its successor) any checks received by the Purchaser drawn by the account holders of the depository accounts of customers of the Seller not assumed hereunder for a period of 30 days following the Closing. 3.7 TRANSFER OF CREDITS BY THE SELLER. The Seller agrees that it shall transfer to the Purchaser any deposits accepted by it after the Closing Date for credit to transferred accounts, but the Seller shall be under no obligation to accept such deposits. 3.8 THE SELLER NOT LIABLE TO PAY. In the event any deposit customer (whose account has been transferred from the Seller to the Purchaser with the Branches) instead of accepting the obligation of the Purchaser to pay the deposit liabilities assumed, shall demand payment for all or any part of any such assumed deposit liabilities, the Purchaser shall be liable or responsible for making such payment. 3.9 THE PURCHASER RESPONSIBLE FOR RETURNED ITEMS. The Purchaser shall pay promptly to the Seller an amount equal to the amount of any checks, drafts or withdrawal orders credited to an assumed account as of the Closing Date which are returned to the Seller after the Closing Date. 3.10 ACQUIRED LIABILITIES. At the Closing, the Purchaser shall assume and agree to pay and discharge the Acquired Liabilities. SECTION 4 ASSUMPTION OF RISKS 4.1 INSURANCE POLICIES. Effective on the Closing Date, the Seller shall discontinue its insurance coverage currently maintained in connection with the Branches. The Purchaser shall be responsible for all casualty and liability insurance protection for the Branches' premises and the activities conducted there as of the Closing Date. 4 4.2 PERSONS AND PROPERTY. As of the Closing Date, the Seller shall discontinue providing the security for persons and property in and around the Branches' premises it may have provided previous to the Closing Date. SECTION 5 PURCHASE PRICE AND SETTLEMENT 5.1 PURCHASE PRICE. The purchase price to be paid by the Purchaser to the Seller at the Closing for the Purchased Assets shall be (a) an amount equal to the outstanding principal balance of the Purchased Loans plus the accrued and unpaid interest on the Purchased Loans, (b) the fair market value of the Purchased Securities as of the day immediately preceding the Closing Date, (c) the book value of the Fixed Assets, and (d) any cash on hand at the Branches (the "Purchase Price"). 5.2 PAYMENT OF ACQUIRED DEPOSITS AND ASSUMPTION OF ACQUIRED LIABILITIES BY THE SELLER. (a) The deposit liabilities to be paid by the Seller to the Purchaser at the Closing shall be an amount equal to the aggregate principal balance of the Acquired Deposits and accrued interest thereon less the aggregate amount of overdrafts for any overdrawn accounts assumed by the Purchaser at the Closing pursuant to Section 3.2 of this Agreement. (b) The Acquired Liabilities to be assumed by the Purchaser at the Closing shall be valued at an amount equal to the amount of the Acquired Liabilities shown on the Premier balance sheet on the Closing Date. (c) The Seller shall deduct the Purchase Price to be paid to it by the Purchaser pursuant to Section 5.1 of this Agreement from the amount provided for in Section 5.2(a) hereof and shall pay such net amount by wire transfer of funds to the Purchaser. Such wire transfer of funds shall be received by the Purchaser by noon of the next business day following the Closing Date. 5.3 PRELIMINARY SETTLEMENT. The amount of cash to be received by and from the Purchaser at the Closing shall be calculated in accordance with Section 5.1 and Section 5.2 of this Agreement and the Preliminary Settlement Statement attached hereto and made a part hereof as Exhibit B-1. At the Closing, the ----------- Seller shall deliver to the Purchaser a copy of the Preliminary Settlement Statement set forth as Exhibit B-1 hereto which shall set forth the computation ----------- of the cash due to or from the Seller. 5.4 FINAL SETTLEMENT. Not more than thirty (30) calendar days following the Closing Date, the parties shall make a final settlement by making any pro rata adjustments provided for in Section 5.5 of this Agreement. Such calculations shall be set forth on the Final Settlement Statement attached hereto and made a part hereof as Exhibit B-2. ----------- 5.5 INTEREST PAID AND EARNED AS OF THE CLOSING DATE. All of the accrued but unpaid interest earned on the Purchased Loans on the Closing Date shall be paid by the Purchaser to the Seller and all of the accrued but unpaid interest earned on the Acquired Deposits or owing on any of the Acquired Liabilities on the Closing Date shall be paid by the Seller to the Purchaser. 5 Following the Closing Date, all of the interest earned on the Purchased Loans shall be paid to the Purchaser and all of the interest paid on the Acquired Deposits shall be the obligation of the Purchaser. SECTION 6 ACCESS TO THE BRANCHES' PROPERTIES AND RECORDS AND DUE DILIGENCE 6.1 ACCESS AND CONFIDENTIAL TREATMENT. From and after the date of this Agreement until the Closing, the Seller shall afford to the agents and representatives of the Purchaser full access, during normal business hours and upon reasonable notice, to all assets, properties, books, records, information and materials (including market surveys) relating to the Branches, the Purchased Loans and the Acquired Deposits, and the Seller shall furnish representatives of the Purchaser during such period with all such information concerning the affairs of the Branches as the Purchaser may reasonably request. 6.2 THE PURCHASER'S DUE DILIGENCE. The Purchaser shall have the right to conduct in good faith a due diligence investigation concerning the Branches, the Acquired Deposits and the Purchased Assets and to satisfy itself that such matters are not materially and adversely different from the facts and conditions represented by the Seller. 6.3 RECORDKEEPING AND ACCESS FOLLOWING THE CLOSING. The Purchaser shall preserve and safely keep, for as long as may be required by applicable law, all of the files, books of account and records delivered to the Purchaser at the Closing with the Branches for the joint benefit of itself and the Seller, and it shall permit the Seller or its representatives, at any reasonable time and at the Seller's expense to inspect, make extracts from or copies of, any such files, books of account or records as the Seller shall deem reasonably necessary. Following the Closing, the Seller shall permit the Purchaser or its representatives, at any reasonable time and at the Purchaser's expense to inspect, make extracts from or copies of any nonconfidential files, books of account or records in the Seller's possession containing information concerning the Branches, the Acquired Deposits and the Purchased Loans. SECTION 7 REPRESENTATIONS AND WARRANTIES OF SELLER Except as disclosed in writing by the Seller to the Purchaser and acceptable to the Purchaser, the Seller represents and warrants to the Purchaser as follows: 7.1 CORPORATE ORGANIZATION. The Seller is a federal savings bank duly organized, validly existing and in good standing under the laws of the United States. 7.2 CORPORATE AUTHORITY TO CARRY ON BUSINESS. The Seller has the requisite corporate power and authority to carry on its business as the same is now being conducted. 7.3 CORPORATE AUTHORITY TO ENTER INTO THIS AGREEMENT. The Seller has the requisite corporate power and authority to enter into and to perform this Agreement and the transactions contemplated by this Agreement, and to sell, transfer, assign and deliver the Purchased Assets to the Purchaser and to vest in the Purchaser good and marketable title to the Purchased Assets. 6 7.4 EXECUTION AND DELIVERY; ENFORCEABILITY. The execution, delivery and performance of this Agreement and the transactions contemplated by this Agreement by the Seller have been duly and validly authorized by all requisite corporate action, and this Agreement is binding and enforceable against the Seller in accordance with its terms. 7.5 STATUS OF THE ACQUIRED DEPOSITS. All of the Acquired Deposits were obtained and remain in material compliance with all applicable laws and regulations, and are properly documented in a manner materially consistent with such laws and regulations and with good banking practices. 7.6 STATUS OF THE PURCHASED LOANS. (a) The Seller is the sole owner of each Purchased Loan except for those Purchased Loans in which participation interests have been sold. No Purchased Loan has been pledged or encumbered, except as collateral for Acquired Liabilities to be assumed by Purchaser. The principal balance of each Purchased Loan as shown on the Seller's books and records is true and correct as of the last date shown thereon. (b) To the best knowledge of the Seller: (i) each Purchased Loan is a valid loan and was made and remains in compliance in all material respects with all applicable laws and regulations, (ii) each Purchased Loan is properly documented in a manner consistent with applicable laws and regulations and with good working practice and all purported signatures on and executions of any document in connection with such loan are genuine and (iii) all loan documentation has been actually signed or executed by all necessary parties, and the Seller has custody of all documents or microfilm records thereof related to such loan. (c) All Purchased Loans (and any notes, other evidences of indebtedness or security agreements associated therewith) transferred at the Closing by the Seller to the Purchaser shall be transferred without recourse and without any warranties or representations as to the collectability of any such loans, the value of the collateral securing same or the creditworthiness of any of the obligors. 7.7 STATUS OF THE PURCHASED SECURITIES. All of the Purchased Securities were acquired and remain in material compliance with all applicable laws and regulations, and are properly documented in a manner materially consistent with such laws and regulations and with good banking practices. 7.8 NO VIOLATIONS. The execution, delivery and performance of this Agreement and the transactions contemplated by this Agreement do not and shall not violate any provision of law to which the Seller is subject and do not and shall not conflict with or result in the violation or breach of any condition or provision of, or constitute a default under, any contract, right, lease (except as previously disclosed to the Purchaser and with respect to which the Seller shall obtain the necessary consents), pledge, lien, security interest, instrument, indenture, mortgage, charge, encumbrance, agreement, order, writ, injunction, decree or judgment to which the Seller is a party or which is binding on the Seller or to which any of the property or assets of the Seller is subject. No consent, license, approval or authorization of or designation, declaration or filing with any governmental authority or other person or entity is required on the part of the Seller (other than as provided for or contemplated hereby) in connection with the execution, delivery or performance 7 of this Agreement or the consummation of the transactions contemplated by this Agreement. The Seller is not in default under any lease, agreement, contract, commitment or other obligation which the Purchaser is assuming or which affects the property rights being transferred to the Purchaser. 7.9 NO ADVERSE LITIGATION. Except as previously disclosed to the Purchaser, there is no investigation, action, arbitration, suit, proceeding or claim pending or threatened against the Seller with respect to, or adversely affecting, the Branches or the Purchased Assets or the Acquired Deposits or the consummation of the transactions contemplated by this Agreement before or by any federal, state, municipal or other governmental department, commission, board, agency or instrumentality, domestic or foreign, nor does there exist any basis or grounds for any such investigation, action, arbitration, suit, proceeding or claim. 7.10 LIMITATIONS OF WARRANTIES. Except as may be expressly represented or warranted in this Agreement by the Seller, the Seller makes no representations or warranties whatsoever, express or implied, with regard to any Purchased Asset, any Acquired Deposits or any other liability or obligation being assumed by the Purchaser, and all Fixed Assets are sold and conveyed in "AS IS" condition, with no warranties by the Seller as to their future performance or condition. SECTION 8 REPRESENTATIONS AND WARRANTIES OF PURCHASER Except as disclosed in writing by the Purchaser to the Seller and acceptable to the Seller, the Purchaser represents and warrants to the Seller as follows: 8.1 CORPORATE ORGANIZATION. The Purchaser is a commercial bank validly existing and in good standing under the laws of the State of Georgia. 8.2 CORPORATE AUTHORITY TO CARRY ON BUSINESS. The Purchaser has the requisite corporate power and authority to carry on its business as the same is now being conducted. 8.3 CORPORATE AUTHORITY TO ENTER THIS AGREEMENT. The Purchaser has full corporate power and authority to enter into and to perform this Agreement and the transactions contemplated by this Agreement. 8.4 EXECUTION AND DELIVERY; ENFORCEABILITY. The execution, delivery and performance of this Agreement by the Purchaser have been duly and validly authorized by all requisite corporate action, and this Agreement is binding and enforceable against the Purchaser in accordance with its terms. 8 8.5 NO VIOLATIONS. The execution, delivery and performance of this Agreement and the transactions contemplated by this Agreement do not and shall not violate any provision of law to which the Purchaser is subject and do not and shall not conflict with or result in the violation or breach of any condition or provision of, or constitute a default under, any contract, right, lease, pledge, lien, security interest, instrument, indenture, mortgage, charge, encumbrance, agreement, order, writ, injunction, decree or judgment to which the Purchaser is a party or which is binding on the Purchaser or to which any of the property or assets of the Purchaser is subject. No consent, license, approval or authorization of or designation, declaration or filing with any governmental authority or other person or entity is required on the part of the Purchaser (other than as provided by or contemplated hereby) in connection with execution, delivery or performance of this Agreement or the consummation of the transactions contemplated by this Agreement. 8.6 NO ADVERSE LITIGATION. There is no investigation, action, arbitration, suit, proceeding or claim pending or threatened against or affecting the Purchaser that might materially and adversely affect or might impair the consummation of the transactions contemplated by this Agreement before or by any federal, state, municipal or other governmental department, commission, board, agency or instrumentality, domestic or foreign, nor does there exist any basis or grounds for any such investigation, action, arbitration, suit, proceeding or claim. SECTION 9 ADDITIONAL UNDERTAKINGS OF THE SELLER 9.1 CONDUCT OF BUSINESS PENDING CLOSING. From the date of this Agreement to the Closing Date, the Seller shall: (a) Use its best efforts to promote the successful operations of the Branches and avoid any act that would materially and adversely affect the value of the Purchased Assets; (b) Operate the business of the Branches only in an ordinary and usual businesslike manner consistent with safe and sound banking practices and the Seller's ordinary course of business; (c) Not discriminate against the Branches with respect to advertising, products offered, or staffing and operations support; (d) Seek the concurrence of the Purchaser prior to hiring or replacing any manager of the Branches; and (e) Not take any action which would cause any representation or warranty to be untrue as if made at the Closing Date. 9.2 DOCUMENTATION AT THE CLOSING AND FURTHER ASSURANCES. At the Closing, the Seller shall transfer, assign and deliver to the Purchaser all existing records, books, papers, collateral and agreements of the Seller relating to the Purchased Assets and the Acquired Deposits including but not limited to signature cards, orders, contracts, deposit slips, cancelled checks, withdrawal orders and records of accounts. The Seller agrees that it shall, at 9 the Closing and at any time and from time to time after the Closing, upon request of the Purchaser do, execute, acknowledge and deliver, or cause to be done, executed, acknowledged and delivered, all such further acts, deeds, assignments, transfers, conveyances, powers of attorney and assurances as may be required for the better assigning, transferring, granting, conveying, assuring and confirming to the Purchaser, or to its successors and assigns, or for aiding and assisting in collecting and reducing to possession, any or all of the Purchased Assets and the Acquired Deposits and the performance of any or all obligations of the Seller hereunder. SECTION 10 ADDITIONAL UNDERTAKINGS OF THE PURCHASER 10.1 THE PURCHASER'S CONTACT WITH CUSTOMERS. Prior to the Closing, the Purchaser at its expense may notify the customers of the Branches of the pending transfer of his, her or its deposit account or loan. The Purchaser agrees to use its best efforts to work with deposit customers of the Branches in securing new checks, deposit slips and other items with the routing and code numbers of the Purchaser prior to the Closing Date. 10.2 REGULATORY FILINGS. The Purchaser shall file all necessary filings, applications and notices concerning the transactions contemplated by this Agreement with the appropriate regulatory authorities by February 15, 1997. SECTION 11 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE PURCHASER The obligation of the Purchaser to close under this Agreement shall be subject to the following conditions (all or any of which may be waived, in whole or in part, by the Purchaser). 11.1 REPRESENTATIONS AND WARRANTIES TRUE. The representations and warranties made by the Seller in this Agreement shall have been true and correct when made and shall be true and correct on and as of the Closing Date with the same force and effect as though such representations and warranties had been made on and as of such date. 11.2 OBLIGATIONS PERFORMED. The Seller shall have performed all covenants and obligations and complied with all conditions required by this Agreement to be performed or complied with by it on or before the Closing Date. 11.3 CERTIFICATE OF COMPLIANCE. The Seller shall have executed and delivered to the Purchaser a certificate of compliance substantially in the form and substance of Exhibit C attached hereto and made a part hereof, dated as of -------- the Closing Date. 11.4 NO ADVERSE LITIGATION. No action, suit or proceeding shall have been instituted or threatened against the Seller or the Purchaser by or before any court or governmental agency to restrain or prohibit, or to obtain damages in respect of, or which is related to or arises out of, this Agreement or the consummation of the transactions contemplated hereby which in the opinion of the Purchaser makes it inadvisable to proceed to the Closing under this Agreement. 10 11.5 REGULATORY APPROVALS. The Purchaser shall have obtained, from all necessary governmental and regulatory authorities, all necessary consents to and authorizations and approvals of this Agreement and the transactions contemplated by this Agreement and the related transfer of ownership and control of all licenses, permits or other governmental authorizations necessary to carry on all aspects of the business of the Branches. SECTION 12 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE SELLER The obligation of the Seller to close under this Agreement shall be subject to the following conditions (all or any of which may be waived, in whole or in part, by the Seller except Section 12.5): 12.1 REPRESENTATIONS AND WARRANTIES TRUE. The representations and warranties made by the Purchaser in this Agreement shall have been true and correct when made and shall be true and correct on and as of the Closing Date with the same force and effect as though such representations and warranties had been made on and as of such date. 12.2 OBLIGATIONS PERFORMED. The Purchaser shall have performed all covenants and obligations and complied with all conditions required by this Agreement to be performed or complied with by it on or before the Closing Date. 12.3 CERTIFICATE OF COMPLIANCE. The Purchaser shall have executed and delivered to the Seller a certificate in substantially the form and substance of Exhibit D attached hereto and made a part hereof, dated as of the --------- Closing Date. 12.4 NO ADVERSE LITIGATION. No action, suit or proceeding shall have been instituted or threatened against the Seller or the Purchaser by or before any court or governmental agency to restrain or prohibit, or to obtain damages in respect of, or which is related to or arises out of, this Agreement or the consummation of the transactions contemplated hereby which in the opinion of the Seller makes it inadvisable to proceed to the Closing under this Agreement. 12.5 REGULATORY APPROVALS. The Seller shall have obtained, from all necessary governmental and regulatory authorities, all necessary consents to and authorizations and approvals of this Agreement and the transactions contemplated by this Agreement and the related transfers of ownership and control of all licenses, permits or other governmental authorizations necessary to carry on all aspects of the business of the Branches. SECTION 13 THE CLOSING 13.1 TIME AND PLACE. The Closing of this Agreement shall take place as soon as practicable after the parties have received all required approvals from their respective regulatory authorities, but not later than as of March 31, 1997. The Closing shall be held at an hour and location to be agreed upon by the parties hereto prior to the date set for the Closing. 11 SECTION 14 TERMINATION 14.1 METHODS OF TERMINATION. This Agreement may be terminated in any of the following ways: (a) At or prior to the Closing, by the mutual consent in writing of the Purchaser and the Seller; (b) At the Closing, by the Purchaser in writing, if the conditions set forth in Section 11 of this Agreement shall not have been met by the Seller or waived in writing by the Purchaser; (c) At the Closing, by the Seller in writing, if the conditions set forth in Section 12 of this Agreement shall not have been met by the Purchaser or waived in writing by the Seller; or (d) By the Seller or the Purchaser in writing at any time after any of the regulatory authorities has denied or has indicated its intent to deny any application of the Purchaser for approval of the transaction(s) contemplated herein. 14.2 PROCEDURE UPON TERMINATION. In the event of termination pursuant to Section 14.1 hereof, written notice thereof shall forthwith be given to the other party, and this Agreement shall terminate upon receipt of such notice immediately unless an extension is consented to by the party having the right to terminate. 14.3 AUTOMATIC TERMINATION. Unless mutually extended by the Board of Directors (or any duly authorized Committee of the Board) of the Purchaser and the Seller, and any provision of this Agreement to the contrary notwithstanding, this Agreement shall terminate, and the purchase, sale, and assumption contemplated hereby shall be abandoned, automatically and without action on the part of either party, and without liability of either party to the other party, unless the purchase, sale and assumption contemplated hereby is consummated as of or before March 31, 1997. SECTION 15 MISCELLANEOUS 15.1 ENTIRE AGREEMENT. This Agreement, including any exhibits and schedules hereto, represents the entire agreement of the parties relating to the subject matter hereof. All prior negotiations between the parties are merged into this Agreement and there are no understandings or agreements other than those incorporated herein. 15.2 MODIFICATIONS AND WAIVERS. This Agreement may not be modified except by an instrument in writing duly executed by the parties. Any waiver must be in writing. 15.3 NO BROKER OR FINDER. The Purchaser and the Seller each represents and warrants to the other that no broker or finder has acted for it in connection with this Agreement or the transactions contemplated hereby. 12 15.4 NO SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations and warranties set forth in this Agreement shall not survive the Closing Date. 15.5 BINDING EFFECT. All terms of this Agreement shall be binding upon, and inure to the benefit of, the parties hereto and their respective successors and permitted assigns. 15.6 COUNTERPARTS. This Agreement may be executed simultaneously in one or more counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same instrument. 15.7 EXPENSES. Each party shall bear its own out-of-pocket expenses incurred in connection with this Agreement and all transactions contemplated hereunder. 15.8 NOTICES. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given if delivered or mailed, certified, return receipt requested, with postage prepaid, to the other party at its respective address reflected on Exhibit E attached hereto, and shall be effective when delivered or when the - --------- first attempt is made to deliver the same by mail, whichever is earlier. 15.9 TIME OF THE ESSENCE. The parties hereto acknowledge that time is of the essence with respect to the performance of this Agreement. 15.10 GOVERNING LAW. Except to the extent governed by federal law, this Agreement shall be construed in accordance with the laws of the State of Georgia applicable to agreements made and to be performed in Georgia. 15.11 HEADINGS. The headings contained in this Agreement are for reference purposes only and shall not affect the meaning or interpretation hereof. The use of the singular in this Agreement shall be deemed to be or include the plural (and vice versa), whenever appropriate. 15.12 SEVERABILITY. If any provision of this Agreement is invalid or unenforceable, the balance of this Agreement shall remain in effect. 15.13 PUBLIC ANNOUNCEMENTS. The parties hereto agree that all public announcements relating to this Agreement or to the transactions contemplated hereby, including announcements to employees, shall be made only as may be agreed upon in advance by the parties hereto. 15.14 ASSIGNABILITY. The rights of the Purchaser in and to this Agreement and the transactions contemplated hereunder shall be assignable by the Purchaser only with the Seller's prior consent. [Remainder of this page intentionally left blank] 13 IN WITNESS WHEREOF, the Seller and the Purchaser have caused this Agreement to be executed by their duly authorized officers and their corporate seals to be affixed hereto as of the day and year first above written. SELLER: ATTEST: PREMIER BANK, F.S.B. - ----------------- Secretary By: -------------------------- [SEAL] Name: ------------------------ Title: ----------------------- PURCHASER:; ATTEST: FIRST ALLIANCE BANK - ----------------- Secretary By: -------------------------- [SEAL] Name: ------------------------ Title: ----------------------- 14 EXHIBIT A ASSUMPTION OF LIABILITIES FOR VALUABLE CONSIDERATION, the receipt and sufficiency of which is hereby acknowledged, First Alliance Bank (the "Purchaser"), pursuant to Section ------- 3.3 of the Purchase and Assumption Agreement , between the Purchaser and Premier - ---- Bank, FSB (the "Seller"), dated December 19, 1996 (the "Agreement"), has executed and delivered this Assumption of Liabilities. Unless otherwise defined herein, all capitalized terms used in this Assumption of Liabilities shall have the meanings attributed to them in the Agreement. From and after the close of business on the Closing Date, the Purchaser hereby assumes and agrees to pay and discharge the following liabilities of the Seller originated at or otherwise attributable to the Branches. (a) The Acquired Deposits being transferred by the Seller, with accrued interest, as of the date shown below; and (b) All Acquired Liabilities, including, without limiting the generality of the foregoing, all leases of personal property, assigned, sold, transferred and delivered to Purchaser. This Assumption of Liabilities shall not create in any third parties (including, but not limited to, holders of the Acquired Deposits or the Acquired Liabilities) (a) any rights or remedies against the Purchaser which such parties did not have against the Seller prior to the execution and delivery of this Assumption of Liabilities with respect to the Acquired Deposits or the Acquired Liabilities other than for payment of principal and accrued interest as of the date hereof, and interest hereafter accrued in accordance with the terms of the Acquired Deposits. IN WITNESS WHEREOF, the Purchaser acting through its duly authorized officers has executed this Assumption of Liabilities in accordance with . of the Agreement, this _____ day of __________, 1997. ATTEST: FIRST ALLIANCE BANK By: - -------------------------------------- ------------------------------- Name: Secretary ----------------------------- Title: ---------------------------- [SEAL] Accepted this _____ day of __________, 1997. PREMIER BANK, F.S.B. By: -------------------------- Name: ------------------------- Title: ------------------------ EXHIBIT B-1 PRELIMINARY SETTLEMENT STATEMENT Pursuant to Section 5.3 of that certain Purchase and Assumption Agreement, ------------ between First Alliance Bank (the "Purchaser") and Premier Bank, FSB (the "Seller"), dated December 19, 1996 (the "Agreement"), the Seller hereby delivers this Preliminary Settlement Statement to the Purchaser. Unless otherwise defined herein, all capitalized terms used in this Preliminary Settlement Statement shall have the meanings attributed to them in the Agreement. The Seller and the Purchaser agree that the following is the computation of the cash due to the Purchaser (or if negative, to the Seller) in settlement at the Closing: Total Acquired Deposits assumed by the Purchaser at the Closing (including accrued interest) $ ----------------- Minus: Aggregate amount of overdrafts for any overdrawn accounts assumed by the Purchaser at the Closing $ ----------------- Net Acquired Deposits assumed by the $ Purchaser at the Closing ----------------- Plus: All Acquired Liabilities $ ------------------ Minus: The Purchase Price: An amount equal to the outstanding principal balance of the Purchased Loans plus the accrued and unpaid interest on the Purchased Loans (net of reserve allocable to the Purchased Loans) $ ---------------- An amount equal to the fair market value of the Purchased Securities $ ---------------- An amount equal to the book value of the Fixed Assets $ ---------------- Any cash on hand at the Branches $ ---------------- The Purchase Price $ -------------- Equals: Net cash due to Purchaser (or if negative, to Seller) $ -------------- The Seller and the Purchaser agree that the above computation is based on the general ledger balances, other financial information available and estimates made therefrom at the Closing and all figures and computations herein shall be subject to adjustment to the extent the parties deem appropriate. The Purchaser and the Seller agree that there shall be a Final Settlement Statement, containing all necessary or required adjustments to this Preliminary Settlement Statement, made and delivered by the Seller (and to be reviewed and agreed to by the Purchaser) within thirty (30) calendar days following the Closing Date. The form and substance of the Final Statement can be found at Exhibit B-2 of the ----------- Agreement. The Seller and the Purchaser agree that the computation as set forth above has been done in accordance with the Agreement and that the Final Settlement Statement shall be calculated and delivered in accordance with the Agreement. IN WITNESS WHEREOF, the Purchaser and the Seller acting through their duly authorized officers have executed this Preliminary Settlement Statement in accordance with Section 5.3 of the Agreement, this _____ day of __________, ----------- 1997. PREMIER BANK, F.S.B. By: ATTEST: ---------------------------- Name: -------------------------- Title: ------------------------- - ------------------------- Secretary [SEAL] FIRST ALLIANCE BANK By: ATTEST: ---------------------------- Name: -------------------------- Title: ------------------------- - ------------------------- Secretary [SEAL] EXHIBIT B-2 FINAL SETTLEMENT STATEMENT Pursuant to Section 5.4 of that certain Purchase and Assumption ------------ Agreement, between First Alliance Bank (the "Purchaser") and Premier Bank, FSB (the "Seller"), dated December 19, 1996 (the "Agreement"), the Seller hereby delivers this Final Settlement Statement to the Purchaser. Unless otherwise defined herein, all capitalized terms used in this Final Settlement Statement shall have the meanings attributed to them in the Agreement. The Seller and the Purchaser agree that the following is the final computation of the cash due to (or from) the Purchaser in settlement of the Purchase of the Branches: Cash due to the Purchaser from the Seller Total Acquired Deposits and Acquired Liabilities assumed by the Purchaser after the Closing Date (including accrued $ interest) ----------------- Plus: Deposits accepted by the Seller after the Closing Date for deposit in accounts assumed by the Purchaser at the Closing and not previously delivered to the Purchaser by the Seller $ ------------------ Plus: Pro-rata Expenses* Expenses accrued by the Seller but unpaid prior to the Closing Date $ ------------------- Minus: Expenses incurred after the Closing Date but prepaid by the Seller $ ------------------- Net Pro-Rata Expenses $ --------------- Plus: Other Adjustments (if any) $ --------------- Plus: Aggregate amount of any checks, drafts or withdrawal orders which had been credited to an account assumed by the Purchaser as of the Closing Date but were returned to the Seller after the Closing Date and have not been previously paid by the Purchaser to the Seller $ --------------- Plus: Other Adjustments (if any) $ --------------- Equals: Cash due to/from Purchaser $ --------------- *Including property taxes, rents, utility payments and similar expenses relating to the physical plant of the Branches and other expenses relating to the Acquired Deposits. IN WITNESS WHEREOF, the Purchaser and the Seller acting through their duly authorized officers have executed this Final Settlement Statement in accordance with Section 5.4 of the Agreement, this _____ day of __________, ----------- 1997. PREMIER BANK, F.S.B. ATTEST By: ---------------------------- Name: -------------------------- Title: ------------------------- Secretary - --------------------------- [SEAL] FIRST ALLIANCE BANK ATTEST By: ---------------------------- Name: -------------------------- Title: ------------------------- - -------------------------- Secretary [SEAL] EXHIBIT C SELLER'S COMPLIANCE CERTIFICATE Premier Bank, FSB (the "Seller") hereby certifies that: (1) The representations and warranties made by the Seller in Section 7 of the --------- Purchase and Assumption Agreement, between the Seller and First Alliance Bank, dated December 19, 1996 (the "Agreement"), are true and correct as of the date hereof. (2) The Seller has complied with or satisfied the conditions required by Section 11 of the Agreement to be complied with or satisfied by it prior to ---------- or as of the date hereof. IN WITNESS WHEREOF, the Seller has caused this Certificate to be executed by its duly authorized officers and its seal to be affixed hereto as of the _____ day of __________, 1997. PREMIER BANK, F.S.B. By: --------------------------- Name: ------------------------- Title: ATTEST: ------------------------ - -------------------------------------- Secretary [SEAL] EXHIBIT D PURCHASER'S COMPLIANCE CERTIFICATE First Alliance Bank (the "Purchaser") hereby certifies that: (1) The representations and warranties made by the Purchaser in Section 8 of --------- the Purchase and Assumption Agreement, between Premier Bank, F.S.B. and Purchaser, dated December 19, 1996 (the "Agreement"), are true and correct as of the date hereof. (2) The Purchaser has complied with or satisfied the conditions required by Section 12 of the Agreement to be complied with or satisfied by it prior to ---------- or as of the date hereof. IN WITNESS WHEREOF, the Seller has caused this Certificate to be executed by its duly authorized officers and its seal to be affixed hereto as of the _____ day of __________, 1997. FIRST ALLIANCE BANK By: --------------------------- Name: ------------------------- Title: ATTEST: ------------------------ - -------------------------------------- Secretary [SEAL] EXHIBIT E NOTICES 1. ADDRESSES: --------- For Seller: ---------- Premier Bank, FSB 2180 Atlanta Plaza 950 East Paces Ferry Road Atlanta, Georgia 30326 Attn: Darrell D. Pittard With Copy To: ------------ Womble, Carlyle, Sandridge & Rice, PLLC Suite 700 1275 Peachtree Street Atlanta, Georgia 30309 Attn: Steven S. Dunlevie, Esq. For Purchaser: ------------- First Alliance Bank 63 Barrett Parkway P. O. Box 670148 Marietta, Georgia 30066-0120 Attn: Frank H. Roach Executive Vice President SCHEDULE A The loans which will be acquired by Net.B@nk, Inc., pursuant to that certain Amended and Restated Stock Purchase Agreement of even date herewith, between Net.B@nk, Inc. and First Alliance/Premier Bancshaes, Inc., shall consist of the following: 1. Five Million Dollars($5,000,000.00) in mortgage loans held for sale to be more particularly indentified at Closing. SCHEDULE B The remaining assets to be acquired by Net.B@nk, Inc., pursuant that certain Amended and Restated Stock Purchase Agreement of even date herewith, between Net.B@nk, Inc. and First Alliance/Premier Bancshares, Inc. shall consist of the following: 1. The Federal Stock Charter of Premier Bank, FSB (Charter Number 6205); 2. One Hundred Thousand Dollars ($100,000.00) in capital which will be paid to First Alliance/Premier Bancshares, Inc. at book value in connection with the consummation of the Amended and Restated Stock Purchase Agreement; and 3. Other miscellaneous assets, to be more particularly identified at Closing. SCHEDULE C The Deposits and Other Liabilities to be acquired by Net.B@nk, Inc., pursuant that certain Amended and Restated Stock Purchase Agreement of even date herewith, between Net.B@nk, Inc. and First Alliance/Premier Bancshares, Inc. shall consist of Five Million Dollars ($5,000,000.00) in certificates of deposit to be more particularly identified at Closing. EX-10.12 14 FIRST AMENDMENT TO PURCHASE AND ASSUMPTION AGMNT. FIRST AMENDMENT TO PURCHASE AND ASSUMPTION AGREEMENT THIS FIRST AMENDMENT (the "Amendment") to the Purchase and Assumption Agreement (the "Agreement"), dated as of December 19, 1996, by and between PREMIER BANK, FSB, a federal savings bank organized under the laws of the United States ("Seller"), and FIRST ALLIANCE BANK, a commercial bank organized under the laws of the State of Georgia ("Purchaser"), is made and entered into this ____ day of March, 1997. Capitalized terms used herein and not otherwise defined shall have the meaning ascribed to them in the Agreement. WHEREAS, the parties hereto desire to amend the Agreement for the purpose of extending the termination date thereof. NOW, THEREFORE, in consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Seller and Purchaser agree to amend the Agreement as follows: 1. Section 13.1 of the Agreement is hereby amended to extend the expiration of the permissible date of Closing to April 30, 1997. 2. Section 14.3 of the Agreement is hereby amended to extend the automatic termination date of the Agreement to April 30, 1997. 3. Except as hereinabove amended, the Agreement shall remain otherwise in full force and effect. 4. This Amendment may be executed in one or more counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same instrument. IN WITNESS WHEREOF, each of the parties has caused this Amendment to be executed on its behalf and its corporate seal to be hereunto affixed and attested by officers hereunto duly authorized all as of the day and year first above written. PREMIER BANK, FSB Attest: By:_______________________________________ J. Edward Mulkey, Jr., President ______________________________ Assistant Secretary [BANK SEAL] FIRST ALLIANCE BANK Attest: By:_______________________________________ J. Edward Mulkey, Jr., President ______________________________ Assistant Secretary [BANK SEAL] 2 EX-10.13 15 SECOND AMENDMENT TO PURCHASE AND ASSUMPTION AGMNT. SECOND AMENDMENT TO PURCHASE AND ASSUMPTION AGREEMENT THIS SECOND AMENDMENT (the "Amendment") to the Purchase and Assumption Agreement (the "Agreement"), dated as of December 19, 1996, by and between PREMIER BANK, FSB, a federal savings bank organized under the laws of the United States ("Seller"), and FIRST ALLIANCE BANK, a commercial bank organized under the laws of the State of Georgia ("Purchaser"), is made and entered into this 25th day of March, 1997. Capitalized terms used herein and not otherwise defined shall have the meaning ascribed to them in the Agreement. WHEREAS, the parties hereto desire to amend the Agreement for the purpose of extending the termination date thereof. NOW, THEREFORE, in consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Seller and Purchaser agree to amend the Agreement as follows: 1. Section 13.1 of the Agreement is hereby amended to extend the expiration of the permissible date of Closing to May 31, 1997. 2. Section 14.3 of the Agreement is hereby amended to extend the automatic termination date of the Agreement to May 31, 1997. 3. Except as hereinabove amended, the Agreement shall remain otherwise in full force and effect. 4. This Amendment may be executed in one or more counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same instrument. IN WITNESS WHEREOF, each of the parties has caused this Amendment to be executed on its behalf and its corporate seal to be hereunto affixed and attested by officers hereunto duly authorized all as of the day and year first above written. PREMIER BANK, FSB Attest: By:_______________________________________ J. Edward Mulkey, Jr., President ______________________________ Assistant Secretary [BANK SEAL] FIRST ALLIANCE BANK Attest: By:_______________________________________ J. Edward Mulkey, Jr., President ______________________________ Secretary [BANK SEAL] 2 EX-10.14 16 FORM OF PREMIER BANCSHARES STOCK OPTION PLAN PREMIER BANCSHARES, INC. 1997 STOCK OPTION PLAN PREMIER BANCSHARES, INC. 1997 STOCK OPTION PLAN 1. PURPOSE ------- The purpose of the Premier Bancshares, Inc. 1997 Stock Option Plan (the "Plan") is to encourage and enable selected key employees, independent contractors, consultants and advisors in the service of Premier Bancshares, Inc. (the "Corporation") or its related corporations to acquire or to increase their holdings of common stock of the Corporation (the "Common Stock") in order to promote a closer identification of their interests with those of the Corporation and its shareholders, thereby further stimulating their efforts to enhance the efficiency, soundness, profitability, growth and shareholder value of the Corporation. This purpose will be carried out through the granting of incentive stock options ("Incentive Options") intended to qualify under Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), and nonqualified stock options ("Nonqualified Options"). Incentive Options and Nonqualified Options shall be referred to herein collectively as "Options." To the extent that any Option is designated as an Incentive Option and such option does not qualify as an Incentive Option, it shall constitute a Nonqualified Option. 2. ADMINISTRATION OF THE PLAN -------------------------- (a) The Plan shall be administered by a committee (the "Committee") appointed by the Board of Directors of the Corporation (the "Board") and comprised solely of members of the Board. The Committee shall include no fewer than the minimum number of "non-employee directors," as such term is defined in Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as may be required by Rule 16b-3 or any successor rule. (b) Any action of the Committee may be taken by a written instrument signed by all of the members of the Committee and any action so taken by written consent shall be as fully effective as if it had been taken by a majority of the members at a meeting duly held and called. Subject to the provisions of the Plan, the Committee shall have full and final authority, in its discretion, to take any action with respect to the Plan including, without limitation, the following: (i) to determine the individuals to receive Options, the nature of each Option as an Incentive Option or a Nonqualified Option, the times when Options shall be granted, the number of shares to be subject to each Option, the Option price (determined in accordance with Section 6), the Option period, the time or times when each Option shall be exercisable and the other terms, conditions, restrictions and limitations of an Option; (ii) to prescribe the form or forms of the agreements evi dencing any Options granted under the Plan; (iii) to establish, amend and rescind rules and regulations for the administration of the Plan; and (iv) to construe and interpret the Plan, the rules and regulations, and the agreements evidencing Options granted under the Plan, and to make all other determinations deemed necessary or advisable for administering the Plan. In addition, the Committee shall have complete authority, in its discretion, to accelerate the date that any Option which is not otherwise exercisable shall become exercisable in whole or in part, without any obligation to accelerate such date with respect to any other Option granted to any person. (c) Notwithstanding Section 2(b), and subject to the terms of the Plan herein, the Committee may delegate to the Chief Executive Officer of the Corporation the authority to grant Options, and to make any or all of the determinations reserved for the Committee in the Plan and summarized in Section 2(b) with respect to Options that have been granted, to any individual who, at the time of such grant or other determination, (i) is not an officer or director of the Corporation subject to Section 16 of the Exchange Act and (ii) is otherwise eligible to participate in the Plan under Section 5. 3. EFFECTIVE DATE -------------- The effective date of the Plan shall be the June 15, 1997. Options may be granted under the Plan on and after the effective date, but not after June 14, 2007. 4. OPTIONS; SHARES OF STOCK SUBJECT TO THE PLAN -------------------------------------------- Both Incentive Options and Nonqualified Options, as designated by the Committee, may be granted under the Plan. Subject to adjustment as provided in Section 10, the shares of Common Stock that may be issued and sold pursuant to Options shall not exceed in the aggregate 750,000 shares of authorized but unissued or reacquired shares of the Common Stock of the Corporation. The Corporation hereby reserves sufficient authorized shares of Common Stock to provide for the exercise of Options granted hereunder. Any shares of Common Stock subject to an Option which, for any reason, expires or is terminated unexercised as to such shares may again be subject to an Option granted under the Plan. No Optionee may be granted Options in any calendar year for more than 75,000 shares of Common Stock (subject to adjustment as provided in Section 10). 5. ELIGIBILITY ----------- An Option may be granted only to an individual who satisfies the following eligibility requirements on the date the Option is granted: (a) The individual is either (i) a key employee of the Corporation or a related corporation or (ii) an independent contractor, consultant or advisor (collectively, "independent contractors") providing services to the Corporation or a related corporation. Directors of the Corporation or a related corporation who are otherwise eligible to participate in the Plan may be granted Options under the Plan. For this purpose, an individual shall be considered to be an "employee" only if there exists between the individual and the Corporation or a related corporation the legal and bona fide relationship of employer and employee. In determining whether such a relationship exists, the regulations of the United States Treasury Department relating to the determination of the employment relationship for the purpose of collection of income tax on wages at the source shall be applied. Also, for this purpose, a "key employee" is an employee of the Corporation or a related corporation whom the Committee determines qualifies as a key employee based on the 2 nature and extent of such employee's duties, responsibilities, personal capabilities, performance and potential, or any combination of such factors. (b) Notwithstanding the foregoing, the Committee shall also have authority, in its discretion, to grant Options to non-employees or non-key employees in connection with a merger, reorganization or other business combination involving the Corporation or a related corporation. (c) With respect to the grant of an Incentive Option, the individual is an employee who does not own, immediately before the time that the Incentive Option is granted, stock possessing more than ten percent of the total combined voting power of all classes of stock of the Corporation or a related corporation; provided, that an individual owning more than ten percent of the total combined voting power of all classes of stock of the Corporation or a related corporation may be granted an Incentive Option if the price at which such Option may be exercised is greater than or equal to 110% of the fair market value of the shares on the date the Option is granted and the Option period does not exceed five years. For this purpose, an individual will be deemed to own stock which is attributed to him under Section 424(d) of the Code. (d) The individual, being otherwise eligible under this Section 5, is selected by the Committee as an individual to whom an Option shall be granted (an "Optionee"). 6. OPTION PRICE ------------ The price per share at which an Option may be exercised (the "Option price") shall be established by the Committee at the time the Option is granted and shall be set forth in the terms of the agreement evidencing the grant of the Option; provided, that in the case of an Incentive Option, the Option price shall be equal to or greater than the fair market value per share of the Common Stock on the date the Option is granted. In addition, the following rules shall apply: (a) An Incentive Option shall be considered to be granted on the date that the Committee acts to grant the Option, or on any later date specified by the Committee as the date of grant of the Option. A Nonqualified Option shall be considered to be granted on the date the Committee acts to grant the Option or any other date specified by the Committee as the date of grant of the Option. (b) The fair market value of the shares shall be determined in good faith by the Committee in accordance with the following provisions: (i) if the shares of Common Stock are listed for trading on the American Stock Exchange or the New York Stock Exchange or included in The Nasdaq National Market, the fair market value shall be the closing sales price of the shares on the American Stock Exchange or the New York Stock Exchange or as reported in The Nasdaq National Market (as applicable) on the date immediately preceding the date the Option is granted, or, if there is no transaction on such date, then on the trading date nearest preceding the date the Option is granted for which closing price information is available; or (ii) if the shares of Common Stock are not listed or reported in any of the foregoing, then fair market value shall be determined by the Committee in accordance with the applicable provisions of Section 20.2031-2 of the Federal Estate Tax Regulations, or in any other manner consistent with the Code and accompanying regulations. 3 (c) In no event shall there first become exercisable by the Optionee in any one calendar year incentive stock Options granted by the Corporation or any related corporation with respect to shares having an aggregate fair market value (determined at the time an Option is granted) greater than $100,000. 7. OPTION PERIOD AND LIMITATIONS ON THE RIGHT TO --------------------------------------------- EXERCISE OPTIONS ---------------- (a) The period during which an Option may be exercised (the "Option period") shall be determined by the Committee when the Option is granted and shall not extend more than ten years from the date on which the Option is granted. An Option shall be exercisable on such date or dates, during such period, for such number of shares, and subject to such conditions as shall be determined by the Committee and set forth in the agreement evidencing such Option, subject to the right of the Committee to accelerate the time when Options may be exercised. Any Option or portion thereof not exercised before the expiration of the Option period shall terminate. (b) An Option may be exercised by giving written notice of at least ten days to the Committee or its designee at such place as the Committee shall direct. Such notice shall specify the number of shares to be purchased pursuant to an Option and the aggregate purchase price to be paid therefor, and shall be accompanied by the payment of such purchase price. Such payment shall be in the form of (i) cash; (ii) shares of Common Stock owned by the Optionee at the time of exercise; (iii) shares of Common Stock withheld upon exercise; (iv) delivery of a properly executed written notice of exercise to the Corporation and delivery to a broker of written notice of exercise and irrevocable instructions to promptly deliver to the Corporation the amount of sale or loan proceeds to pay the Option price; or (v) any combination of the foregoing methods. Shares tendered or withheld in payment upon the exercise of an Option shall be valued at their fair market value on the date of exercise, as determined by the Committee by applying the provisions of Section 6(b). (c) No Option granted to an Optionee who was an employee at the time of grant shall be exercised unless the Optionee is, at the time of exercise, an employee as described in Section 5(a), and has been an employee continuously since the date the Option was granted, subject to the following: (i) An Option shall not be affected by any change in the terms, conditions or status of the Optionee's employment, provided that the Optionee continues to be an employee of the Corporation or a related corporation. (ii) The employment relationship of an Optionee shall be treated as continuing intact for any period that the Optionee is on military or sick leave or other bona fide leave of absence, provided that the period of such leave does not exceed ninety days, or, if longer, as long as the Optionee's right to reemployment is guaranteed either by statute or by contract. The employment relationship of an Optionee shall also be treated as continuing intact while the Optionee is not in active service because of disability. For purposes of this Section 7(c)(ii), "disability" shall mean the inability of the Optionee to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in 4 death, or which has lasted or can be expected to last for a continuous period of not less than twelve months. The Committee shall determine whether an Optionee is disabled within the meaning of this paragraph. (iii) If the employment of an Optionee is terminated because of disability within the meaning of subparagraph (ii), or if the Optionee dies while he is an employee or dies after the termination of his employment because of disability, the Option may be exercised only to the extent exercisable on the date of the Optionee's termination of employment or death while employed (the "termination date"), except that the Committee may in its discretion accelerate the date for exercising all or any part of the Option which was not otherwise exercisable on the termination date. The Option must be exercised, if at all, prior to the first to occur of the following, whichever shall be applicable: (A) the close of the period of twelve months next succeeding the termination date; or (B) the close of the Option period. In the event of the Optionee's death, such Option shall be exercisable by such person or persons as shall have acquired the right to exercise the Option by will or by the laws of intestate succession. (iv) If the employment of the Optionee is terminated for any reason other than disability (as defined in subparagraph (ii)) or death or for "cause," his Option may be exercised to the extent exercisable on the date of such termination of employment, except that the Committee may in its discretion accelerate the date for exercising all or any part of the Option which was not otherwise exercisable on the date of such termination of employment. The Option must be exercised, if at all, prior to the first to occur of the following, whichever shall be applicable: (A) the close of the period of 90 days next succeeding the termination date; or (B) the close of the Option period. If the Optionee dies following such termination of employment and prior to the earlier of the dates specified in (A) or (B) of this subparagraph (iv), the Optionee shall be treated as having died while employed under subparagraph (iii) immediately preceding (treating for this purpose the Optionee's date of termination of employment as the termination date). In the event of the Optionee's death, such Option shall be exercisable by such person or persons as shall have acquired the right to exercise the Option by will or by the laws of intestate succession. (v) If the employment of the Optionee is terminated for "cause," his Option shall lapse and no longer be exercisable as of the effective time of his termination of employment, as determined by the Committee. For purposes of this subparagraph (v) and subparagraph (iv), the Optionee's termination shall be for "cause" if such termination results from the Optionee's (A) dishonesty; (B) refusal to perform his duties for the Corporation; or (C) engaging in conduct that could be materially damaging to the Corporation without a reasonable good faith belief that such conduct was in the best interest of the Corporation. The determination of "cause" shall be made by the Committee and its determination shall be final and conclusive. (vi) Notwithstanding the foregoing, the Committee shall have authority, in its discretion, to extend the period during which an Option may be exercised; provided that, in the event that any such extension shall cause an Incentive Option to be designated as a Nonqualified Option, no such extension shall be made without the prior written request and consent of the Optionee. (d) An Option granted to an Optionee who was an independent contractor of the Corporation or a related corporation at the time of grant (and who does not thereafter become an employee, in which case he shall be subject to the provisions of Section 7(c) herein) may be exercised only to the extent exercisable on the date of the Optionee's termination of service to the Corporation or a related corporation (unless the termination was for cause), and 5 must be exercised, if at all, prior to the first to occur of the following, as applicable: (A) the close of the period of 90 days next succeeding the termination date; or (B) the close of the Option period. If the services of such an Optionee are terminated for cause (as defined in Section 7(c)(v) herein), his Option shall lapse and no longer be exercisable as of the effective time of his termination of services, as determined by the Committee. Notwithstanding the foregoing, the Committee may in its discretion accelerate the date for exercising all or any part of an Option which was not otherwise exercisable on the termination date or extend the Option period, or both. (e) An Optionee or his legal representative, legatees or distributees shall not be deemed to be the holder of any shares subject to an Option unless and until certificates for such shares are issued to him or them under the Plan. (f) Nothing in the Plan shall confer upon the Optionee any right to continue in the service of the Corporation or a related corporation as an employee or independent contractor, as the case may be, or to interfere in any way with the right of the Corporation or a related corporation to terminate the Optionee's service at any time. 8. CHANGE OF CONTROL ----------------- (a) Except as provided in Section 8(b) herein, in the event of a Change of Control (as defined in Section 8(c) herein), all Options outstanding as of the date of such Change of Control shall become fully exercisable, whether or not then otherwise exercisable. (b) Notwithstanding the foregoing, in the event of a merger, share exchange, reorganization or other business combination affecting the Corporation or a related corporation, the Committee may, in its sole and absolute discretion, determine that any or all Options granted pursuant to the Plan shall not become exercisable on an accelerated basis, if the Board of Directors or the surviving or acquiring corporation, as the case may be, shall have taken such action, including but not limited to the assumption of Options granted under the Plan or the grant of substitute options or awards, as in the opinion of the Committee is equitable or appropriate to protect the rights and interests of participants under the Plan. For the purposes herein, the Committee authorized to make the determinations provided for in this Section 8(b) shall be appointed by the Board of Directors, two-thirds of the members of which shall have been Directors of the Corporation prior to the merger, share exchange, reorganization or other business combination affecting the Corporation or a related corporation. (c) For the purposes herein, as "Change of Control" shall be deemed to have occurred on the earliest of the following dates: (i) The date any entity or person shall have become the beneficial owner of, or shall have obtained voting control over, thirty percent (30%) or more of the outstanding Common Stock of the Corporation; (ii) The date the shareholders of the Corporation approve a definitive agreement (A) to merge or consolidate the Corporation with or into another corporation, in which the Corporation is not the continuing or surviving corporation or pursuant to which any shares of Common Stock of the Corporation would be converted into cash, securities or other property of another 6 corporation, other than a merger of the Corporation in which holders of Common Stock immediately prior to the merger have the same proportionate ownership of Common Stock of the surviving corporation immediately after the merger as immediately before, or (B) to sell or otherwise dispose of all or substantially all the assets of the Corporation; or (iii) The date there shall have been a change in a majority of the Board of Directors of the Corporation within a twelve-month period unless the nomination for election by the Corporation's shareholders of each new director was approved by the vote of two-thirds of the directors then still in office who were in office at the beginning of the twelve-month period. For the purposes herein, the term "person" shall mean any individual, corporation, partnership, group, association or other person, as such term is defined in Section 13(d)(3) or Section 14(d)(2) of the Exchange Act, other than the Corporation, a subsidiary of the Corporation or any employee benefit plan(s) sponsored or maintained by the Corporation or any subsidiary thereof, and the term "beneficial owner" shall have the meaning given the term in Rule 13d-3 under the Exchange Act. 9. NONTRANSFERABILITY OF OPTIONS AND SHARES ---------------------------------------- Incentive Options granted pursuant to the Plan shall not be transferable (including by pledge or hypothecation) other than by will or the laws of intestate succession or pursuant to a qualified domestic relations order, as defined by the Code or Title I of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or the rules thereunder. Nonqualified Options granted pursuant to the Plan shall not be transferable (including by pledge or hypothecation) other than by will or the laws of intestate succession or pursuant to a qualified domestic relations order, as defined by the Code or Title I of ERISA or the rules thereunder, except as may be permitted by the Committee in a manner consistent with the registration provisions of the Securities Act of 1933, as amended (the "Securities Act"). An Option shall be exercisable during the Optionee's lifetime only by him. To the extent required by Section 16 of the Exchange Act, shares acquired upon the exercise of an Option shall not, without the consent of the Committee, be transferable (including by pledge or hypothecation) until the expiration of six months after the date the Option was granted. 10. DILUTION OR OTHER ADJUSTMENTS ----------------------------- If there is any change in the outstanding shares of Common Stock of the Corporation as a result of a merger, consolidation, reorganization, stock dividend, stock split distributable in shares, or other change in the capital stock structure of the Corporation, the Committee shall make such adjustments to Options, to the number of shares reserved for issuance and issuable under the Plan, and to any provisions of this Plan as the Committee deems equitable to prevent dilution or enlargement of Options or otherwise advisable to reflect such change. 11. WITHHOLDING ----------- The Corporation shall require any recipient of shares pursuant to the exercise of an Option to pay to the Corporation in cash the amount of any tax or other amount required by any governmental authority to be withheld and paid over by the Corporation to such authority for the account of such Optionee. 7 Notwithstanding the foregoing, the Optionee may satisfy such obligation in whole or in part, and any other local, state or federal income tax obligations relating to the exercise of an Option, by electing (the "Election") to have the Corporation withhold shares of Common Stock from the shares to which the Optionee is entitled. The number of shares to be withheld shall have a fair market value (determined in accordance with Section 6(b)) as of the date that the amount of tax to be withheld is determined (the "Tax Date") as nearly equal as possible to (but not exceeding) the amount of such obligations being satisfied. Each Election must be made in writing to the Committee prior to the Tax Date. 12. CERTAIN DEFINITIONS ------------------- For purposes of the Plan, the following terms shall have the meaning indicated: (a) "Related corporation" means any parent, subsidiary or predecessor of the Corporation. (b) "Parent" or "parent corporation" shall mean any corporation (other than the Corporation) in an unbroken chain of corporations ending with the Corporation if, at the time that the Option is granted, each corporation other than the Corporation owns stock possessing fifty percent or more of the total combined voting power of all classes of stock in another corporation in the chain. (c) "Subsidiary" or "subsidiary corporation" means any corporation (other than the Corporation) in an unbroken chain of corporations beginning with the Corporation if, at the time that the Option is granted, each corporation other than the last corporation in the unbroken chain owns stock possessing fifty percent or more of the total combined voting power of all classes of stock in another corporation in the chain. (d) "Predecessor" or "predecessor corporation" means a corporation which was a party to a transaction described in Section 424(a) of the Code (or which would be so described if a substitution or assumption under that Section had occurred) with the Corporation, or a corporation which is a parent or subsidiary of the Corporation, or a predecessor of any such corporation. In general, terms used in the Plan shall, where appropriate, be given the meaning ascribed to them under the provisions of the Code applicable to incentive stock Options. 13. STOCK OPTION AGREEMENT ---------------------- The grant of any Option under the Plan shall be evidenced by the execution of an agreement (the "Agreement") between the Corporation and the Optionee. Such Agreement shall set forth the date of grant of the Option, the Option price, the Option period, the designation of the Option as an Incentive Option or a Nonqualified Option, and the time or times when and the conditions upon the happening of which the Option shall become exercisable. Such Agreement shall also set forth the restrictions, if any, with respect to which the shares to be purchased thereunder shall be subject, and such other terms and conditions as the Committee shall determine which are consistent with the provisions of the Plan and applicable law and regulations. 8 14. RESTRICTIONS ON SHARES ---------------------- The Corporation may impose such restrictions on any shares acquired upon exercise of Options granted under the Plan as it may deem advisable, including, without limitation, restrictions necessary to ensure compliance with the Securities Act under the requirements of any applicable self-regulatory organization and under any blue sky or state securities laws applicable to such shares. The Corporation may cause a restrictive legend to be placed on any certificate issued pursuant to the exercise of an Option in such form as may be prescribed from time to time by applicable laws and regulations or as may be advised by legal counsel to the Corporation. 15. AMENDMENT OR TERMINATION ------------------------ The Plan may be amended or terminated at any time by action of the Board; provided, that: (a) Any amendment which would (i) materially increase the aggregate number of shares which may be issued under the Plan (other than changes as described in Section 10), or (ii) materially change the requirements for eligibility to receive Options under the Plan shall be made only with the approval of the shareholders of the Corporation. (b) No outstanding Option shall be amended or terminated (i) without the consent of the Optionee if such amendment or termination would adversely affect the Optionee's rights with respect to such Option; and (ii) if the Option is an Incentive Option, without the opinion of legal counsel to the Corporation that such amendment or termination will not constitute a "modification" within the meaning of Section 424 of the Code if the Committee determines such an opinion is necessary. 16. APPLICABLE LAW -------------- Except as otherwise provided herein, the Plan shall be construed and enforced according to the laws of the State of Georgia. 17. SECTION 16(B) COMPLIANCE ------------------------ To the extent that participants in the Plan are subject to Section 16(b) of the Exchange Act, it is the intention of the Corporation that transactions under the Plan shall comply with Rule 16b-3 under the Exchange Act and, if any Plan provision is later found not to be in compliance with Section 16 of the Exchange Act, the provision shall be deemed null and void, and in all events the Plan shall be construed in favor of Plan transactions meeting the requirements of Rule 16b-3 or successor rules applicable to the Plan. 18. SHAREHOLDER APPROVAL -------------------- The Plan is subject to the approval of the shareholders of the Corporation, which approval must occur, if at all, within twelve months of the effective date of the Plan. All Incentive Options granted prior to shareholder approval shall be conditioned upon such approval, and no Incentive Option shall be exercisable prior to such approval. 9 IN WITNESS WHEREOF, this Premier Bancshares, Inc. 1997 Stock Option Plan, is, by the authority of the Board of Directors of the Corporation, executed in behalf of the Corporation, the ___ day of ___________, 1997. PREMIER BANCSHARES, INC. By: /s/ Darrell D. Pittard ------------------------------ Darrell D. Pittard Chairman of the Board and Chief Executive Officer Attest: - ----------------------------- Secretary [Corporate Seal] 10 PREMIER BANCSHARES, INC. 1997 STOCK OPTION PLAN (EMPLOYEE OPTION AGREEMENT) THIS AGREEMENT (the "Agreement"), made the ______ day of ____________, ____, between PREMIER BANCSHARES, INC., a Georgia corporation (the "Corporation"), and __________________________, an employee of the Corporation or a related corporation (the "Optionee"); R E C I T A L S : - - - - - - - - In furtherance of the purposes of the Premier Bancshares, Inc. 1997 Stock Option Plan, as it may be hereafter amended (the "Plan"), the Corporation and the Optionee hereby agree as follows: 1. The rights and duties of the Corporation and the Optionee under this Agreement shall in all respects be subject to and governed by the provisions of the Plan, a copy of which is delivered herewith or has been previously provided to the Optionee and the terms of which are incorporated herein by reference. 2. The Corporation hereby grants to the Optionee pursuant to the Plan, as a matter of separate inducement and agreement in connection with his employment or service to the Corporation, and not in lieu of any salary or other compensation for his services, the right and Option (the "Option") to purchase all or any part of an aggregate of _______________ (_________) shares (the "shares") of the Common Stock of the Corporation, at the purchase price of _____________________________ ($__________) per share. The Option to purchase _____________ (_____) of the shares shall be designated as an Incentive Option. The Option to purchase ________________ (_____) of the shares shall be designated as a Nonqualified Option. To the extent that any Option is designated as an Incentive Option and such Option does not qualify as an Incentive Option, it shall be treated as a Nonqualified Option. Except as otherwise provided in the Plan, the Option will expire if not exercised in full before ______________, ________. 3. The Option shall become exercisable on the date or dates set forth on Schedule A attached hereto. To the extent that an Option which is exercisable is not exercised, such Option shall accumulate and be exercisable by the Optionee in whole or in part at any time prior to expiration of the Option. The minimum number of shares that may be purchased under the Option at one time shall be ten (10). Upon the exercise of an Option in whole or in part, the Optionee shall pay the Option price to the Corporation in accordance with the provisions of Section 7 of the Plan, and the Corporation shall as soon thereafter as practicable deliver to the Optionee a certificate or certificates for the shares purchased. 4. Nothing contained in this Agreement or the Plan shall require the Corporation or a related corporation to continue to employ the Optionee for any particular period of time, nor shall it require the Optionee to remain in the employ of the Corporation or such related corporation for any particular period of time. Except as otherwise expressly provided in the Plan, all rights of the Optionee under the Plan with respect to the unexercised portion of his Option shall terminate upon termination of the employment of the Optionee with the Corporation or a related corporation. 5. To the extent that this Option is designated as an Incentive Option, the Option shall not be transferable (including by pledge or hypothecation) other than by will or the laws of intestate succession or pursuant to a qualified domestic relations order (as defined by the Internal Revenue Code of 1986, as amended (the "Code"), or Title I of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or the rules thereunder). To the extent that this Option is designated as a Nonqualified Option, the Option shall not be transferable (including by pledge or hypothecation) other than by will or the laws of intestate succession or pursuant to a qualified domestic relations order (as defined by the Code, Title I of ERISA or the rules thereunder), except as may be permitted pursuant to the Plan. This Option shall be exercisable during the Optionee's lifetime only by the Optionee. 6. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective executors, administrators, next-of-kin, successors and assigns. 7. Except as otherwise provided in the Plan or herein, this Agreement shall be construed and enforced according to the laws of the State of Georgia. IN WITNESS WHEREOF, this Agreement has been executed in behalf of the Corporation and by the Optionee on the day and year first above written. PREMIER BANCSHARES, INC. By:____________________________________________ Name:__________________________________________ Title:_________________________________________ Attest: ______________________________ Secretary [Corporate Seal] OPTIONEE ________________________________________(SEAL) 2 PREMIER BANCSHARES, INC. 1997 STOCK OPTION PLAN (EMPLOYEE OPTION AGREEMENT) SCHEDULE A Date Option granted: __________________, 19__. Date Option expires: __________________, 19__. Number of shares subject to Option: _______ shares. Option price (per share): $________. Date Installment Number of Shares Incentive or First Exercisable in Installment Nonqualified Stock Option - ----------------- --------------------- ------------------------- PREMIER BANCSHARES, INC. 1997 STOCK OPTION PLAN (INDEPENDENT CONTRACTOR/CONSULTANT/ADVISOR AGREEMENT) THIS AGREEMENT (the "Agreement"), made the ______ day of ____________, ____, between PREMIER BANCSHARES, INC., a Georgia corporation (the "Corporation"), and __________________________ (the "Optionee"); R E C I T A L S : - - - - - - - - In furtherance of the purposes of the Premier Bancshares, Inc. 1997 Stock Option Plan, as it may be hereafter amended (the "Plan"), the Corporation and the Optionee hereby agree as follows: 1. The rights and duties of the Corporation and the Optionee under this Agreement shall in all respects be subject to and governed by the provisions of the Plan, a copy of which is delivered herewith or has been previously provided to the Optionee and the terms of which are incorporated herein by reference. 2. The Corporation hereby grants to the Optionee pursuant to the Plan, as a matter of separate inducement and agreement in connection with his services to the Corporation or a related corporation, and not in lieu of any salary or other compensation for his services, the right and Option (the "Option") to purchase all or any part of an aggregate of _______________ (_________) shares (the "shares") of the Common Stock of the Corporation, at the purchase price of _____________________________ ($__________) per share. The Option shall be designated as a Nonqualified Option. Except as otherwise provided in the Plan, the Option will expire if not exercised in full before ____________, ______. 3. The Option shall become exercisable on the date or dates shown on Schedule A. To the extent that an Option which is exercisable is not exercised, such Option shall accumulate and be exercisable by the Optionee in whole or in part at any time prior to expiration of the Option. The minimum number of shares that may be purchased under the Option at one time shall be ten (10). Upon the exercise of an Option in whole or in part, the Optionee shall pay the Option price to the Corporation in accordance with the provisions of Section 7 of the Plan, and the Corporation shall as soon thereafter as practicable deliver to the Optionee a certificate or certificates for the shares purchased. 4. Nothing contained in this Agreement or the Plan shall require the Corporation or a related corporation to continue to require the services of the Optionee for any particular period of time, nor shall it require the Optionee to remain in service to the Corporation or such related corporation for any particular period of time. Except as otherwise expressly provided in the Plan, all rights of the Optionee under the Plan with respect to the unexercised portion of his Option shall terminate upon termination of the service of the Optionee with the Corporation or a related corporation. 5. Except as may be permitted pursuant to the Plan, this Option shall not be transferable (including by pledge or hypothecation) other than by will or the laws of intestate succession or pursuant to a qualified domestic relations order (as defined by the Internal Revenue Code of 1986, as amended, or Title I of the Employee Retirement Income Security Act of 1974, as amended, or the rules thereunder). This Option shall be exercisable during the Optionee's lifetime only by the Optionee. 6. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective executors, administrators, next-of-kin, successors and assigns. 7. Except as otherwise provided herein or in the Plan, this Agreement shall be construed and enforced according to the laws of the State of Georgia. IN WITNESS WHEREOF, this Agreement has been executed in behalf of the Corporation and by the Optionee on the day and year first above written. PREMIER BANCSHARES, INC. By:_____________________________________ Name:___________________________________ Title:__________________________________ Attest: ___________________________ Secretary [Corporate Seal] OPTIONEE ________________________________ (SEAL) 2 PREMIER BANCSHARES, INC. 1997 STOCK OPTION PLAN (INDEPENDENT CONTRACTOR/CONSULTANT/ADVISOR AGREEMENT) SCHEDULE A Date Option granted: __________________, 19__. Date Option expires: __________________, 19__. Number of shares subject to Option: _______ shares. Option price (per share): $________. Date Installment Number of Shares First Exercisable in Installment ----------------- --------------------- EX-10.15 17 FORM OF PREMIER BANCSHARES DIRECTORS' STOCK OPTION PREMIER BANCSHARES, INC. DIRECTORS' STOCK OPTION PLAN 1. PURPOSE ------- The purpose of the Premier Bancshares, Inc. Directors' Stock Option Plan (the "Plan") is to provide members of the Board of Directors (the "Board") of Premier Bancshares, Inc. (the "Corporation") and members of the boards of directors of its Subsidiaries with the opportunity to defer receipt of all or part of their compensation as a Director (as defined below) and to acquire or increase their holdings of the common stock of the Corporation (the "Common Stock") in order to promote a closer identification of their interests with those of the Corporation and its shareholders, thereby further stimulating their efforts to enhance the efficiency, soundness, profitability, growth and shareholder value of the Corporation. This purpose will be carried out through the granting of stock options ("Options") to acquire shares of the Common Stock. Such Options may be incentive stock options ("Incentive Options") intended to qualify under Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), or nonqualified stock options ("Nonqualified Options"). 2. ADMINISTRATION OF THE PLAN -------------------------- (a) The Plan shall be administered by the Compensation Committee (the "Committee") of the Board and comprised solely of members of the Board. The Committee shall include no fewer than the minimum number of "non-employee directors," as such term is defined in Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as may be required by Rule 16b-3 or any successor rule. (b) Any action of the Committee may be taken by a written instrument signed by all of the members of the Committee and any action so taken by written consent shall be as fully effective as if it had been taken by a majority of the members at a meeting duly called and held. Subject to the provisions of the Plan, the Committee shall have full and final authority, in its discretion, to take action with respect to the Plan including, without limitation, the authority to (i) to prescribe the form or forms of the agreements evidencing Options granted under the Plan; (ii) to establish, amend and rescind rules and regulations for the administration of the Plan; and (iii) to construe and interpret the Plan, the rules and regulations and the agreements, and to make all other determinations deemed necessary or advisable for administering the Plan. 3. EFFECTIVE DATE -------------- The effective date of the Plan shall be June 15, 1997 (the "Effective Date"). Options may be granted effective on or after the Effective Date but not after June 14, 2007. 4. SHARES OF COMMON STOCK SUBJECT TO THE PLAN ------------------------------------------ Subject to adjustment as provided in Section 10, the shares of Common Stock that may be issued and sold pursuant to Options granted under the Plan shall not exceed 150,000 shares of authorized but unissued or reacquired shares of the Common Stock of the Corporation. The Corporation hereby reserves sufficient authorized shares of Common Stock to provide for the exercise of Options granted hereunder. Any shares of Common Stock subject to an Option which, for any reason, expires or is terminated unexercised as to such shares may again be subject to an Option granted under the Plan. No Director may be granted Options in any calendar year for more than 15,000 shares of Common Stock. 5. ELIGIBILITY ----------- (a) Options may be granted only to individuals who are members of the Board of the Corporation or the board of directors of a Subsidiary of the Corporation at the time of grant. Such individuals may be employees or non- employees of the Corporation or a related corporation. Persons who are eligible to participate in the Plan are referred to herein individually as a "Director" and collectively as "Directors," and a Director who elects to participate in the Plan is referred to herein as a "Participant." (b) Notwithstanding the foregoing, the following provisions apply with respect to the grant of Incentive Options: (i) An Incentive Option may only be granted to a person who is an employee of the Corporation or a related corporation. For this purpose, an individual shall be considered to be an "employee" only if there exists between the individual and the Corporation or a related corporation the legal and bona fide relationship of employer and employee. In determining whether such a relationship exists, the regulations of the United States Treasury Department relating to the determination of the employment relationship for the purpose of collection of income tax on wages at the source shall be applied. (ii) With respect to the grant of an Incentive Option, the individual is an employee who does not own, immediately before the time that the Incentive Option is granted, stock possessing more than ten percent of the total combined voting power of all classes of stock of the Corporation or a related corporation; provided, that an individual owning more than ten percent of the total combined voting power of all classes of stock of the Corporation or a related corporation may be granted an Incentive Option if the price at which such Option may be exercised is greater than or equal to 110% of the fair market value of the shares on the date the Option is granted and the period of the Option does not exceed five years. For this purpose, an individual will be deemed to own stock which is attributed to him under Section 424(d) of the Code. 6. GRANT OF OPTIONS ---------------- (a) Both Nonqualified Options and Incentive Options may be granted under the Plan. If a Director is an employee of the Corporation or a related corporation on the date of grant of an Option, such Option shall be intended to be designated as an Incentive Option. If a Director is not an employee of the Corporation or a related corporation on the date of -2- grant of an Option, such Option shall be treated as a Nonqualified Option. To the extent that any Option is designated as an Incentive Option and such Option does not qualify as an Incentive Option, it shall constitute a Nonqualified Option. (b) A Participant's total compensation for services as a Director shall consist of a combination of (1) the annual retainer received by such Director (the "Retainer Fee") and (2) the sum of all meeting fees of the Board, Subsidiary board and board committee on which such Director serves (the "Meeting Fees"). Each Participant may elect under the Plan to defer 0%, 50% or 100% of his Retainer Fee for each calendar year for the application of that amount toward the grant of Options. In addition, each Participant may elect under the Plan to defer 0%, 50% or 100% of his Meeting Fees for each calendar year for the application of that amount towards the grant of Options. (c) Each Participant shall make an irrevocable election in writing to receive Options in lieu of all or a designated percentage of his Retainer Fee or Meeting Fees, or both, on or before December 31 of the year preceding the calendar year for which the Retainer Fees or Meeting Fees apply. (d) On July 1 following the beginning of the calendar year for which an election has been made pursuant to this Section 6, Options shall be granted to any Participant for the elected portion of his Retainer Fee for that calendar year. On that same date, Options shall be granted to any Participant who has so elected for the elected portion of the Meeting Fees actually earned by the Participant in the first six-month period of the applicable calendar year. For the second six months of the applicable calendar year, Options shall be granted to Participants for the elected portion of the Meeting Fees actually earned for the second six months on December 31 of the applicable calendar year. For purposes of this Section 6(d), the following rules shall apply in making the above calculations: (i) The elected portion of the Meeting Fees earned in the first six months of the calendar year shall be defined as the fraction of the Meeting Fees that the Participant elected to defer, multiplied by the cash attendance fee for each Board, Subsidiary board and committee meeting, multiplied by the number of such meetings actually attended by that director in the first six months of the applicable calendar year; and (ii) The elected portion of the Meeting Fees earned in the second six months of the calendar year shall be defined as the fraction of the Meeting Fees that the Participant elected to defer, multiplied by the cash attendance fee for each Board, Subsidiary board and committee meeting, multiplied by the number of such meetings actually attended in the second six months of the applicable calendar year. (e) For purposes of determining the number of shares to be the subject an Option granted in accordance with the Plan, the number of shares will be equal to that number of whole shares of Common Stock that has an aggregate fair market value on the date of grant closest to, but not in excess of, the combined amount of elected Retainer Fees and/or Meeting Fees that are applied to the grant of Options at such time. -3- (f) Fractional shares of Common Stock shall not be granted under the Plan, and any remaining amount of elected Retainer Fees and Meeting Fees will be paid to each Participant in cash as soon as possible after the date or dates Option grants are made in accordance with the Plan, unless otherwise deferred pursuant to a plan or arrangement between the Participant and the Corporation. 7. OPTION PRICE ------------ The price per share at which an Incentive Option may be exercised shall be equal to the fair market value per share of the Common Stock on the date the Option is granted. The price per share at which a Nonqualified Option may be exercised shall be 85% of the fair market value of the Common Stock on the date the Option is granted. The price per share at which an Incentive Option or Nonqualified Option may be exercised is referred to herein as the "Option price." In addition, the following rules shall apply: (a) The "fair market value" of the shares shall mean: (i) if the shares of Common Stock are listed for trading on the American Stock Exchange or the New York Stock Exchange or included in The Nasdaq National Market, the fair market value shall be the closing sales price of the shares on the American Stock Exchange or the New York Stock Exchange or as reported in The Nasdaq National Market (as applicable) on the date immediately preceding the date the Option is granted, or, if there is no transaction on such date, then on the trading date nearest preceding the date the Option is granted for which closing price information is available; or (ii) if the shares of Common Stock are not listed or reported in any of the foregoing, then fair market value shall be determined by the Committee in accordance with the applicable provisions of Section 20.2031-2 of the Federal Estate Tax Regulations, or in any manner consistent with the Code and accompanying regulations. (b) In no event shall there first become exercisable by a Participant in any one calendar year Incentive Options granted by the Corporation or any related corporation with respect to shares having an aggregate fair market value (determined at the time an option is granted) greater than $100,000. 8. OPTION PERIOD AND OPTION EXERCISE; LIMITATIONS ON THE RIGHT TO EXERCISE ----------------------------------------------------------------------- OPTIONS - ------- (a) The period during which an Option may be exercised (the "Option period") shall be ten years from the date on which the Option is granted. An Option shall be fully exercisable with respect to the total number of shares of Common Stock subject to the Option as of the date of grant. An option or portion thereof not exercised before the expiration of the Option period shall terminate. (b) An Option may be exercised by giving written notice of at least ten days to the Committee or its designee at such place as the Committee shall direct. Such notice shall specify the number of shares to be purchased pursuant to an Option and the aggregate purchase price to be paid therefor, and shall be accompanied by the payment of such purchase price. Such payment shall be in the form of (i) cash; (ii) shares owned by the Participant at the time of -4- exercise; (iii) shares of common stock withheld upon exercise; (iv) delivery of a properly executed written notice of exercise to the Corporation and delivery to a broker of written notice of exercise and irrevocable instructions to promptly deliver to the Corporation the amount of sale or loan proceeds to pay the Option price; or (v) any combination of the foregoing methods. Shares tendered or withheld in payment upon the exercise of an Option shall be valued at their fair market value on the date of exercise, as determined by the Committee by applying the provisions of Section 7(a). (c) No Option granted to a Participant who was an employee at the time of grant shall be exercised unless the Participant is, at the time of exercise, an employee as described in Section 5, and has been an employee continuously since the date the Option was granted, subject to the following: (i) An Option shall not be affected by any change in the terms, conditions or status of the Participant's employment, provided that the Participant continues to be an employee of the Corporation or a related corporation. (ii) The employment relationship of a Participant shall be treated as continuing intact for any period that the Participant is on military or sick leave or other bona fide leave of absence, provided that the period of such leave does not exceed 90 days, or, if longer, as long as the Participant's right to reemployment is guaranteed either by statute or by contract. The employment relationship of a Participant shall also be treated as continuing intact while the Participant is not in active service because of disability. For purposes of this Section 8(c)(ii), "disability" shall mean the inability of the Participant to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death, or which has lasted or can be expected to last for a continuous period of not less than twelve months. (iii) If the employment of a Participant is terminated because of disability within the meaning of subparagraph (ii), or if the Participant dies while he is an employee or dies after the termination of his employment because of disability, the Option may be exercised only to the extent exercisable on the date of the Participant's termination of employment or death while employed (the "termination date"), except that the Committee may in its discretion accelerate the date for exercising all or any part of the Option which was not otherwise exercisable on the termination date. The Option must be exercised, if at all, prior to the first to occur of the following, whichever shall be applicable: (A) the close of the period of twelve months next succeeding the termination date; or (B) the close of the Option period. In the event of the Participant's death, such Option shall be exercisable by such person or persons as shall have acquired the right to exercise the Option by will or by the laws of intestate succession. (iv) If the employment of the Participant is terminated for any reason other than disability (as defined in subparagraph (ii)) or death or for "cause," his Option may be exercised to the extent exercisable on the date of such termination of employment, except that the Committee may in its discretion accelerate the date for exercising all or -5- any part of the Option which was not otherwise exercisable on the date of such termination of employment. The Option must be exercised, if at all, prior to the first to occur of the following, whichever shall be applicable: (A) the close of the period of 90 days next succeeding the termination date; or (B) the close of the Option period. If the Participant dies following such termination of employment and prior to the earlier of the dates specified in (A) or (B) of this subparagraph (iv), the Participant shall be treated as having died while employed under subparagraph (iii) immediately preceding (treating for this purpose the Participant's date of termination of employment as the termination date). In the event of the Participant's death, such Option shall be exercisable by such person or persons as shall have acquired the right to exercise the Option by will or by the laws of intestate succession. (v) If the employment of the Participant is terminated for "cause," his Option shall lapse and no longer be exercisable as of the effective time and date of his termination of employment as determined by the Committee. For purposes of this subparagraph (v) and subparagraph (iv), the Participant's termination shall be for "cause" if such termination results from the Participant's (A) dishonesty; (B) refusal to perform his duties for the Corporation; or (C) engaging in conduct that could be materially damaging to the Corporation without a reasonable good faith belief that such conduct was in the best interest of the Corporation. The determination of "cause" shall be made by the Committee and its determination shall be final and conclusive. (vi) Notwithstanding the foregoing, the Committee shall have authority, in its discretion, to extend the period during which an Option may be exercised; provided that, in the event that any such extension shall cause an Incentive Option to be designated as a Nonqualified Option, no such extension shall be made without the prior written request and consent of the Optionee. (d) No Option granted to a Participant who was not an employee of the Corporation or a related corporation at the time of grant shall be exercised unless the Participant either (i) is, at the time of exercise, a Director and has been a Director continuously since the date the Option was granted, or (ii) was, within 90 days prior to the time of exercise, a Director and, prior to such termination of service as a Director, had been a Director continuously since the date the Option was granted; provided, that if the Participant's service as a Director is terminated because of death, such Option shall be exercisable by such person or persons who shall have acquired the right to exercise the Option by will or the laws of intestate succession, and such Option shall be exercisable at any time prior to the earlier of (A) the close of the Option period, or (B) the close of the period ending twelve months from the date of death of the Participant. Notwithstanding the foregoing, the Committee may, in its discretion, extend the period during which an Option may be exercised upon written request of an Optionee. (e) A Participant or his legal representative, legatees or distributees shall not be deemed to be the holder of any shares subject to an Option unless and until certificates for such shares are issued to him or them under the Plan. (f) Nothing in the Plan shall confer upon the Director any right to continue in the service of the Corporation or a related corporation as an employee or member of the Board or the board of a Subsidiary, or to interfere in any way with the right of the Corporation or a related corporation to terminate the Director's service or employment at any time. 9. NONTRANSFERABILITY OF OPTIONS AND SHARES ---------------------------------------- Incentive Options granted pursuant to the Plan shall not be transferable (including by pledge or hypothecation) other than by will or the laws of intestate succession or pursuant to a qualified domestic relations order, as -6- defined by the Code or Title I of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or the rules thereunder. Nonqualified Options granted pursuant to the Plan shall not be transferable (including by pledge or hypothecation) other than by will or the laws of intestate succession or pursuant to a qualified domestic relations order, as defined by the Code or Title I of ERISA or the rules thereunder, except as may be permitted by the Committee in a manner consistent with the registration provisions of the Securities Act of 1933, as amended (the "Securities Act"). An Option shall be exercisable during the Optionee's lifetime only by him. To the extent required by Section 16 of the Exchange Act, shares acquired upon the exercise of an Option shall not, without the consent of the Committee, be transferable (including by pledge or hypothecation) until the expiration of six months after the date the Option was granted. 10. DILUTION OR OTHER ADJUSTMENTS ----------------------------- If there is any change in the outstanding shares of Common Stock of the Corporation as a result of a merger, consolidation, reorganization, stock dividend, stock split distributable in shares, or other change in the capital stock structure of the Corporation, the Committee shall make such adjustments to Options, to the number of shares reserved for issuance and issuable under the Plan, and to any provisions of this Plan as the Committee deems equitable to prevent dilution or enlargement of Options or otherwise advisable to reflect such change. 11. WITHHOLDING ----------- The Corporation shall require any recipient of shares pursuant to the exercise of a Nonqualified Option to pay to the Corporation in cash the amount of any tax or other amount required by any governmental authority to be withheld and paid over by the Corporation to such authority for the account of such Optionee. Notwithstanding the foregoing, the Optionee may satisfy such obligation in whole or in part, and any other local, state or federal income tax obligations relating to the exercise of a Nonqualified Option, by electing (the "Election") to have the Corporation withhold shares of Common Stock from the shares to which the Optionee is entitled. The number of shares to be withheld shall have a fair market value (determined in accordance with Section 7) as of the date that the amount of tax to be withheld is determined (the "Tax Date") as nearly equal as possible to (but not exceeding) the amount of such obligations being satisfied. Each Election must be made in writing to the Committee prior to the Tax Date. 12. CERTAIN DEFINITIONS ------------------- For purposes of the Plan, the following terms shall have the meaning indicated: (a) "Related corporation" means any parent, subsidiary or predecessor of the Corporation. (b) "Parent" or "parent corporation" shall mean any corporation (other than the Corporation) in an unbroken chain of corporations ending with the Corporation if, at the time that the Option is granted, each corporation other than the Corporation owns stock possessing fifty percent or more of the total combined voting power of all classes of stock in another corporation in the chain. -7- (c) "Subsidiary" or "subsidiary corporation" means any corporation (other than the Corporation) in an unbroken chain of corporations beginning with the Corporation if, at the time that the Option is granted, each corporation other than the last corporation in the unbroken chain owns stock possessing fifty percent or more of the total combined voting power of all classes of stock in another corporation in the chain. (d) "Predecessor" or "predecessor corporation" means a corporation which was a party to a transaction described in Section 424(a) of the Code (or which would be so described if a substitution or assumption under that Section had occurred) with the Corporation, or a corporation which is a parent or subsidiary of the Corporation, or a predecessor of any such corporation. In general, terms used in the Plan shall, where appropriate, be given the meaning ascribed to them under the provisions of the Code applicable to incentive stock Options. 13. STOCK OPTION AGREEMENT ---------------------- The grant of any Option under the Plan shall be evidenced by the execution of an agreement (the "Agreement") between the Corporation and the Optionee. Such Agreement shall set forth the date of grant of the Option, the Option price, the Option period, the designation of the Option as an Incentive Option or a Nonqualified Option, and the time or times when and the conditions upon the happening of which the Option shall become exercisable. Such Agreement shall also set forth the restrictions, if any, with respect to which the shares to be purchased thereunder shall be subject, and such other terms and conditions as the Committee shall determine which are consistent with the provisions of the Plan and applicable law and regulations. 14. RESTRICTIONS ON SHARES ---------------------- The Corporation may impose such restrictions on any shares acquired upon exercise of Options granted under the Plan as it may deem advisable, including, without limitation, restrictions necessary to ensure compliance with the Securities Act, under the requirements of any applicable self-regulatory organization and under any blue sky or state securities laws applicable to such shares. The Corporation may cause a restrictive legend to be placed on any certificate issued pursuant to the exercise of an Option in such form as may be prescribed from time to time by applicable laws and regulations or as may be advised by legal counsel to the Corporation. 15. AMENDMENT OR TERMINATION ------------------------ The Plan may be amended or terminated at any time by action of the Board; provided, that: (a) Any amendment which would (i) materially increase the aggregate number of shares which may be issued under the Plan (other than changes as described in Section 10), or (ii) materially change the requirements for eligibility to receive Options under the Plan shall be made only with the approval of the shareholders of the Corporation. -8- (b) No outstanding Option shall be amended or terminated (i) without the consent of the Optionee if such amendment or termination would adversely affect the Optionee's rights with respect to such Option; and (ii) if the Option is an Incentive Option, without the opinion of legal counsel to the Corporation that such amendment or termination will not constitute a "modification" within the meaning of Section 424 of the Code if the Committee determines such an opinion is necessary. 16. APPLICABLE LAW -------------- Except as otherwise provided herein, the Plan shall be construed and enforced according to the laws of the State of Georgia. 17. SECTION 16(B) COMPLIANCE ------------------------ To the extent that participants in the Plan are subject to Section 16(b) of the Exchange Act, it is the intention of the Corporation that transactions under the Plan shall comply with Rule 16b-3 under the Exchange Act and, if any Plan provision is later found not to be in compliance with Section 16 of the Exchange Act, the provision shall be deemed null and void, and in all events the Plan shall be construed in favor of Plan transactions meeting the requirements of Rule 16b-3 or successor rules applicable to the Plan. 18. SHAREHOLDER APPROVAL -------------------- The Plan is subject to the approval of the shareholders of the Corporation, which approval must occur, if at all, within twelve months of the effective date of the Plan. All Incentive Options granted prior to shareholder approval shall be conditioned upon such approval, and no Incentive Option shall be exercisable prior to such approval. -9- IN WITNESS WHEREOF, this Premier Bancshares, Inc. Directors' Stock Option Plan has been executed in behalf of the Corporation effective as of the __ day of __________, 1997. PREMIER BANCSHARES, INC. By: /s/ Darrell D. Pittard ---------------------------- Darrell D. Pittard Chairman of the Board and Chief Executive Officer Attest: - -------------------------- Secretary [Corporate Seal] -10- EX-11 18 STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS EXHIBIT 11 STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS Year Ended December 31, 1996 1995 1994 ---------- ---------- ---------- Primary Weighted average Premier common shares outstanding during the year 2,351,535 2,262,520 1,966,308 Common shares issuable in connection with assumed exercise of options under the treasury stock method 33,862 28,402 11,234 ---------- ---------- ---------- Total 2,385,397 2,290,922 1,977,542 ========== ========== ========== Net income $2,539,716 $1,988,949 $ 291,148 ========== ========== ========== Per share earnings $ 1.06 $ 0.87 $ 0.15 ========== ========== ========== EX-13 19 FORM OF ANNUAL REPORT PREMIER MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION BACKGROUND Premier was incorporated in 1988 under the laws of Georgia and the regulations of the Bank Holding Company Act of 1956. Premier's bank subsidiary, First Alliance Bank is a commercial bank which opened for business in 1984. On August 31, 1996, Premier acquired, through a pooling of interests, Premier Bancshares, Inc., a thrift holding company. Premier Bancshares, Inc. operated two 100% owned subsidiaries, Premier Lending and Premier Bank. Premier also owns 80% of Alliance Finance. LIQUIDITY AND CAPITAL RESOURCES Liquidity management involves the matching of the cash flow requirements of customers who may be either depositors desiring to withdraw funds or borrowers needing assurance that sufficient funds will be available to meet their credit needs and the ability of Premier to meet those needs. Premier seeks to meet liquidity requirements primarily through management of short-term investments (principally Federal Funds sold and overnight funds), monthly amortizing loans, repayment of single payment loans, periodic repayments of mortgage- backed securities, and draws on lines of credit. In addition, at December 31, 1996, First Alliance Bank and Premier Bank had $11,000,000 in approved Federal Funds lines with correspondent banks which could provide funds on an immediate basis if the need arose. Also, First Alliance Bank has access to various Certificate of Deposit ("CD") networks which would allow it to raise deposits from credit unions and other small banks for varying time periods at rates comparable to the short-term U.S. Government Bond rate curve. These deposits are not brokered and no fee outside of the market rate is paid. Additionally, First Alliance Bank and Premier Bank are members of the Federal Home Loan Bank system. At December 31, 1996, First Alliance Bank and Premier Bank had the ability to borrow approximately $20 million by pledging qualifying loans and securities as collateral. The liquidity and capital resources of Premier, First Alliance Bank, and Premier Bank are monitored on a periodic basis by federal regulatory authorities. In addition, management performs liquidity analyses in the same manner as the federal regulatory agencies. As of December 31, 1996, the various liquidity ratios were considered adequate by regulatory definitions. In management's opinion, Premier, First Alliance Bank, and Premier Bank maintained liquidity that was adequate to meet their respective needs. Premier, First Alliance Bank, and Premier Bank continue to be well- capitalized by both industry and regulatory definitions. At December 31, 1996, Premier's consolidated capital ratios were as follows:
MINIMUM REGULATORY REQUIREMENT TO BE WELL-CAPITALIZED ------------------ Leverage Capital Ratio............................ 7.27% 5.00% Risk Based Capital Ratios: Tier 1 Capital.................................. 9.69% 6.00% Total Capital................................... 10.79% 10.00%
A more detailed chart of regulatory capital ratios is included in Note 13 of the Notes to Consolidated Financial Statements. Management is not aware of any current recommendations of the regulatory authorities which, if they were implemented, would have a material effect on Premier's liquidity, capital resources, or operations. Premier regularly evaluates business combination opportunities and conducts due diligence activities in connection with possible business combinations. As a result, business combination discussions and, in some cases, negotiations take place, and future business combinations involving cash, debt, or equity securities may 46 be expected. Any future business combination or series of business combinations that Premier might undertake may be material, in terms of assets acquired or liabilities assumed, to Premier's financial condition. ASSET/LIABILITY MANAGEMENT At December 31, 1996, Premier, utilizing a "static gap" view of interest rate sensitivity, was positioned in an asset-sensitive position (1.44%) at three months and a slightly asset-sensitive position (1.01%) at one year. This "static gap" view of interest rate sensitivity at a point in time looks at the volume of assets and liabilities that will mature or reprice within varying time periods. Such a view does not necessarily indicate the impact of general interest rate movements on the net interest margin since the repricing of various categories of assets and liabilities is subject to competitive pressures and the needs of Premier's customers. It is also probable that actual repricing may happen at different times than estimated and at different rates than anticipated. Management also utilizes a forecasting model for First Alliance Bank and Premier Bank which attempts to project the net interest margin in various rising, flat, and falling interest rate scenarios. The model assumes that First Alliance Bank and Premier Bank make no material changes in the composition, maturity, or interest rate sensitivity of their earning assets and interest-bearing liabilities as a result of a change in interest rate cycles. The model projects that in the next 12 months, First Alliance Bank and Premier Bank combined would earn approximately 4.93% more net interest income in a 200 basis point rising rate environment and approximately 5.12% less in a 200 basis point falling rate environment. However, management will act to change Premier's asset or liability composition and interest rate sensitivity in response to a definitive change in the direction of interest rates. Specifically, Premier actively manages the mix of asset and liability maturities to control the effects of changes in the general level of interest rates on net interest income. Except for its effect on the general level of interest rates, inflation does not have a material impact on Premier due to the rate variability and short-term maturities of its earning assets. Interest Rate Sensitivity
AFTER AFTER THREE ONE YEAR MONTHS BUT WITHIN BUT WITHIN THREE WITHIN FIVE AFTER MONTHS ONE YEAR YEARS FIVE YEARS TOTAL -------- -------- -------- ---------- -------- (DOLLARS IN THOUSANDS) Earning assets: Interest bearing deposits... $ 1,447 $ -- $ -- $ -- $ 1,447 Federal funds sold.......... 21,680 -- -- -- 21,680 Securities.................. 6,814 6,107 19,770 2,463 3,515 Loans....................... 146,216 16,029 42,782 6,237 211,264 -------- -------- ------- ------- -------- Total interest earning assets................... 176,157 22,136 62,552 8,700 269,545 -------- -------- ------- ------- -------- Interest bearing liabilities: Interest bearing demand deposits................... 57,562 -- -- -- 57,562 Savings..................... 8,302 -- -- -- 8,302 Time deposits, less than $100,000................... 23,273 52,842 29,465 -- 105,580 Time deposits, $100,000 and over....................... 10,476 17,712 6,916 -- 35,104 Repurchase agreements....... -- -- -- -- -- Other borrowings............ 22,824 2,755 1,980 2,661 30,220 -------- -------- ------- ------- -------- Total interest bearing liabilities.............. 122,437 73,309 38,361 2,661 236,768 -------- -------- ------- ------- -------- Interest rate sensitivity gap.......................... $ 53,720 $(51,173) 24,191 $ 6,039 $ 32,777 ======== ======== ======= ======= ======== Cumulative interest rate sen- sitivity gap................. 53,720 $ 2,547 26,738 $32,777 ======== ======== ======= ======= Interest rate sensitivity gap ratio........................ 1.44 0.30 1.63 3.27 ======== ======== ======= ======= Cumulative interest rate sen- sitivity gap ratio........... 1.44 1.01 1.11 1.14 ======== ======== ======= =======
47 CHANGES IN FINANCIAL CONDITION Cash and Short-term Assets Total assets as of December 31, 1996 increased $56,633,000 since December 31, 1995. Non-earning cash and due from banks increased $2,088,000 as of December 31, 1996, from December 31, 1995. This change is representative of normal daily fluctuations in cash and check clearings and an increase in transaction account balances of $17,513,000. Interest-bearing deposits in First Alliance Bank and Premier Bank decreased $8,501,000 to a balance of $1,447,000 at December 31, 1996. This balance is primarily excess funds that are held at the Federal Home Loan Bank and accrue interest at a rate approximately equal to the Federal Funds rate. Federal Funds sold increased $19,150,000 from December 31, 1995. The increase in Federal Funds is the result of seasonal deposits placed in First Alliance Bank by a local municipality and the movement of Premier Bank's excess cash from the Federal Home Loan Bank to the Federal Funds market. Securities Portfolio
DECEMBER 31, ----------------------- 1996 1995 1994 ------- ------- ------- (DOLLARS IN THOUSANDS) Types of Securities: U.S. Treasury and other U.S. government agencies and corporations........................................ $17,240 $19,103 $ 8,818 Municipal securities................................. 105 304 292 Collateralized mortgage obligations.................. 10,068 18,647 10,640 Mortgage-backed passthroughs......................... 3,625 3,120 8,393 Structured notes..................................... 2,337 3,210 3,274 Equity securities.................................... 1,779 1,412 1,089 ------- ------- ------- $35,154 $45,796 $32,506 ======= ======= =======
- -------- All securities are held as available-for-sale and are reported at their fair values. Maturities The amounts of securities in each category as of December 31, 1996 are shown in the following table according to contractual maturity classifications (i) one year or less, (ii) after one year through five years, (iii) after five years through ten years, and (iv) after ten years.
U.S. TREASURY AND OTHER U.S. GOVERNMENT AGENCIES MUNICIPAL OTHER AND CORPORATIONS(1) SECURITIES(2) SECURITIES -------------------- ----------------- ------------------- AMOUNT YIELD(3) AMOUNT YIELD(3) AMOUNT YIELD(3) ----------- -------- -------- -------- ---------- -------- One year or less........ $ -- -- $ -- -- $ 380,600 7.86% After one year through five years............. 19,327,933 6.12% 104,691 8.60% -- -- After five years through ten years.............. 5,408,410 6.08% -- -- -- -- After ten years......... 8,533,131 6.01% -- -- 1,398,876 6.40% ----------- -------- ---------- Total................. $33,269,474 $104,691 $1,779,476 =========== ======== ==========
- -------- (1) Includes mortgage-backed securities based on their current maturity date. (2) Yields on municipal securities have not been computed on a tax equivalent basis. (3) Yields were computed using coupon interest, adding discount accretion, or subtracting premium amortization, as appropriate, on a ratable basis over the life of each security. The weighted average yield for each maturity range was computed using the carrying value of each security in that range. 48 Changes in Position Securities available-for-sale on December 31, 1996 decreased $10,643,000 from December 31, 1995. In the first quarter of 1996, Premier sold approximately $10,000,000 in securities from the available-for-sale portfolio. These sales represented the termination of an arbitrage transaction made up of these assets and various floating rate deposits and borrowings. These securities were primarily floating rate collateralized mortgage obligations and mortgage-backed passthroughs. The proceeds from the sale of securities provided funding for the increase in loans. LOAN PORTFOLIO Types of Loans Management realizes that Premier's loan portfolio is concentrated in loans secured by real estate which constituted 75% of the portfolio at December 31, 1996. Real estate loans include real estate mortgages, real estate construction projects, and consumer home equity lines. The amount of loans outstanding at the indicated dates are shown in the following table according to the type of loan. The other concentration is in commercial and financial loans which are made primarily to businesses in the Atlanta, Georgia metropolitan area. The following table presents this major category of net loans for each period, excluding the allowance for loan losses.
DECEMBER 31, ----------------------------------------- 1996 1995 1994 1993 1992 -------- -------- ------- ------- ------- (DOLLARS IN THOUSANDS) Real Estate: Secured by Mortgages............... $ 73,272 $ 58,463 $46,602 $46,278 $46,895 Construction....................... 67,432 36,987 19,518 15,326 9,131 Consumer and other loans............. 17,553 15,242 10,656 15,983 17,825 Commercial and financial............. 28,599 22,182 6,275 7,833 9,773 -------- -------- ------- ------- ------- $186,856 $132,874 $83,051 $85,420 $83,624 ======== ======== ======= ======= =======
Maturities and Sensitivity to Changes in Interest Rates Total loans as of December 31, 1996 are shown in the following table according to maturity classifications (i) one year or less, (ii) after one year through five years, and (iii) after five years.
(DOLLARS IN THOUSANDS) Maturity: One year or less................................. $144,824 After one year through five years................ 33,943 After five years................................. 8,089 -------- $186,856 ========
The following table summarizes loans at December 31, 1996 with due dates after one year which have predetermined and floating or adjustable interest rates.
(DOLLARS IN THOUSANDS) Predetermined interest rates....................... $42,032 Floating or adjustable interest rates.............. -- ------- $42,032 =======
49 Records were not available to present the above information for each category listed above (one year or less, after one year through five years, and after five years) and could not be extracted without undue burden to Premier. Variable rate loan maturity information is not available by maturity date in summary and could not be determined without undue burden on the subsidiaries of Premier. Management is evaluating cost/benefit and the ability to generate such information in the future. Changes in Position Loans held for sale decreased $1,504,000 from December 31, 1995 to December 31, 1996. These loans represent first mortgage loans which have been originated by Premier Lending and have been sold to third party investors and are waiting for funding from the investor. This balance fluctuates based on time of month, new loan volumes, and length of investor closing periods. These loans are sold servicing released and the investor commitment price is obtained simultaneously with the closing of most loans; therefore, minimizing the effect of interest rate fluctuation. Portfolio loans grew by $53,982,000 at December 31, 1996 from December 31, 1995. In addition, at December 31, 1996, construction loans increased $30,445,000, other loans secured by real estate increased $14,809,000, commercial loans increased $6,417,000, and consumer loans increased $2,311,000 from December 31, 1995. The primary reason for these increases was the addition of five experienced real estate and commercial loan officers. Loan officers at Premier Lending generate loans that are specifically underwritten by First Alliance Bank. In prior periods, the majority of these loans were sold to third party financial institutions due to the former Premier Bancshares, Inc. group's not having the capital to fund these loans. DEPOSITS Deposits and the yield on those deposits classified as to noninterest- bearing demand, interest-bearing demand, savings, and time deposits, for the years indicated are presented below.
YEARS ENDED DECEMBER 31 -------------------------------------------------- 1996 1995 1994 ---------------- ---------------- ---------------- AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT -------- ------- -------- ------- -------- ------- (DOLLARS IN THOUSANDS) Noninterest-bearing demand................... $ 29,472 -- % $ 24,936 -- % $ 21,652 -- % Interest-bearing demand... 50,993 3.09 37,833 3.39 36,407 2.97 Savings................... 8,515 2.96 10,438 2.66 11,048 2.96 Time...................... 114,961 5.95 78,736 5.72 53,551 4.41 -------- -------- -------- Total deposits.......... $203,941 $151,943 $122,658 ======== ======== ========
The amount of time deposits issued in amounts of $100,000 or more as of December 31, 1996 are shown below by category, which is based on time remaining until maturity of (i) three months or less, (ii) over three through 12 months, and (iii) over 12 months.
(DOLLARS IN THOUSANDS) Three months or less............................... $10,476 Over three through twelve months................... 17,807 Over twelve months................................. 6,820 ------- Total............................................ $35,104 =======
Changes in Position Total deposits grew $58,280,000 at December 31, 1996 from December 31, 1995. Non-interest bearing demand deposits increased $889,000 at December 31, 1996 from December 31, 1995. Interest-bearing demand 50 deposits were up $16,624,000 primarily due to a seasonal increase in the balances of a local municipal depositor and growth in commercial money market accounts. Other time deposits increased by $40,767,000 at December 31, 1996 from December 31, 1995 as both First Alliance Bank and Premier Bank aggressively marketed for deposits in several key submarkets in Premier's market area. OTHER BORROWINGS The following table sets forth certain information regarding securities sold under repurchase agreements, FHLB borrowings, and other borrowings.
1996 1995 1994 ------- ------- ------- (DOLLARS IN THOUSANDS) Balance at December 31.............................. $30,221 $31,862 $14,429 Weighted average interest rate at December 31....... 6.72 8.09 7.54 Maximum month end balance during year............... 30,221 60,731 14,429 Average amount outstanding during the year.......... 38,600 32,715 5,371 Weighted average interest rate during the year...... 6.77 6.77 6.31
Federal Home Loan Bank advances were down $6,500,000 at December 31, 1996 compared to December 31, 1995 due to the sale of securities involved in an arbitrage funded primarily by FHLB advances. Retail repurchase agreements increased by $7,135,000 as First Alliance Bank received a $6,000,000 repurchase agreement from a corporate customer in the first quarter of 1996. It is anticipated that this balance will remain in First Alliance Bank for the foreseeable future. Other borrowings decreased by $2,276,000 at December 31, 1996 compared to December 31, 1995 due primarily to First Alliance Bank's and Premier Bank's increasing their purchases of the mortgage loans from Premier Lending by funding those purchases with increases in other time deposits. In addition to the above, Premier Lending and Alliance Finance also utilize a combination of subordinated debentures and revolving lines of credit to fund their mortgage, commercial, and consumer finance lending activities. Note 5 in the Notes to Consolidated Financial Statements details the maturities, rates, and terms of these instruments. Additionally, Premier owed $4 million at December 31, 1996 in term debt which is an increase of $1 million from December 31, 1995. This increase was used by Premier to inject additional capital into Premier Bank for asset growth. The original $3 million was also used as capital in the acquisition of Premier Bank in 1995. CREDIT ANALYSIS Non-performing Loans Information with respect to impaired, past due, and restructured loans at December 31, 1996 is as follows:
DECEMBER 31, ---------------------------- 1996 1995 1994 1993 1992 ------ ---- ---- ---- ------ (DOLLARS IN THOUSANDS) Impaired loans................................... $1,224 $268 $604 $309 $2,892 Loans contractually past due ninety days or more as to interest or principal payments and still accruing........................................ -- 1 -- 127 10 Loans, the terms of which have been renegotiated to provide a reduction or deferral of interest or principal because of deterioration in the financial position of the borrower.............. 60 -- -- -- 700 Loans, now current, about which there are serious doubts as to the ability of the borrower to comply with present loan repayment terms........ -- -- -- -- -- Interest income that would have been recorded on impaired loans under original terms............. 92 Interest income that was recorded on impaired and restructured loans.............................. 15
51 At December 31, 1996, three first mortgage loans totaling $464,000, made to individuals who subsequently declared bankruptcy are included in the non- accrual number. In addition, $641,000 related to one residential builder was also in the non-accrual number. Of that amount, all but $70,000 has been paid out subsequent to year end. Management expects no material losses on the remaining balances. Accrual of interest income is discontinued on all loans when they become 90 days past due or, in the opinion of management, collection of such interest income becomes doubtful. When a loan is determined to be impaired, all interest previously accrued but not collected is reversed against current interest income. Accrual of interest on such loans is resumed when, in management's judgment, the collection of interest and principal becomes probable. In the opinion of management, any loans classified by regulatory authorities as doubtful, substandard, or special mention that have not been included in the table above do not represent or result from trends or uncertainties which management reasonably expects will materially impact future operating results, liquidity, or capital resources. These classified loans do not represent (i) material credits about which management is aware or (ii) any information which causes management to have serious doubts as to the ability of such borrowers to comply with the loan repayment terms. Any loans classified by regulatory authorities as loss are charged off at the time such loans are identified. Commitments and Lines of Credit Premier enters into residential construction and commercial loan commitments in advance of closing to fund loans to its customers at locked-in interest rates in the normal course of business. These instruments, to the extent they are not covered by investor purchase commitments, involve credit and interest rate risk in excess of the amount recognized in the financial statements. In the normal course of business, Premier has entered into off-balance-sheet financial instruments which are not reflected in the financial statements. These financial instruments include commitments to extend credit and standby letters of credit. Such financial instruments are included in the financial statements when funds are disbursed or the instruments become payable. These instruments involve, to varying degrees, elements of credit risk in excess of the amount recognized in the balance sheet. Premier's exposure to credit loss in the event of nonperformance by the other party to the financial instrument for unfunded mortgage loan commitments, residential construction, and commercial loan commitments to extend credit and standby letters of credit is represented by the contractual amount of those instruments. A summary of Premier's commitments is as follows:
DECEMBER 31, ----------------------- 1996 1995 ----------- ----------- Unfunded mortgage loan commitments................. $20,000,000 $31,968,000 Residential construction and commercial loan com- mitments.......................................... 27,277,198 18,526,425 Commitments to extend credit....................... 49,987,828 20,387,000 Standby letters of credit.......................... 695,742 1,249,532 ----------- ----------- $97,960,768 $72,130,957 =========== ===========
SUMMARY OF LOAN EXPERIENCE The provision for possible loan losses is created by direct charges to operations. Losses on loans are charged against the allowance in the period in which such loans, in management's opinion, become uncollectible. Recoveries during the period are credited to the allowance. The factors that influence management's judgment in determining the amount charged to operating expense are past loan loss experience, composition of the loan portfolio, evaluation of possible future losses, current economic conditions, and other relevant facts. Premier's 52 allowance for loan losses was approximately $2,404,000 at December 31, 1996 compared with $1,802,000 at December 31, 1995. The allowance for loan losses is reviewed continuously based on management's evaluation of current risk characteristics of the loan portfolio, as well as the impact of prevailing and expected economic business conditions. Management considers the allowance for loan loss adequate to cover possible loan losses on the loans outstanding. Management has not allocated Premier's allowance for loan losses to specific categories of loans. Based on management's best estimate, approximately 45% of the allowance should be allocated to real estate loans, 40% to commercial and financial loans, and 15% to consumer loans.
PERCENT OF LOANS IN EACH CATEGORY OF TOTAL LOANS DECEMBER 31, ------------------------------------------ 1996 1995 1994 1993 1992 ------ ------ ------ ------ ------ Commercial.......................... 15% 17% 7% 9% 12% Real estate......................... 76 72 80 72 67 Consumer............................ 9 11 13 19 21 ------ ------ ------ ------ ------ 100% 100% 100% 100% 100% ====== ====== ====== ====== ======
The following table summarizes average loan balances for each year, changes in the allowance for loan losses arising from loans charged off, recoveries on loans previously charged off, additions to the reserve which have been charged to operating expense, and the rate of net charge-offs during the period to average loans.
1996 1995 1994 1993 1992 -------- -------- ------- ------- ------- (DOLLARS IN THOUSANDS) Average amount of loans out- standing $183,367 $134,712 $90,640 $86,765 $83,905 Balance of allowance for loan losses at beginning of year... 1,802 1,301 1,581 1,403 1,478 Charge offs: Commercial and financial..... (51) (149) (204) (736) (349) Real estate.................. (13) (181) (398) (125) (292) Consumer..................... (88) (59) (132) (176) (421) -------- -------- ------- ------- ------- (152) (389) (734) (1,037) (1,062) -------- -------- ------- ------- ------- Recoveries: Commercial and financial..... 78 132 80 67 21 Real estate.................. 34 83 32 28 20 Consumer..................... 44 43 57 113 45 -------- -------- ------- ------- ------- 156 258 169 208 86 -------- -------- ------- ------- ------- Net (charge-offs), recoveries.. 4 (131) (565) (829) (976) -------- -------- ------- ------- ------- Allowance acquired in business combinations.................. 0 294 -- -- 460 -------- -------- ------- ------- ------- Additions to allowance charged to operating expense during year.......................... 598 338 285 1,007 441 -------- -------- ------- ------- ------- Balance of allowance for loan losses at end of year......... $ 2,404 $ 1,802 $ 1,301 $ 1,581 $ 1,403 ======== ======== ======= ======= ======= Ratio of net loans charged off during the year to average loans outstanding............. -- % 0.10% 0.62% 0.96% 1.16% ======== ======== ======= ======= =======
Provision for Loan Loss The provision for loan losses was $598,000 in 1996 as compared to $338,000 in 1995. Premier had net recoveries of $4,000 in 1996. The ratio of net charge-offs to average loans in 1996 was at its lowest level in the last five years. The provision expense is primarily related to the growth in loans of $53,982,000. 53 RESULTS OF OPERATIONS Premier reported record earnings of $2,540,000 for the year ended December 31, 1996. This amount was an increase of $551,000 or 28% from the previous year's net income of $1,989,000. Year to date earnings include unusual expenses of $1,036,000. This figure includes merger expenses, data processing conversion expenses, severance expenses, as well as the special SAIF fund recapitalization assessment. On an after tax basis, these unusual items totaled $854,000. Fourth quarter 1996 net income was $1,002,000, which is representative of normal operations exclusive of any unusual expense or income items. Interest Income and Interest Expense The following table sets forth the amount of Premier's average balances, interest income, and interest expense for each category of interest-earning assets and interest-bearing liabilities, average interest rates for interest- earning assets and interest yields for interest-bearing liabilities, net interest spread, and net yield on average interest-earning assets. Distribution of Assets, Liabilities, and Stockholders' Equity Interest Rates and Interest Differentials
1996 1995 1994 --------------------------- --------------------------- --------------------------- AVERAGE AVERAGE AVERAGE YIELDS/ INCOME OR YIELDS/ INCOME OR YIELDS/ INCOME OR BALANCES(1) EXPENSES RATES BALANCES(1) EXPENSES RATES BALANCES(1) EXPENSES RATES ----------- --------- ----- ----------- --------- ----- ----------- --------- ----- (DOLLARS IN THOUSANDS) Interest-bearing depos- its in banks........... $ 7,716 $ 381 4.94% $ 2,521 $ 119 4.72% $ 523 $ 18 3.44% Taxable securities(4)... 37,185 2,284 6.14 41,683 2,735 6.56 34,020 1,743 5.12 Federal funds sold...... 10,902 592 5.43 9,481 560 5.91 9,977 451 4.52 Loans(2)................ 183,367 19,759 10.78 134,712 13,887 10.31 90,640 8,743 9.65 Allowance for loan losses................. (2,122) (1,683) (1,509) Cash and due from banks.................. 7,982 10,978 5,689 Other assets............ 13,477 11,721 7,955 --------- --------- -------- Total.................. $ 258,507 $ 23,016 $ 209,413 $17,301 $147,295 $10,955 ========= ======== ========= ======= ======== ======= ==== Total interest-earning assets................. $ 239,170 9.62% $ 188,397 9.18% $135,160 8.11% ========= ===== ========= ===== ======== ==== Noninterest-bearing demand................. $ 29,472 $ $ 24,936 $ $ 21,652 Interest-bearing demand................. 50,993 1,577 3.09 37,833 1,283 3.39 36,407 1,082 2.97 Savings................. 8,515 252 2.96 10,438 278 2.66 11,048 327 2.96 Time.................... 114,961 6,838 5.95 78,736 4,504 5.72 53,551 2,364 4.41 --------- -------- ----- --------- ------- ----- -------- ------- ---- Total deposits......... 203,941 8,667 151,943 6,065 122,648 3,773 Borrowings.............. 28,096 2,615 9.31 32,714 2,216 6.77 5,371 339 6.31 Other liabilities....... 3,220 2,738 1,195 Stockholders' equi- ty(3).................. 23,250 22,018 18,071 --------- -------- --------- ------- -------- ------- Total.................. $ 258,507 $ 11,282 $ 209,413 $ 8,281 $147,295 $ 4,112 ========= ======== ========= ======= ======== ======= Total interest-bearing liabilities............ $ 202,565 5.57% $ 159,721 5.18% $106,377 3.87% ========= ===== ========= ===== ======== ==== Net interest spread..... 4.05% 4.00% 4.24% ===== ===== ==== Net yield on average interest- earning assets................. $ 11,734 4.91% $ 9,020 4.79% $ 6,843 5.06% ======== ===== ======= ===== ======= ====
- ------- (1)Average balances were determined using the daily average balances. (2)Average loans include impaired loans and are stated net of unearned income. Income on impaired loans is recognized on the cash basis. (3)Average shareholders' equity is net of unrealized losses on securities available-for-sale, net of taxes (4)Average taxable securities represent securities available-for-sale and are based on their fair values. (5)Interest and fees on loans include $1,285,892, $902,787, and $685,034 of loan fee income for the years ended December 31, 1996, 1995, and 1994. 54 The increase in net interest income of $2,714,000 during fiscal 1996 is the primary reason for the increase in net income. The following table reflects the changes in net interest income resulting from changes in interest rates and from asset and liability volume. The change in interest attributable to rate has been determined by applying the change in rate between years to average balances outstanding in the earlier year. The change in interest due to volume has been determined by applying the rate from the earlier year to change in average balances outstanding between years. Thus, changes that are not solely due to rate or volume have been consistently allocated between rate and volume.
1995 TO 1996 1994 TO 1995 INCREASE (DECREASE) INCREASE (DECREASE) DUE TO CHANGE IN DUE TO CHANGE IN ------------------------ ------------------------- RATE VOLUME TOTAL RATE VOLUME TOTAL ------ ------- ------- ------- ------- ------- (DOLLARS IN THOUSANDS) Income from interest- earning assets: Interest and fees on loans................. $ 654 $ 5,218 $ 5,872 $ 637 $ 4,507 $ 5,144 Interest on taxable securities............ (168) (283) (451) 551 441 992 Interest on Federal funds sold............ (50) 82 32 135 (26) 109 Interest on deposits in banks................. 6 256 262 9 92 101 ------ ------- ------- ------- ------- ------- Total interest income.............. $ 442 $ 5,273 $ 5,715 $ 1,332 $ 5,014 $ 6,346 ====== ======= ======= ======= ======= ======= Expense from interest- bearing liabilities: Interest on interest- bearing deposits...... $ (116) $ 410 $ 294 $ 158 $ 43 $ 201 Interest on savings deposits.............. 28 (54) (26) (32) (17) (49) Interest on time deposits.............. 186 2,148 2,334 827 1,313 2,140 Interest on other borrowings............ 732 (313) 399 27 1,850 1,877 ------ ------- ------- ------- ------- ------- Total interest expense............. $ 830 $ 2,171 $ 3,001 $ 980 $ 3,189 $ 4,169 ------ ------- ------- ------- ------- ------- Net interest income.. $ (388) $ 3,102 $ 2,714 $ 352 $ 1,825 $ 2,177 ====== ======= ======= ======= ======= =======
Non-Interest Income Total non-interest income increased $3,702,000 in fiscal 1996 over fiscal 1995. This increase was primarily due to an increase in mortgage loan activity of $2,934,000. Commercial finance maintenance fees were up $515,000 in fiscal 1996 from fiscal 1995. The increase in income of these business lines is a continuation of a trend which began in 1994. In 1995, mortgage origination fees were up $4,683,000 and commercial finance fees were up $432,000 over fiscal 1994. Management expects these income streams to continue to grow in 1997. Non-Interest Expense Total non-interest expense increased $5,675,000 in fiscal 1996 over fiscal 1995. As discussed above, unusual expenses related to merger, conversion, and special SAIF fees totaled $1,036,000. In addition, Premier acquired Premier Bank in a purchase accounting transaction in April of 1995. An estimate of the increase in expense of twelve months in 1996 versus eight months since acquisition in 1995 is $870,000. Salary and commission expense was up $2,591,000 in Premier Lending due to increased volume and the addition of a new origination office and staff. Expenses in Premier Bank were up an estimated $400,000 due to a full year of one new branch and six months of an additional branch. Non-interest expenses were up $5,036,000 in fiscal 1995 over fiscal 1994. Salary and commission expense in Premier Lending was up $2,413,000 due primarily to increases in volume. Premier Bank opened a new branch and Premier Lending opened two additional offices in 1995. 55 Income Taxes Consolidated income taxes decreased in 1996 by $69,000 as compared to 1995. Premier was able to utilize net operating loss ("NOL") carryforwards of $237,000 in Premier Bank and Premier Lending which had been incurred and not utilized in 1994 and 1995. The effective tax rate is higher in 1996 versus 1995 due to the non-deductibility of merger related expenses. A more complete discussion and detailed schedule are contained in Note 10 of the Notes to Consolidated Financial Statements. RETURN ON EQUITY AND ASSETS The following rate of return information for the years indicated is presented below.
YEAR ENDED DECEMBER 31, -------------------------- 1996 1995 1994 ------- ------- -------- Return on assets(1)........................... .98% .95% .20% Return on equity(2)........................... 10.92 9.03 1.61 Cash dividend payout ratio(3)................. 96.15 2.76 105.00 Equity to assets ratio(4)..................... 8.99 10.51 12.27
- -------- (1) Net income divided by average total assets (2) Net income divided by average equity (3) Cash dividends declared divided by net income (4) Average equity divided by average total assets The fluctuation in the cash dividend payout ratio is a fluctuation of several issues. In 1996, a dividend related to 1995 earnings was declared and paid in January 1996. An additional dividend related to 1996 earnings was declared in December 1996 and paid in January 1997. In addition, Premier Bancshares, Inc., which was acquired by Premier in 1996, incurred net losses in 1994 and 1995, and had never paid a common stock dividend. QUARTERLY FINANCIAL DATA
FIRST SECOND THIRD FOURTH QUARTER QUARTER QUARTER QUARTER ----------- ----------- ----------- ------------ (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) Interest income........... $5,693 $5,787 $5,386 $6,150 Interest expense.......... 2,706 2,668 2,766 3,141 ----------- ----------- ----------- ------------ Net interest income....... 2,987 3,119 2,620 3,009 Provision for loan losses................... 129 202 132 135 ----------- ----------- ----------- ------------ Net interest income after provision for loan losses................... 2,858 2,917 2,488 2,874 Noninterest income........ 2,557 2,763 2,917 3,618 Noninterest expense....... 4,324 4,776 5,201 5,070 ----------- ----------- ----------- ------------ Income before income taxes.................... 1,091 904 204 1,422 Income tax expense........ 325 229 97 418 Minority interest in net income................... 3 3 4 2 ----------- ----------- ----------- ------------ Net income................ $ 763 $ 672 $ 103 $ 1,002 =========== =========== =========== ============ Net income per share...... $ 0.32 $ 0.28 $ 0.04 $ 0.42 =========== =========== =========== ============
The quarterly information reported on Forms 10-QSB by Premier for the quarters ended March 30, 1996 and June 30, 1996 have been restated above to reflect the business combination of First Alliance Bancorp, Inc. (predecessor to Premier) with Premier Bancshares, Inc. which was consummated on August 31, 1996. The business combination was accounted for as a pooling of interests. There were no other changes from previously reported amounts. 56 PREMIER BANCSHARES, INC. AND SUBSIDIARIES CONSOLIDATED FINANCIAL REPORT DECEMBER 31, 1996 TABLE OF CONTENTS
PAGE ------------- INDEPENDENT AUDITOR'S REPORT ON THE FINANCIAL STATEMENTS......... F-1 FINANCIAL STATEMENTS Consolidated balance sheets...................................... F-2 Consolidated statements of income................................ F-3 Consolidated statements of stockholders' equity.................. F-4 Consolidated statements of cash flows............................ F-5 and F-6 Notes to consolidated financial statements....................... F-7 and F-27 INDEPENDENT AUDITOR'S REPORT ON THE SUPPLEMENTARY INFORMATION.... F-28 SUPPLEMENTARY INFORMATION Consolidating balance sheet...................................... F-30 and F-31 Consolidating statement of income................................ F-32 and F-35 Note to consolidating financial statements....................... F-36
INDEPENDENT AUDITOR'S REPORT ON THE FINANCIAL STATEMENTS To the Board of Directors Premier Bancshares, Inc. and Subsidiaries Atlanta, Georgia We have audited the accompanying consolidated balance sheets of Premier Bancshares, Inc. and subsidiaries as of December 31, 1996 and 1995, and the related statements of income, stockholders' equity and cash flows for each of the three years in the period ended December 31, 1996. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Premier Bancshares, Inc. and subsidiaries as of December 31, 1996 and 1995, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1996, in conformity with generally accepted accounting principles. Atlanta, Georgia January 31, 1997 PREMIER BANCSHARES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31, 1996 AND 1995
1996 1995 ------------ ------------ ASSETS Cash and due from banks............................. $ 11,633,707 $ 9,545,638 Interest-bearing deposits in banks.................. 1,447,173 9,947,819 Federal funds sold.................................. 21,680,000 2,530,000 Securities available-for-sale....................... 35,153,641 45,796,237 Loans held for sale................................. 24,408,287 25,912,226 Loans............................................... 186,856,184 132,873,733 Less allowance for loan losses...................... 2,404,189 1,801,917 ------------ ------------ Loans, net...................................... 184,451,995 131,071,816 Premises and equipment.............................. 6,634,633 5,644,655 Other real estate owned............................. 603,489 313,117 Goodwill and other intangibles...................... 2,276,728 2,686,233 Other assets........................................ 5,868,826 4,077,242 ------------ ------------ Total assets.................................... $294,158,479 $237,524,983 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Deposits Noninterest-bearing demand........................ $ 30,184,254 $ 29,295,271 Interest-bearing demand........................... 57,562,280 40,938,564 Savings........................................... 8,302,341 9,049,907 Time, $100,000 and over........................... 35,103,940 31,003,923 Other time........................................ 105,580,365 68,165,694 ------------ ------------ Total deposits.................................. 236,733,180 178,453,359 Securities sold under repurchase agreements......... 8,443,316 1,308,634 Federal Home Loan Bank advances..................... 4,625,000 11,125,000 Other borrowings.................................... 17,152,230 19,428,642 Other liabilities................................... 3,916,085 3,762,705 ------------ ------------ Total liabilities............................... 270,869,811 214,078,340 ------------ ------------ Minority interest in subsidiary..................... 13,618 16,754 ------------ ------------ Commitments and contingent liabilities Stockholders' equity Common stock, par value $1 at December 31, 1996; and $5 at December 31, 1995; 20,000,000 shares authorized; 2,353,779 and 2,351,529 issued and outstanding, respectively........................ 2,353,779 11,757,645 Capital surplus................................... 20,449,502 11,023,136 Retained earnings................................. 640,485 542,730 Unrealized gains (losses) on securities available- for-sale, net of tax............................. (168,716) 106,378 ------------ ------------ Total stockholders' equity...................... 23,275,050 23,429,889 ------------ ------------ Total liabilities and stockholders' equity...... $294,158,479 $237,524,983 ============ ============
See Notes to Consolidated Financial Statements. F-2 PREMIER BANCSHARES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
1996 1995 1994 ------------ ------------ ----------- INTEREST INCOME Loans................................ $ 19,759,157 $ 13,886,775 $ 8,742,677 Taxable securities................... 2,264,378 2,723,768 1,731,311 Nontaxable securities................ 20,237 11,261 11,265 Deposits in banks.................... 380,551 119,049 17,616 Other short-term investments......... 591,458 559,739 450,891 ------------ ------------ ----------- Total interest income.............. 23,015,781 17,300,592 10,953,760 ------------ ------------ ----------- INTEREST EXPENSE Deposits............................. 8,666,641 6,064,829 3,772,280 Other borrowings..................... 2,614,820 2,216,141 338,991 ------------ ------------ ----------- Total interest expense............. 11,281,461 8,280,970 4,111,271 ------------ ------------ ----------- Net interest income................ 11,734,320 9,019,622 6,842,489 PROVISION FOR LOAN LOSSES.............. 598,398 337,659 285,000 ------------ ------------ ----------- Net interest income after provision for loan losses................... 11,135,922 8,681,963 6,557,489 ------------ ------------ ----------- OTHER INCOME Service charges on deposit accounts.. 960,395 877,318 909,660 Other service charges and fees....... 1,375,896 892,834 450,957 Gain on mortgage loans held for sale................................ 4,720,267 2,327,916 99,969 Gain on sale of SBA loans............ 279,061 -- -- Mortgage loan fees................... 4,180,748 3,638,835 1,183,601 Net realized gains (losses) on securities available-for-sale....... 135,295 52,841 (28,568) Net realized losses on securities held-to-maturity.................... -- (30,778) -- Other operating income............... 203,573 393,964 346,496 ------------ ------------ ----------- Total other income................. 11,855,235 8,152,930 2,962,115 ------------ ------------ ----------- OTHER EXPENSES Salaries and employee benefits....... $ 11,870,099 $ 8,183,327 $ 4,985,065 Equipment expenses................... 1,110,368 681,966 568,654 Occupancy expenses................... 1,297,448 958,622 607,859 Advertising expenses................. 249,054 166,186 191,132 Telephone expenses................... 353,892 190,316 159,672 Merger related expenses.............. 498,556 21,511 -- Stationery and supplies.............. 433,049 293,040 268,934 Legal expenses....................... 202,243 254,915 168,802 Director expenses.................... 307,584 249,247 150,349 Deposit insurance.................... 327,708 212,447 247,874 Collection expenses.................. 91,886 144,763 146,073 Goodwill amortization expense........ 190,813 149,197 -- Other operating expenses............. 2,438,357 2,190,127 1,165,461 ------------ ------------ ----------- Total other expenses............... 19,371,057 13,695,664 8,659,875 ------------ ------------ ----------- Income before income taxes and minority interest in net income of subsidiary........................ 3,620,100 3,139,229 859,729 Income tax expense..................... 1,068,534 1,137,571 568,581 ------------ ------------ ----------- Net income before minority interest in net income of subsidiary....... 2,551,566 2,001,658 291,148 Minority interest in net income of subsidiary............................ 11,850 12,709 -- ------------ ------------ ----------- Net income......................... $ 2,539,716 $ 1,988,949 $ 291,148 ============ ============ =========== Net income per share of common stock... $ 1.06 $ 0.87 $ 0.15 ============ ============ =========== Weighted average shares outstanding.... 2,385,397 2,290,922 1,977,541 ============ ============ ===========
See Notes to Consolidated Financial Statements. F-3 PREMIER BANCSHARES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
UNREALIZED GAINS COMMON STOCK RETAINED (LOSSES) ON TOTAL --------------------- CAPITAL EARNINGS SECURITIES AVAILABLE- STOCKHOLDERS' SHARES PAR VALUE SURPLUS (DEFICIT) FOR-SALE, NET OF TAX EQUITY --------- ----------- ----------- ----------- --------------------- ------------- BALANCE, DECEMBER 31, 1993................... 1,956,962 $ 9,784,810 $ 8,489,317 $ (414,329) $ -- $ 17,859,798 Net income............ -- -- -- 291,148 -- 291,148 Cash dividends declared............. -- -- -- (305,758) -- (305,758) Stock issued.......... 33,588 167,940 207,072 -- -- 375,012 Net change in unrealized gains (losses) on securities available- for-sale, net of tax.................. -- -- -- 50,483 (716,247) (665,764) --------- ----------- ----------- ----------- ----------- ------------ BALANCE, DECEMBER 31, 1994................... 1,990,550 9,952,750 8,696,389 (378,456) (716,247) 17,554,436 Net income............ -- -- -- 1,988,949 -- 1,988,949 5% stock dividend..... 76,206 381,030 628,699 (1,012,822) -- (3,093) Stock issued.......... 284,773 1,423,865 1,698,048 -- -- 3,121,913 Cash dividends declared............. -- -- -- (54,941) -- (54,941) Net change in unrealized gains (losses) on securities available- for-sale, net of tax.................. -- -- -- -- 822,625 822,625 --------- ----------- ----------- ----------- ----------- ------------ BALANCE, DECEMBER 31, 1995................... 2,351,529 11,757,645 11,023,136 542,730 106,378 23,429,889 Net income............ -- -- -- 2,539,716 -- 2,539,716 Stock options exercised............ 2,250 2,250 20,250 -- -- 22,500 Cash dividends declared............. -- -- -- (2,441,961) -- (2,441,961) Recapitalization...... -- (9,406,116) 9,406,116 -- -- -- Net change in unrealized gains (losses) on securities available- for-sale, net of tax.................. -- -- -- -- (275,094) (275,094) --------- ----------- ----------- ----------- ----------- ------------ BALANCE, DECEMBER 31, 1996................... 2,353,779 $ 2,353,779 $20,449,502 $ 640,485 $ (168,716) $23,275,050 ========= =========== =========== =========== =========== ============
See Notes to Consolidated Financial Statements. F-4 PREMIER BANCSHARES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
1996 1995 1994 ------------ ------------ ------------ OPERATING ACTIVITIES Net income before minority interest in net income of subsidiary....... $ 2,551,566 $ 2,001,658 $ 291,148 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation..................... 798,761 522,115 484,319 Amortization of intangibles...... 190,813 149,197 -- Provision for loan losses........ 598,398 337,659 285,000 Deferred income taxes............ 11,752 107,200 (241,862) Net (increase) decrease in loans held for sale................... 1,672,026 (12,958,178) (679,265) Net realized (gains) losses on securities available-for-sale... (135,295) (52,841) 28,568 Net realized losses on securities held-to-maturity................ -- 30,778 -- (Increase) decrease in interest receivable...................... (111,054) (552,809) 23,742 Increase (decrease) in interest payable......................... 180,059 231,394 (4,658) Other operating activities....... (2,891,833) 1,738,549 1,280,934 ------------ ------------ ------------ Net cash provided by (used in) operating activities.......... 2,865,193 (8,445,278) 1,467,926 ------------ ------------ ------------ INVESTING ACTIVITIES Purchases of securities available- for-sale.......................... (10,985,469) (22,918,884) (5,794,542) Proceeds from sales of securities available-for-sale................ 11,534,120 8,831,030 2,702,013 Proceeds from maturities of securi- ties available-for-sale........... 9,798,510 3,578,536 429,038 Purchases of securities held-to-ma- turity............................ -- (6,590,781) (9,302,235) Proceeds from sales of securities held-to-maturity.................. -- 4,560,718 -- Proceeds from maturities of securi- ties held-to-maturity............. -- 2,817,235 4,823,195 Net (increase) decrease in Federal funds sold........................ (19,150,000) 16,580,000 (8,230,000) Net (increase) decrease in inter- est-bearing deposits in banks..... 8,500,646 (9,931,730) (16,089) Net (increase) decrease in loans... (54,207,952) (13,452,625) 2,146,808 Purchase of premises and equip- ment.............................. (1,788,739) (788,429) (349,537) Net cash acquired in business com- binations......................... -- 678,430 -- Investment in subsidiary........... -- (5,894,871) -- ------------ ------------ ------------ Net cash used in investing ac- tivities...................... (56,298,884) (22,531,371) (13,591,349) ------------ ------------ ------------
See Notes to Consolidated Financial Statements. F-5 PREMIER BANCSHARES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
1996 1995 1994 ----------- ------------ ----------- FINANCING ACTIVITIES Net increase in deposits............. $58,279,821 $ 29,256,260 $ 843,283 Net increase in repurchase agree- ments............................... 7,134,682 1,308,634 0 Net increase (decrease) in other borrowings.......................... (2,276,412) 3,025,506 10,029,263 Net decrease in Federal Home Loan Bank advances....................... (6,500,000) (2,059,990) 0 Dividends paid....................... (1,123,845) (58,034) (305,758) Dividends paid to minority sharehold- er.................................. (14,986) -- -- Proceeds from exercise of stock op- tions............................... 22,500 -- -- Proceeds from common stock issued.... -- 3,121,913 375,012 ----------- ------------ ----------- Net cash provided by financing ac- tivities.......................... 55,521,760 34,594,289 10,941,800 ----------- ------------ ----------- Net increase (decrease) in cash and due from banks...................... 2,088,069 3,617,640 (1,181,623) Cash and due from banks at beginning of year............................. 9,545,638 5,927,998 7,109,621 ----------- ------------ ----------- Cash and due from banks at end of year................................ $11,633,707 $ 9,545,638 $ 5,927,998 =========== ============ =========== SUPPLEMENTAL DISCLOSURES Cash paid for: Interest........................... $11,101,402 $ 8,049,576 $ 4,115,929 Income taxes....................... $ 1,257,556 $ 1,272,504 $ 98,322 BUSINESS COMBINATION Net cash acquired.................... $ 678,430 ============ Securities available-for-sale........ $ 1,563,926 Loans held for sale.................. 7,829,133 Loan................................. 37,517,520 Premises and equipment............... 1,401,710 Other assets......................... 1,240,845 Goodwill............................. 2,547,828 Deposits............................. (31,031,023) Advances from Federal Home Loan Bank................................ (13,184,990) Subordinated debentures.............. (1,974,394) Other liabilities.................... (694,114) ------------ Net assets acquired, net of cash and due from banks of $678,430.......... $ 5,216,441 ============ NONCASH TRANSACTIONS Unrealized (gains) losses on securi- ties available-for-sale............. $ 430,730 $ (1,263,607) $ 1,085,220 Principal balances of loans trans- ferred to other real estate......... $ 435,816 $ 657,190 $ 309,572
See Notes to Consolidated Financial Statements. F-6 PREMIER BANCSHARES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES NATURE OF BUSINESS Premier Bancshares, Inc., (the "Company" and formerly First Alliance/Premier Bancshares, Inc.) is a bank and thrift holding company whose business is conducted by its wholly-owned subsidiaries, First Alliance Bank (the "Bank") located in Marietta, Georgia, Premier Bank (the "Thrift") located in Acworth, Georgia, Premier Lending Corporation ("Lending") located in Atlanta, Georgia and Interim Alliance Corporation d/b/a Alliance Finance located in Smyrna, Georgia, an 80% owned subsidiary. The Company is not engaged in any substantial business other than the normal financial services provided by its subsidiaries. However, the Company incurs operating expenses in connection with evaluating and pursuing potential business acquisitions. First Alliance Bank is a commercial bank with operations in Marietta and Kennesaw, Georgia. The Bank provides a full range of banking services to individual and corporate customers in its primary market area of Cobb County and surrounding counties. Premier Bank was acquired by the Company during 1995 in a business combination accounted for as a purchase. The Thrift provides a full range of banking services to individual and corporate customers in its primary market area of Cobb County and surrounding counties. Premier Lending Corporation, Inc. originates, processes, funds and sells residential mortgage loans, construction loans and commercial finance loans primarily in the metropolitan Atlanta area. The majority of the mortgage loans are sold to independent third party investors with servicing released and a significant portion of the construction and commercial finance loans are participated to affiliated and non-affiliated financial institutions. Alliance Finance provides lending and financing services to consumer and business enterprises. The Finance Company's primary activities consist of origination of consumer loans including mortgage loans, retail sales financing and related insurance products. NAME CHANGE In January 1997, the Company changed its name from First Alliance/Premier Bancshares, Inc. to Premier Bancshares, Inc. BASIS OF PRESENTATION The consolidated financial statements include the accounts of the Company and its subsidiaries. Significant intercompany transactions and accounts are eliminated in consolidation. The accounting and reporting policies of the Company conform to generally accepted accounting principles and general practices within the financial services 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 from those estimates. CASH AND DUE FROM BANKS Cash on hand, cash items in process of collection and amounts due from banks are included in cash and due from banks. F-7 PREMIER BANCSHARES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) The Company and its subsidiaries maintain amounts due from banks which, at times, may exceed Federally insured limits. The Company has not experienced any losses in such accounts. SECURITIES Securities are classified based on management's intention on the date of purchase. Securities which management has the intent and ability to hold to maturity are classified as held-to-maturity and reported at amortized cost. All other debt securities are classified as available-for-sale and carried at fair value with net unrealized gains and losses included in stockholders' equity, net of tax. Marketable equity securities are carried at fair value with net unrealized gains and losses included in stockholders' equity. Other equity securities without a readily determinable fair value are carried at cost. Interest and dividends on securities, including amortization of premiums and accretion of discounts, are included in interest income. Realized gains and losses from the sales of securities are determined using the specific identification method. LOANS HELD FOR SALE Loans held for sale include primarily mortgage loans which are carried at the lower of aggregate cost or fair value. The determination of fair value includes consideration of outstanding commitments from investors, related origination fees and costs, and commitment fees paid. Gains and losses are recognized at settlement dates and are determined by the difference between the selling price and the carrying value of the loans sold. The Company sells all mortgage loans on a servicing released basis. The Company's practice is to originate mortgage loans subject to existing purchase commitments from third party investors. LOANS Loans are carried at their principal amounts outstanding less unearned income, net deferred loan fees and costs and the allowance for loan losses. Interest income on most loans is credited to income based on the principal amount outstanding. Interest on other loans is recognized on the sum-of-the- months method, the results of which are not materially different from generally accepted accounting principles. Loan origination fees and certain direct costs incurred in originating most loans are deferred and recognized as income over the life of the loan. Fees and costs incurred in origination of other loans are recognized at the time the loan is recorded. The results of operations are not materially different than the results which would be obtained by accounting for all loan fees and costs in accordance with generally accepted accounting principles. The allowance for loan losses is maintained at a level that management believes to be adequate to absorb potential losses in the loan portfolio. Management's determination of the adequacy of the allowance is based on an evaluation of the portfolio, past loan loss experience, current economic conditions, volume, growth, composition of the loan portfolio, and other risks inherent in the portfolio. In addition, regulatory agencies, as an integral part of their examination process, periodically review the Company's allowance for loan losses, and may require the Company to record additions to the allowance based on their judgment about information available to them at the time of their examinations. The accrual of interest on impaired loans is discontinued when, in management's opinion, the borrower may be unable to meet payments as they become due. When accrual of interest is discontinued, all unpaid accrued interest is reversed. Interest income is subsequently recognized only to the extent cash payments are received. A loan is impaired when it is probable the Company will be unable to collect all principal and interest payments due in accordance with the terms of the loan agreement. Individually identified impaired loans are F-8 PREMIER BANCSHARES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) measured based on the present value of payments expected to be received, using the contractual loan rate as the discount rate. Alternatively, measurement may be based on observable market prices or, for loans that are solely dependent on the collateral for repayment, measurement may be based on the fair value of the collateral. If the recorded investment in the impaired loan exceeds the measure of fair value, a valuation allowance is established as a component of the allowance for loan losses. Changes to the valuation allowance are recorded as a component of the provision for loan losses. PREMISES AND EQUIPMENT Premises and equipment are stated at cost less accumulated depreciation. Depreciation is computed principally by the straight-line method over the estimated useful lives of the assets. OTHER REAL ESTATE OWNED Other real estate owned represents properties acquired through foreclosure. Other real estate owned is held for sale and is carried at the lower of the recorded amount of the loan or fair value of the properties less estimated selling costs. Any write-down to fair value at the time of transfer to other real estate owned is charged to the allowance for loan losses. Subsequent gains or losses on sale and any subsequent adjustment to the value are recorded as other expenses. 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 for 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. The Company and the subsidiaries file a consolidated income tax return. Each entity provides for income taxes based on its contribution to income taxes (benefits) of the consolidated group. NET INCOME PER COMMON SHARE Net income per common share is computed by dividing net income by the weighted average number of shares of common stock and common stock equivalents outstanding. Common stock equivalents consist of stock options and warrants. F-9 PREMIER BANCSHARES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) NOTE 2. SECURITIES The amortized cost and fair value of securities are summarized as follows:
GROSS GROSS AMORTIZED UNREALIZED UNREALIZED FAIR COST GAINS LOSSES VALUE ------------ ---------- ---------- ------------ SECURITIES AVAILABLE FOR SALE December 31, 1996: U. S. Government and agency securities........ $ 19,592,588 $ 38,756 $ (53,968) $ 19,577,376 State and municipal secu- rities................... 101,145 3,546 -- 104,691 Mortgage backed securi- ties..................... 13,909,362 39,378 (256,642) 13,692,098 Equity securities......... 1,834,545 -- (55,069) 1,779,476 ------------ --------- ---------- ------------ $ 35,437,640 $ 81,680 $ (365,679) $ 35,153,641 ============ ========= ========== ============ December 31, 1995: U. S. Government and agency securities........ $ 22,226,156 $ 238,490 $ (151,542) $ 22,313,104 State and municipal secu- rities................... 291,803 12,038 -- 303,841 Mortgage backed securi- ties..................... 21,691,002 260,327 (184,535) 21,766,794 Equity securities......... 1,440,545 -- (28,047) 1,412,498 ------------ --------- ---------- ------------ $ 45,649,506 $ 510,855 $ (364,124) $ 45,796,237 ============ ========= ========== ============
The amortized cost and fair value of securities as of December 31, 1996 by contractual maturity are shown below. Maturities may differ from contractual maturities in mortgage-backed securities because the mortgages underlying the securities may be called or prepaid with or without penalty. Therefore, these securities and equity securities are not included in the maturity categories in the following summary.
SECURITIES ------------------------- AMORTIZED FAIR COST VALUE ------------ ------------ Due from one year to five years................... $ 17,288,569 $ 17,280,585 Due from five to ten years........................ 2,026,196 2,018,440 Due after ten years............................... 378,968 383,042 Mortgage backed securities........................ 13,909,362 13,692,098 Equity securities................................. 1,834,545 1,779,476 ------------ ------------ $ 35,437,640 $ 35,153,641 ============ ============
Securities with a carrying value of approximately $31,452,000 and $38,224,000 at December 31, 1996 and 1995, respectively, were pledged to secure public deposits and for other purposes. Gains and losses on sales of securities consist of the following:
HELD TO MATURITY AVAILABLE FOR SALE ---------------- ------------------------------- 1995 1996 1995 1994 ---------------- --------- --------- --------- Gross gains.............. $ 725 $ 148,325 $ 130,926 $ 1,431 Gross losses............. (31,503) (13,030) (78,085) (29,999) --------- --------- --------- --------- Net realized gains (loss- es)..................... $ (30,778) $ 135,295 $ 52,841 $ (28,568) ========= ========= ========= =========
The Company sold during the third quarter of 1995 securities classified as held-to-maturity, with a carrying amount of $4,560,718, recognizing a net loss of $30,778, in response to changes in the bond market and F-10 PREMIER BANCSHARES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) management's evaluation of the securities portfolio. The circumstances leading to the sale of these securities were identified as an isolated instance based on prudent business decisions. On December 15, 1995, the Company transferred its remaining held-to-maturity portfolio totaling $20,103,806 to available- for-sale, resulting in a net unrealized loss of $23,815 which was included in stockholders' equity at $15,718 net of related taxes of $8,097. NOTE 3. LOANS AND ALLOWANCE FOR LOAN LOSSES The composition of loans is summarized as follows:
DECEMBER 31, -------------------------- 1996 1995 ------------ ------------ Commercial and financial............................ $ 28,599,233 $ 22,182,076 Real estate--construction........................... 67,410,541 37,157,871 Real estate--mortgage 73,272,062 58,463,177 Consumer............................................ 17,991,335 14,776,676 Other............................................... 81,094 912,432 ------------ ------------ 187,354,265 133,492,232 Unearned income..................................... (520,446) (447,306) Net deferred loan (fees) costs...................... 22,365 (171,193) Allowance for loan losses........................... (2,404,189) (1,801,917) ------------ ------------ Loans, net.......................................... $184,451,995 $131,071,816 ============ ============
Changes in the allowance for loan losses for the years ended December 31, 1996, 1995 and 1994 were as follows:
1996 1995 1994 ---------- ---------- ---------- BALANCE, BEGINNING OF YEAR.................. $1,801,917 $1,301,582 $1,581,532 Allowance acquired in acquisitions........ -- 294,309 -- Provision for loan losses................. 598,398 337,659 285,000 Loans charged off......................... (152,326) (389,570) (735,324) Recoveries................................ 156,200 257,937 170,374 ---------- ---------- ---------- BALANCE, END OF YEAR........................ $2,404,189 $1,801,917 $1,301,582 ========== ========== ==========
The total recorded investment in impaired loans was $1,223,510 and $268,463 at December 31, 1996 and 1995, respectively. None of these loans had a specific allowance for loan losses at December 31, 1996 and 1995 determined in accordance with generally accepted accounting principles. The average recorded investment in impaired loans for 1996 and 1995 was $1,038,284 and $692,500, respectively. Interest income on impaired loans of $14,085 and $10,155 was recognized for cash payments received for the years ended 1996 and 1995, respectively. The Company has granted loans to certain related parties including directors, executive officers, and their related entities. The interest rates on these loans were substantially the same as rates prevailing at the time of the transaction and repayment terms are customary for the type of loan involved. Changes in related party loans for the year ended December 31, 1996 are as follows: BALANCE, BEGINNING OF YEAR....................................... $1,410,900 Advances....................................................... 223,601 Repayments..................................................... (407,081) ---------- BALANCE, END OF YEAR............................................. $1,227,420 ==========
F-11 PREMIER BANCSHARES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) NOTE 4. PREMISES AND EQUIPMENT Premises and equipment are summarized as follows:
DECEMBER 31, ------------------------ 1996 1995 ----------- ----------- Land............................................... $ 1,132,414 $ 1,132,414 Buildings.......................................... 3,607,228 3,469,036 Equipment.......................................... 5,835,742 4,471,926 ----------- ----------- 10,575,384 9,073,376 Accumulated depreciation........................... (3,940,751) (3,428,721) ----------- ----------- $ 6,634,633 $ 5,644,655 =========== ===========
NOTE 5. OTHER BORROWINGS SECURITIES SOLD UNDER REPURCHASE AGREEMENTS The balance of securities sold under repurchase agreements was $8,443,316 and $1,308,634 at December 31, 1996 and 1995, respectively. SUBORDINATED DEBENTURES Subordinated debt of Alliance Finance and Premier Lending consists of fixed rate debentures which are payable on demand or mature at twelve, twenty-four or thirty-six months after date of issue. The debentures have various principal amounts and interest is payable monthly. The Company may repay the debentures for a price equal to 100% of the principal plus any unpaid interest to date of redemption without penalty. A summary of the outstanding debentures by interest rate and maturity are as follows:
DECEMBER 31, --------------------- 1996 1995 ---------- ---------- 7.50% due on demand................................... $4,236,971 $ -- 7.50% due in 1997..................................... 70,000 -- 7.50% due February 20, 1999........................... 70,000 -- 8.00% due on demand................................... 1,327,000 1,194,000 8.00% due in 1998..................................... 35,000 35,000 8.50% due on demand................................... 90,000 -- 10.0% due on demand................................... 25,000 25,000 ---------- ---------- $5,853,971 $1,254,000 ========== ==========
F-12 PREMIER BANCSHARES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) Lines of credit at December 31, 1996 and 1995 consisted of:
1996 1995 ---------- ----------- Revolving line of credit of $4,000,000 with a nonaffiliated institution, bearing interest at prime less .50% (7.75% at December 31, 1996) due on October 31, 1997. Line is secured by all commercial finance notes receivable, all stock of the Company's subsidi- aries and guaranteed by the Company................... $2,320,000 $ -- Revolving line of credit of $4,000,000 with a nonaffiliated institution, bearing interest at prime less .50% (7.75% at December 31, 1996), due October 31, 1997. Line is secured by all stock of the Company's subsidiaries and guaranteed by the Company.. 3,675,000 -- Revolving line of credit of $3,000,000 with a nonaffiliated institution, bearing interest at prime less .50% (7.75% at December 31, 1996), due October 31, 1997. Line is secured by accounts receivable of Alliance Finance, all stock of the Company's subsidi- aries and guaranteed by the Company................... 475,000 -- Treasury, tax and loan note option account with the Federal Reserve Bank of Atlanta, due on demand, bear- ing interest at 5.148% at December 31, 1996, collater- alized by securities.................................. 828,259 -- Line of credit of $505,000 with a nonaffiliated insti- tution, bearing interest at prime plus 1% (9.25% at December 31, 1995), matured on August 14, 1996........ -- 505,000 Revolving warehouse line of credit of $30,000,000 with a nonaffiliated institution, bearing interest at an annual rate varying from published rates on high- graded unsecured commercial paper plus 1.75% to plus 3%, matured October 21, 1995.......................... $ -- $13,584,642 Revolving line of credit of $3,000,000 with a nonaffiliated institution, bearing interest at prime (8.50% at December 31, 1995) matured February 15, 1996.................................................. -- 1,085,000 ---------- ----------- $7,298,259 $15,174,642 ========== =========== Long-term debt at December 31, 1996 and 1995 consisted of: 1996 1995 ---------- ----------- Note payable in the amount of $4,000,000, due in eight annual instalments of $500,000 beginning April 1, 1999 with interest due quarterly at prime less .50% (7.75% at December 31, 1996), due April 1, 2006. Note payable is secured by all stock of the Company's subsidiaries and guaranteed by the Company......................... $4,000,000 $ -- Note payable in the amount of $3,000,000, due in annual instalments of $300,000 with interest due quarterly at prime plus 1% (9.25% at December 31, 1995) to October 28, 2006 collateralized by 320,000 shares of common stock of Premier Bank................................. -- 3,000,000 ---------- ----------- $4,000,000 $ 3,000,000 ========== ===========
In connection with the long-term debt, the Company has agreed, among other covenants, to during the term of the loan: (1) maintain earnings at a level equal to or above .60 percent of average assets; (2) maintain reserves for possible loan losses at a level of not less than 1% of total gross loans, excluding residential first mortgage loans on owner-occupied single family dwellings, of the Banks; (3) maintain in aggregate a total risk based capital ratio of no less than 10.0% and Tier 1 capital to average total assets of no less than 6.0%; and (4) not permit its capital to be less than $20,000,000. F-13 PREMIER BANCSHARES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) Aggregate maturities required on long-term debt at December 31, 1996 were as follows: 1999................................................................ $ 500,000 2000................................................................ 500,000 2001................................................................ 500,000 Thereafter.......................................................... 2,500,000 ----------- $ 4,000,000 ===========
NOTE 6. FEDERAL HOME LOAN BANK ADVANCES Federal Home Loan Bank advances consisted of the following at December 31, 1996 and 1995:
1996 1995 ----------- ------------ Advance from the Federal Home Loan Bank with interest at 6.79%, due on August 1, 2001. Interest is payable monthly.............................................. $ 1,000,000 $ -- Advance from the Federal Home Loan Bank with interest at 6.99%, due on September 15, 1997. Interest is pay- able monthly......................................... 1,000,000 1,000,000 Advance from the Federal Home Loan Bank with interest at 8.27%, due on December 8, 1997. Interest is pay- able monthly......................................... 1,750,000 1,750,000 Advance from the Federal Home Loan Bank with interest at 8.41%, due on December 8, 1999. Interest is pay- able monthly......................................... 875,000 875,000 Advance from the Federal Home Loan Bank with interest at the one month LIBOR rate plus 20 basis points (6.17% at December 31, 1995), due on May 31, 2005......................................... -- 5,000,000 Advance from the Federal Home Loan Bank with interest based on the Federal Home Loan Bank's cost of funds plus .25% (5.85% at December 31, 1995), matured on January 2, 1996...................................... -- 1,000,000 Variable rate advances from the Federal Home Loan Bank with interest based on the Federal Home Loan Bank's cost of funds plus .25% (6.10% December 31, 1995), matured on October 12, 1996.......................... $ -- $ 1,000,000 Variable rate advances from the Federal Home Loan Bank with interest based on the Federal Home Loan Bank's cost of funds plus .25% (6.10% at December 31, 1995), matured on November 3, 1996.......................... -- 500,000 ----------- ------------ $ 4,625,000 $ 11,125,000 =========== ============
The advances from the Federal Home Loan Bank are collateralized by a blanket floating lien on qualifying first mortgages and pledges of certain securities and the Company's Federal Home Loan Bank stock. NOTE 7. DEFERRED COMPENSATION PLANS First Alliance Bank has three deferred compensation plans providing for the deferral of director fees and certain retirement benefits for the directors. The first retirement benefit plan was put in place in January, 1994. The Bank accrues an amount equal to the present value of the estimated benefit to be paid under the plan. The accrual recorded for the years ended December 31, 1996, 1995 and 1994 was $103,994, $89,303 and $50,601, respectively. The plan was terminated effective December 31, 1996 and no additional benefits will be accrued under this plan. F-14 PREMIER BANCSHARES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) The Bank's other plans allow the directors to defer up to $500 per month of their monthly director's fees. The first plan covers one current and one former director. Under that plan, the monthly amount deferred is utilized to purchase life insurance on those directors. The Bank's liability under that plan is equal to the cash value of those policies. The second plan is similar to the first except deferred fees are recorded in a liability account monthly plus an interest amount based on the current market rate accrued annually. During 1996, 1995 and 1994, an amount of $38,260, $31,322 and $21,200, respectively, was deferred by the directors and recorded as a liability of the Bank. In conjunction with these plans, several universal life insurance policies were purchased by the Bank. The Bank is the owner of the policies which insure the lives of certain directors. These policies may be used by the Bank as funding vehicles for plan obligations. The directors are general creditors of the Bank and have no specific claims on these assets. NOTE 8. EMPLOYEE BENEFIT PLANS PROFIT SHARING PLAN The Company has a 401(k) retirement plan covering all employees, subject to certain minimum age requirements. Contributions to the plan charged to expense were $73,252, $38,933 and $39,975 for the years ended December 31, 1996, 1995 and 1994, respectively. Premier Bank had a defined contribution 401(k) plan covering all full-time employees, subject to certain minimum service requirements. This 401(k) plan was terminated on January 30, 1996 with the individual participants' funds being disbursed on that date. There were no contributions to the plan for the year ended December 31, 1996 and the period from acquisition to December 31, 1995. INCENTIVE STOCK OPTION PLANS The Company has an Employee Incentive Stock Option Plan. Under the Plan, the Company can grant to key personnel options to purchase an aggregate of 150,000 shares of the Company's common stock at a price not less than the fair market value of such shares on the date the option is granted. The option period will not exceed ten years from date of grant. The Company also has an employee and a director stock option plan whereby 40,000 and 32,500 shares, respectively, of common stock have been reserved for stock options. Under the employee plan, the Company can grant to key personnel options to purchase common stock at a price not less than the fair market value of such shares on the date the option is granted. The option period will not exceed ten years from date of grant. F-15 PREMIER BANCSHARES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) Under the director plan, each eligible director who attends at least 75% of the meetings of the Company's Board and related committee meetings shall receive an option to purchase 500 shares annually of common stock. The options expire ten years from the date of grant. All options granted were exercisable at December 31, 1996. Other pertinent information related to the options is as follows:
DECEMBER 31, ---------------------------------------------------- 1996 1995 1994 ----------------- ----------------- ---------------- WEIGHTED- WEIGHTED- WEIGHTED- AVERAGE AVERAGE AVERAGE EXERCISE EXERCISE EXERCISE NUMBER PRICE NUMBER PRICE NUMBER PRICE ------ --------- ------ --------- ------ --------- Under option, beginning of year................. 69,000 $10.33 32,500 $10.00 25,500 $10.00 Granted................ 10,000 16.00 41,000 10.55 7,000 10.00 Exercised.............. (2,250) 10.00 -- -- -- -- Expired................ (500) 10.00 (4,500) 10.00 -- -- ------ ------ ------ Under option and exercis- able, end of year....... 76,250 11.08 69,000 10.33 32,500 10.00 ====== ====== ======
WEIGHTED- AVERAGE WEIGHTED- REMAINING AVERAGE CONTRACTUAL EXERCISE LIFE IN NUMBER PRICE PRICE YEARS ------ ------ --------- ----------- Options Outstanding and Exercisable, End of Year.................................. 61,250 $10.00 $10.00 7.0 5,000 14.50 14.50 8.0 10,000 16.00 16.00 10.0 ------ 76,250 ======
As permitted by Statement of Financial Accounting Standard No. 123, "Accounting for Stock-Based Compensation" (SFAS No. 123), the Company recognizes compensation cost for stock-based employee compensation awards in accordance with APB Opinion No. 25, "Accounting for Stock Issued to Employees". The Company recognized no compensation cost for stock-based employee compensation awards for the years ended December 31, 1996 and 1995. If the Company had recognized compensation cost in accordance with SFAS No. 123, net income and net income per share would have been reduced as follows:
DECEMBER 31, --------------------------------------------- 1996 1995 ---------------------- ---------------------- NET INCOME NET INCOME NET INCOME PER SHARE NET INCOME PER SHARE ---------- ---------- ---------- ---------- As reported..................... $2,539,716 $1.06 $1,988,949 $0.87 Stock based compensation, net of related tax effect............. (25,782) (0.01) (69,691) (0.03) ---------- ----- ---------- ----- As adjusted..................... $2,513,934 $1.05 $1,919,258 $0.84 ========== ===== ========== =====
The fair value of the options granted during the year was based upon the discounted value of future cash flows of the options using the following assumptions: Risk free interest rate............................................ 6.45% Expected life of the options....................................... 7-10 Years Expected dividends (as a percent of the fair value of the stock)... 2.68% Volatility......................................................... 9.80%
F-16 PREMIER BANCSHARES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) NOTE 9. SEGMENT REPORTING The Company's operations include two primary business segments: banking and mortgage banking activities. The Company, primarily through its subsidiary banks, offers banking services including a full range of commercial and corporate banking services. Mortgage banking activities are provided by Lending and include the origination of residential mortgage loans for sale to various investors and origination of construction and commercial finance loans for participation with other financial institutions.
INDUSTRY SEGMENTS ---------------------------------------------------------------- FOR THE YEAR ENDED HOLDING BANKING MORTGAGE DECEMBER 31, 1996 COMPANY SUBSIDIARIES BANKING ELIMINATIONS CONSOLIDATED ------------------ ----------- ------------ ----------- ------------ ------------ Revenues from unaffili- ated customers......... $ -- $ 23,201,562 $11,669,454 $ -- $ 34,871,016 Revenues from affili- ates................... 3,164,034 236,953 -- (3,400,987) -- ----------- ------------ ----------- ------------ ------------ Total revenue......... $ 3,164,034 $ 23,438,515 $11,669,454 $ (3,400,987) $ 34,871,016 =========== ============ =========== ============ ============ Income from continuing operations before in- come taxes............. $ 2,101,909 $ 4,060,370 $ 598,302 $ (3,140,481) $ 3,620,100 =========== ============ =========== ============ ============ Identifiable assets at December 31, 1996...... $28,690,340 $286,781,318 $13,052,684 $(34,365,863) $294,158,479 =========== ============ =========== ============ ============ Depreciation expense.... $ -- $ 606,405 $ 192,356 $ 798,761 =========== ============ =========== ============ Premises and equipment acquisitions........... $ -- $ 1,006,195 $ 782,544 $ 1,788,739 =========== ============ =========== ============ INDUSTRY SEGMENTS ---------------------------------------------------------------- FOR THE YEAR ENDED HOLDING BANKING MORTGAGE DECEMBER 31, 1995 COMPANY SUBSIDIARIES BANKING ELIMINATIONS CONSOLIDATED ------------------ ----------- ------------ ----------- ------------ ------------ Revenues from unaffili- ated customers......... $ 848,513 $ 17,823,464 $ 6,781,545 $ -- $ 25,453,522 Revenues from affili- ates................... 823,052 197,878 -- (1,020,930) -- ----------- ------------ ----------- ------------ ------------ Total revenue......... $ 1,671,565 $ 18,021,342 $ 6,781,545 $ (1,020,930) $ 25,453,522 =========== ============ =========== ============ ============ Income (loss) from con- tinuing operations be- fore income taxes...... $ (92,001) $ 3,412,496 $ 629,454 $ (810,720) $ 3,139,229 =========== ============ =========== ============ ============ Identifiable assets at December 31, 1995...... $26,648,602 $219,065,627 $21,690,588 $(29,879,834) $237,524,983 =========== ============ =========== ============ ============ Depreciation expense.... $ 7,030 $ 424,898 $ 90,187 $ 522,115 =========== ============ =========== ============ Premises and equipment acquisitions........... $ -- $ 669,462 $ 118,967 $ 788,429 =========== ============ =========== ============
F-17 PREMIER BANCSHARES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
INDUSTRY SEGMENTS ---------------------------------------------------------------- FOR THE YEAR ENDED HOLDING BANKING MORTGAGE DECEMBER 31, 1994 COMPANY SUBSIDIARIES BANKING ELIMINATIONS CONSOLIDATED ------------------ ----------- ------------ ----------- ------------ ------------ Revenues from unaffili- ated customers......... $ -- $ 11,989,288 $ 1,914,958 $ -- $ 13,915,875 Revenues from affili- ates................... 1,461,295 -- -- (1,461,295) -- ----------- ------------ ----------- ------------ ------------ Total revenue......... $ 1,461,295 $ 11,989,288 $ 1,914,958 $ (1,461,295) $ 13,915,875 =========== ============ =========== ============ ============ Income (loss) from con- tinuing operations be- fore income taxes...... $ 1,272,260 $ 2,088,861 $(1,040,097) $ (1,461,295) $ 859,729 =========== ============ =========== ============ ============ Identifiable assets at December 31, 1994...... $15,173,401 $143,555,410 $ 7,920,414 $(15,123,652) $151,525,573 =========== ============ =========== ============ ============ Depreciation expense.... $ 68,506 $ 415,813 $ -- $ 484,319 =========== ============ =========== ============ Premises and equipment acquisitions........... $ 192,121 $ 157,416 $ -- $ 349,537 =========== ============ =========== ============
NOTE 10. INCOME TAXES Income tax expense consists of the following:
DECEMBER 31, -------------------------------- 1996 1995 1994 ---------- ---------- --------- Current.................................. $1,561,724 $1,030,371 $ 456,810 Benefit of net operating loss carryforward............................ (236,575) -- -- Valuation allowance adjustment........... (268,367) -- 353,633 Deferred................................. 11,752 107,200 (241,862) ---------- ---------- --------- Income tax expense..................... $1,068,534 $1,137,571 $ 568,581 ========== ========== =========
The Company's income tax expense differs from the amounts computed by applying the Federal income tax statutory rates to income before income taxes. A reconciliation of the differences is as follows:
DECEMBER 31, -------------------------------------------------------- 1996 1995 1994 ------------------- ------------------ ----------------- AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT ---------- ------- ---------- ------- -------- ------- Income taxes at statu- tory rate.............. $1,230,834 34% $1,067,337 34% $292,308 34% Disallowed merger ex- penses............... 142,021 4 36,462 1 6,257 1 Valuation allowance adjustment........... (268,367) (7) -- -- 353,633 41 Alternative minimum tax credit........... -- -- -- -- (37,135) (4) Other items, net...... (35,954) (1) 33,772 1 (46,482) (6) ---------- --- ---------- --- -------- --- Income tax expense...... $1,068,534 30% $1,137,571 36% $568,581 66% ========== === ========== === ======== ===
The above reconciliation reflects the inability to utilize the net operating losses generated by the Premier Bancshares, Inc. group prior to the business combination with First Alliance Bancorp, Inc., as discussed in Note 15. F-18 PREMIER BANCSHARES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) The components of deferred income taxes are as follows:
DECEMBER 31, --------------------- 1996 1995 ---------- --------- Deferred tax assets: Loan loss reserves..................................... $ 425,865 $ 209,729 Deferred compensation.................................. 150,896 97,215 Other real estate...................................... 16,038 10,377 Securities available-for-sale.......................... 115,283 -- Write-down of mutual funds............................. 18,885 18,885 Net operating loss carryforward........................ 585,067 821,642 Georgia tax credits.................................... 72,423 72,423 Other.................................................. 44,824 -- Valuation allowance.................................... (374,294) (642,661) ---------- --------- 1,054,987 587,610 ---------- --------- Deferred tax liabilities: Depreciation and amortization.......................... 273,439 273,568 Deferred loan fees, net of cost........................ 141,507 59,119 Securities available-for-sale.......................... -- 49,889 Cash method accounting on certain receivables.......... 144,250 131,030 ---------- --------- 559,196 513,606 ---------- --------- Net deferred tax assets.................................. $ 495,791 $ 74,004 ========== =========
At December 31, 1996, the Company has available net operating loss carryforwards of approximately $1,379,000 for Federal income tax purposes. If unused, the carryforwards will expire beginning in 2009. Utilization of the net operating loss carryforwards is subject to the separate return limitations and change of ownership rules of the Internal Revenue Code of 1996. NOTE 11. COMMITMENTS AND CONTINGENT LIABILITIES The Company enters into firm commitments to sell mortgage loans which it has originated at agreed upon prices. The sales price for the loans is set based on market rates at the time the commitment is entered into. The Company generally has ten days after a mortgage loan closes in which to provide the investor with the loan documentation, at which time the investor will fund the loan. The investor bears the interest rate risk on the loan from the time of the commitment. The Company's risk is limited to specific recourse provisions within the agreement with the investor and its ability to provide the required loan documentation to the investor within the commitment period. The Company sells mortgage loans to investors under various blanket agreements. Under the agreements, investors generally have a limited right of recourse to the Company for normal representations and warranties and, in some cases, for delinquencies within the first three to six months which lead to loan default and foreclosure. Management believes that the risk of loss to the Company as a result of these provisions is insignificant. The Company enters into residential construction and commercial loan commitments in advance of closing to fund loans to its customers at locked-in interest rates in the normal course of business. These instruments, to the extent they are not covered by investor purchase commitments, involve credit and interest rate risk in excess of the amount recognized in the financial statements. F-19 PREMIER BANCSHARES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) In the normal course of business, the Company has entered into off-balance- sheet financial instruments which are not reflected in the financial statements. These financial instruments include commitments to extend credit and standby letters of credit. Such financial instruments are included in the financial statements when funds are disbursed or the instruments become payable. These instruments involve, to varying degrees, elements of credit risk in excess of the amount recognized in the balance sheet. The Company's exposure to credit loss in the event of nonperformance by the other party to the financial instrument for unfunded mortgage loan commitments, residential construction and commercial loan commitments, commitments to extend credit and standby letters of credit is represented by the contractual amount of those instruments. A summary of the Company's commitments is as follows:
DECEMBER 31, ----------------------- 1996 1995 ----------- ----------- Unfunded mortgage loan commitments.................... $20,000,000 $31,968,000 Residential construction and commercial loan commit- ments................................................ 27,277,198 18,526,425 Commitments to extend credit.......................... 49,987,828 20,387,000 Standby letters of credit............................. 695,742 1,249,532 ----------- ----------- $97,960,768 $72,130,957 =========== ===========
At December 31, 1996, the Company had agreements with unaffiliated institutions allowing it to sell participations in loans at the Company's option. The unused participation amount was $36,082,936 at December 31, 1996. Commitments to extend credit generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The credit risk involved in issuing these financial instruments is essentially the same as that involved in extending loans to customers. The Company evaluates each customer's creditworthiness 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 customer. Collateral held varies but may include real estate and improvements, marketable securities, accounts receivable, inventory, equipment and personal property. Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. Those guarantees are primarily issued to support public and private borrowing arrangements. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. Collateral held varies as specified above and is required in instances which the Company deems necessary. In the normal course of business, the Company is involved in various legal proceedings. In the opinion of management of the Company, any liability resulting from such proceedings would not have a material effect on the Company's consolidated financial statements. LEASE OBLIGATIONS: The Company leases ten office facilities and certain equipment under noncancelable lease agreements. F-20 PREMIER BANCSHARES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) The future minimum lease commitments at December 31, 1996 are summarized as follows: Years Ending December 31, 1997......................................................... $ 588,336 1998......................................................... 580,444 1999......................................................... 411,395 2000......................................................... 253,157 2001......................................................... 115,991 ---------- $1,949,323 ==========
Rental expense for the years ended December 31, 1996, 1995 and 1994 was $723,717, $116,583 and $58,777, respectively. The Bank leases the land on which its main office is located for $5,717 per month for five years with renewal options up to forty years. Escalation features include a 5% increase every five years plus an additional amount added which shall be the average yearly amount for the Consumer Price Index (CPI) for metropolitan Atlanta for the previous five years, not to exceed 8% per year. At any time after the first five years, the Bank may exercise an option to purchase the property for $1,000,000. The Company also leases various other equipment under short-term leases. NOTE 12. CONCENTRATIONS OF CREDIT The Company originates primarily commercial, residential, and consumer loans to customers in the metro Atlanta area, and surrounding counties. The ability of the majority of the Company's customers to honor their contractual loan obligations is dependent on the economy in the metro Atlanta area. Seventy-five percent (75%) of the Company's loan portfolio is concentrated in loans secured by real estate of which 36% consists of construction loans. A substantial portion of these loans are secured by real estate in the Company's primary market area. In addition, a substantial portion of the other real estate owned is located in those same markets. Accordingly, the ultimate collectibility of the loan portfolio and the recovery of the carrying amount of other real estate owned are susceptible to changes in market conditions in the Company's primary market area. The other significant concentrations of credit by type of loan are set forth in Note 3. The Bank and Thrift, as a matter of policy, do not generally extend credit to any single borrower or group of related borrowers in excess of $3,305,000 and $930,000, respectively. NOTE 13. REGULATORY MATTERS The Bank and Thrift are subject to certain restrictions on the amount of dividends that may be declared without prior regulatory approval. At December 31, 1996, approximately $1,300,000 and $45,000, respectively, of retained earnings were available for dividend declaration without supervisory approval. The Company and the Banks are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory--and possibly additional discretionary--actions by regulators that, if undertaken, could have a direct material effect on the financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and Banks must meet specific capital guidelines that involve quantitative measures of the assets, liabilities, and certain off-balance- sheet items as calculated under regulatory accounting F-21 PREMIER BANCSHARES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) practices. The Company and Banks' capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors. Quantitative measures established by regulation to ensure capital adequacy require the Company and the Banks to maintain minimum amounts and ratios of total and Tier I capital to risk-weighted assets and of Tier I capital to average assets. Premier Bank must also have core capital equal to 3% of adjusted total assets and tangible capital equal to 1.5% of adjusted total assets. These additional requirements are in accordance with the Office of Thrift Supervision, their primary regulator. Management believes, as of December 31, 1996, the Company and Banks meet all capital adequacy requirements to which they are subject. As of December 31, 1996 and 1995, notification from the FDIC categorized First Alliance Bank and Premier Bank as well capitalized and adequately capitalized, respectively, under the regulatory framework for prompt corrective action. To be categorized as adequately capitalized, the Banks must maintain minimum total risk-based, Tier I risk-based, and Tier I leverage ratios as set forth in the following table. There are no conditions or events since that notification that management believes have changed the Banks' category. The Company and Banks' actual capital amounts and ratios are presented in the following table.
TO BE WELL FOR CAPITAL CAPITALIZED UNDER ADEQUACY PROMPT CORRECTIVE ACTUAL PURPOSES ACTION PROVISIONS ------------- ------------- ------------------ AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO ------- ----- ------- ----- ------------------ (DOLLARS IN THOUSANDS) As of December 31, 1996 Total Capital (to Risk Weighted Assets): Consolidated............... $23,526 10.79% $17,443 8% $ 21,804 10% First Alliance Bank........ $18,716 14.02% $10,680 8% $ 13,350 10% Premier Bank............... $ 6,221 8.57% $ 5,807 8% $ 7,259 10% Tier I Capital (to Risk Weighted Assets): Consolidated............... $21,122 9.69% $ 8,719 4% $ 13,079 6% First Alliance Bank........ $17,044 12.74% $ 5,351 4% $ 8,027 6% Premier Bank............... $ 5,819 8.02% $ 2,902 4% $ 4,353 6% Tier I Capital (to Average Assets): Consolidated............... $21,122 7.27% $11,621 4% $ 14,527 5% First Alliance Bank........ $17,044 8.89% $ 7,669 4% $ 9,586 5% Premier Bank............... $ 5,819 6.86% $ 3,393 4% $ 4,241 5% Core Capital Premier Bank............... $ 5,819 5.85% $ 2,984 3% Tangible Capital Premier Bank............... $ 5,819 5.85% $ 1,492 1.5%
NOTE 14. FAIR VALUE OF FINANCIAL INSTRUMENTS The following methods and assumptions were used by the Company in estimating its fair value disclosures for financial instruments. In cases where quoted market prices are not available, fair values are based on estimates using discounted cash flow methods. Those methods are significantly affected by the assumptions used, including the discount rates and estimates of future cash flows. In that regard, the derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, could not be realized in immediate settlement of the instrument. The use of different methodologies may have a material effect on the estimated fair value amounts. Also, the fair value estimates presented herein are based on pertinent information available to management as of December 31, 1996 and 1995. Such amounts have not been revalued for purposes of these financial statements since those dates and, therefore, current estimates of fair value may differ significantly from the amounts presented herein. F-22 PREMIER BANCSHARES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) The following methods and assumptions were used by the Company in estimating fair values of financial instruments as disclosed herein: CASH, DUE FROM BANKS, AND FEDERAL FUNDS SOLD: The carrying amounts of cash, due from banks, and Federal funds sold approximate their fair value. SECURITIES AVAILABLE-FOR-SALE: Fair values for securities are based on quoted market prices. The carrying values of equity securities with no readily determinable fair value approximate fair values. LOANS: For variable-rate loans that reprice frequently and have no significant change in credit risk, fair values are based on carrying values. For other loans, the fair values are estimated using discounted cash flow methods, using interest rates currently being offered for loans with similar terms to borrowers of similar credit quality. Fair values for impaired loans are estimated using discounted cash flow methods or underlying collateral values. The carrying amount of loans held for sale approximates fair value. DEPOSITS: The carrying amounts of demand deposits, savings deposits, and variable-rate certificates of deposit approximate their fair values. Fair values for fixed- rate certificates of deposit are estimated using discounted cash flow methods, using interest rates currently being offered on certificates. SECURITIES SOLD UNDER REPURCHASE AGREEMENTS, FEDERAL HOME LOAN BANK ADVANCES AND OTHER BORROWINGS: The fair values of Federal Home Loan Bank advances and other borrowings are estimated using discounted cash flow methods based on the Company's current incremental borrowing rates for similar types of borrowing arrangements. The fair value of variable-rate other borrowings and securities sold under repurchase agreements approximate the carrying value. ACCRUED INTEREST: The carrying amounts of accrued interest approximate their fair values. OFF-BALANCE-SHEET INSTRUMENTS: Fair values of the Company's off-balance sheet financial instruments are based on fees charged to enter into similar agreements. However, commitments to extend credit do not represent a significant value to the Company until such commitments are funded or closed. The Company has determined that these instruments do not have a distinguishable fair value and no fair value has been assigned. F-23 PREMIER BANCSHARES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) The estimated fair values of the Company's financial instruments were as follows:
DECEMBER 31, 1996 DECEMBER 31, 1995 ------------------------- ------------------------- CARRYING FAIR CARRYING FAIR AMOUNT VALUE AMOUNT VALUE ------------ ------------ ------------ ------------ Financial assets: Cash, due from banks, in- terest-bearing deposits in banks and Federal funds sold.............. $ 34,760,880 $ 34,760,880 $ 22,023,457 $ 22,023,457 Securities available-for- sale.................... 35,153,641 35,153,641 45,796,237 45,796,237 Loans.................... 208,860,282 211,261,541 156,984,042 158,862,597 Accrued interest receiv- able.................... 1,742,269 1,742,269 1,631,215 1,631,215 Financial liabilities: Deposits................. $236,733,180 $237,523,181 $178,453,359 $178,152,367 Securities sold under re- purchase agreements..... 8,443,316 8,443,316 1,308,634 1,308,634 Federal Home Loan Bank advances................ 4,625,000 4,722,254 11,125,000 11,292,000 Other borrowings......... 17,152,230 17,154,380 19,428,642 20,595,808 Accrued interest pay- able.................... 1,062,978 1,062,978 882,918 882,918
NOTE 15. BUSINESS COMBINATIONS On February 3, 1997, the Company entered into an Agreement and Plan of Reorganization with Central and Southern Holding Company ("Central and Southern") of Milledgeville, Georgia. Under this agreement, Central and Southern will merge with and into the Company. Upon consummation of the merger, each share of Central and Southern's common stock issued and outstanding will be converted into and exchanged for the right to receive one share of the Company's common stock. Consummation of the merger is subject to certain conditions, including approval of the agreement by the Boards of Directors and the shareholders of both the Company and Central and Southern and approval of the merger by various regulatory agencies. On August 31, 1996, First Alliance Bancorp, Inc. effected a business combination with Premier Bancshares, Inc. by exchanging 746,530 shares of its common stock for all the outstanding common and preferred stock of Premier Bancshares, Inc. Premier Bancshares, Inc. is a thrift holding company whose business is conducted by its wholly-owned subsidiaries, Premier Bank and Premier Lending, as discussed in Note 1. Subsequent to the business combination, the combined holding company changed its name to Premier Bancshares, Inc. The combination was accounted for as a pooling of interest and, accordingly, all prior financial statements have been restated to include Premier Bancshares, Inc. The results of operations of the separate companies for the periods prior to the combination are summarized as follows:
REVENUES NET INCOME ----------- ---------- Eight months ended August 31, 1996 First Alliance Bancorp, Inc........................... $10,800,000 $1,501,000 Premier Bancshares, Inc. ............................. 11,707,000 115,000 ----------- ---------- $22,507,000 $1,616,000 =========== ========== Year ended December 31, 1995 First Alliance Bancorp, Inc........................... $14,244,000 $1,850,000 Premier Bancshares, Inc. ............................. 11,209,000 139,000 ----------- ---------- $25,453,000 $1,989,000 =========== ==========
F-24 PREMIER BANCSHARES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) On May 1, 1995, Premier Bancshares, Inc. acquired all of the stock of Allatoona Federal Savings Bank for $5,496,458, including expenses related to the merger totaling $339,973. The purchase price was funded through the sale of preferred stock and a loan obtained from a third party financial institution in the amount of $3 million. The excess of the total acquisition cost over the fair value of the net assets acquired of $2,779,772 is being amortized over a period of fifteen years. The acquisition was accounted for as a purchase and the results of operations of Allatoona Federal Savings Banks since the date of acquisition are included in the consolidated financial statements. The consolidated statement of income for the year ended December 31, 1995 includes the combined operations of the Company and Allatoona since acquisition. Allatoona's results of operations included are for the period from April 28, 1995 through December 31, 1995. The net loss for the month ended April 28, 1995 was $123,395, as summarized below: Interest income.................................................. $ 330,556 Interest expense................................................. 193,925 --------- Net interest income............................................ 136,631 Plus noninterest income.......................................... 215,090 Less noninterest expense......................................... 475,116 --------- Net loss....................................................... $(123,395) =========
Upon the acquisition of Allatoona, the mortgage operations of Allatoona were combined with the mortgage operations of Premier Lending Corporation. The commercial banking operations continued to operate as Premier Bank. On January 31, 1995, First Alliance Bancorp, Inc. acquired Interim Alliance Corporation (d/b/a Alliance Finance) in exchange for 80% of the outstanding common stock owned personally by the President of First Alliance Bancorp, Inc. The price paid for the stock was $28,000, which represents $25,000 for the initial capitalization of the Company plus $3,000 of incidental expenses. The acquisition was accounted for as a purchase. NOTE 16. COMMON STOCK SPLIT On February 24, 1997, the Company declared a 1.8055 stock split for shares of record as of March 6, 1997. The number of shares to effect the stock split times the par value of $1 will be transferred from capital surplus to common stock on March 20, 1997. The net income per share of common stock and common stock equivalents for December 31, 1996, 1995 and 1994 restated is $.59, $.48 and $.08, respectively. F-25 PREMIER BANCSHARES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) NOTE 17. PARENT COMPANY FINANCIAL INFORMATION The following information presents the condensed balance sheets of Premier Bancshares, Inc. at December 31, 1996 and 1995 and the statements of income and cash flows for the years ended December 31, 1996, 1995 and 1994: CONDENSED BALANCE SHEETS
1996 1995 ----------- ----------- ASSETS Cash................................................. $ 1,196,494 $ 323,428 Investment in subsidiaries........................... 27,074,523 24,915,754 Other assets......................................... 419,323 1,409,420 ----------- ----------- Total assets....................................... $28,690,340 $26,648,602 =========== =========== LIABILITIES Other borrowings..................................... $ 4,000,000 $ 3,000,000 Other liabilities.................................... 97,174 218,713 ----------- ----------- 4,097,174 3,218,713 ----------- ----------- STOCKHOLDERS' EQUITY................................... 24,593,166 23,429,889 ----------- ----------- Total liabilities and stockholders' equity......... $28,690,340 $26,648,602 =========== ===========
CONDENSED STATEMENTS OF INCOME
1996 1995 1994 ---------- ---------- ---------- INCOME Interest on deposits..................... $ 23,553 $ 50,713 $ -- Interest and fees on loans............... -- 424,137 652,652 Dividends from subsidiaries.............. 2,390,263 780,648 409,694 Other income............................. -- 385,995 1,262,306 ---------- ---------- ---------- 2,413,816 1,641,493 2,324,652 ---------- ---------- ---------- EXPENSES Salaries and employee benefits........... 55,742 910,896 1,939,227 Interest................................. 293,673 331,514 333,511 Merger related expenses.................. 468,449 -- -- Legal and professional................... 42,212 79,672 159,467 Other expenses........................... 202,049 441,484 711,885 ---------- ---------- ---------- Total expenses......................... 1,062,125 1,763,566 3,144,090 ---------- ---------- ---------- Income (loss) before income tax benefits and equity in undistributed income of subsidiary and minority interest in net income of subsidiary.. 1,351,691 (122,073) (819,438) INCOME TAX BENEFITS........................ (449,657) (286,992) (58,985) ---------- ---------- ---------- Income (loss) before equity in undistributed income of subsidiary and minority interest in net income of subsidiary............................ 1,801,348 164,919 (760,453) EQUITY IN UNDISTRIBUTED INCOME OF SUBSIDIARY................................ 750,218 1,836,739 1,051,601 ---------- ---------- ---------- Income before minority interest in net income of subsidiary.................. 2,551,566 2,001,658 291,148 MINORITY INTEREST IN NET INCOME OF SUBSIDIARY................................ 11,850 12,709 -- ---------- ---------- ---------- Net income............................. $2,539,716 $1,988,949 $ 291,148 ========== ========== ==========
F-26 PREMIER BANCSHARES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) CONDENSED STATEMENTS OF CASH FLOWS
1996 1995 1994 ----------- ----------- ----------- OPERATING ACTIVITIES Net income before minority interest in net income of subsidiary............. $ 2,551,566 $ 2,001,658 $ 291,148 Adjustments to reconcile net income to net cash provided by (used in) oper- ating activities: Depreciation........................ -- 7,030 68,506 Amortization........................ 23,148 22,557 20,585 Undistributed income of subsidiar- ies................................ (750,218) (1,836,739) (1,051,601) Net increase in loans held for sale............................... -- (456,640) (679,265) Other operating activities.......... 833,561 468,816 (220,417) ----------- ----------- ----------- Net cash provided by (used in) op- erating activities............... 2,658,057 206,682 (1,571,044) ----------- ----------- ----------- INVESTING ACTIVITIES Net increase in loans................. -- (1,646,888) (810,759) Purchase of premises and equipment.... -- -- (192,121) Investment in subsidiaries............ (1,683,646) (7,739,452) -- Proceeds from sale of premises and equipment............................ -- 19,893 -- ----------- ----------- ----------- Net cash used in investing activi- ties............................. (1,683,646) (9,366,447) (1,002,880) ----------- ----------- ----------- FINANCING ACTIVITIES Net increase in borrowings............ 1,000,000 5,438,566 879,263 Dividends paid........................ (1,123,845) (58,034) (305,758) Proceeds from exercise of stock op- tions................................ 22,500 -- -- Proceeds from common stock issued..... -- 3,121,913 375,012 Proceeds from redemption of subsidiary common stock......................... -- -- 2,000,000 ----------- ----------- ----------- Net cash provided by (used in) fi- nancing activities............... (101,345) 8,502,445 2,948,517 ----------- ----------- ----------- Net increase (decrease) in cash......... 873,066 (657,320) 374,593 Cash at beginning of year............... 323,428 980,748 606,155 ----------- ----------- ----------- Cash at end of year..................... $ 1,196,494 $ 323,428 $ 980,748 =========== =========== ===========
F-27 INDEPENDENT AUDITOR'S REPORT ON THE SUPPLEMENTARY INFORMATION To the Board of Directors Premier Bancshares, Inc. and Subsidiaries Atlanta, Georgia Our audits were performed for the purpose of forming an opinion on the consolidated financial statements taken as a whole. The consolidating and other supplemental information for the year ended December 31, 1996 is presented for purposes of additional analysis of the basic consolidated financial statements rather than to present the financial position, results of operations and cash flows of the individual companies. The consolidating and other supplementary information has been subjected to the auditing procedures applied in the audit of the basic consolidated financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic consolidated financial statements taken as a whole. Atlanta, Georgia January 31, 1997 F-28 [THIS PAGE INTENTIONALLY LEFT BLANK] F-29 PREMIER BANCSHARES, INC. AND SUBSIDIARIES CONSOLIDATING BALANCE SHEET DECEMBER 31, 1996
FIRST ALLIANCE PREMIER ALLIANCE BANK BANK FINANCE ------------ ----------- ---------- ASSETS Cash and due from banks.................. $ 8,881,683 $ 2,758,936 $ 176,003 Interest-bearing deposits in banks....... 623,045 824,128 -- Federal funds sold....................... 17,130,000 7,550,000 -- Investment in subsidiaries............... -- -- -- Securities available-for-sale............ 34,275,305 878,257 -- Loans held for sale...................... 476,893 23,185,118 -- Loans, net of unearned income............ 116,982,516 61,198,654 2,965,297 Less allowance for loan losses........... 1,899,284 402,749 67,796 ------------ ----------- ---------- Loans, net........................... 115,083,232 60,795,905 2,897,501 Premises and equipment................... 3,798,225 1,557,181 239,364 Other real estate owned.................. 300,915 -- -- Goodwill and other intangibles........... 12,090 1,206,535 -- Other assets............................. 3,338,355 757,133 35,514 ------------ ----------- ---------- Total assets......................... $183,919,743 $99,513,193 $3,348,382 ============ =========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Deposits Noninterest-bearing demand............. $ 25,289,496 $ 7,583,663 $ -- Interest-bearing demand................ 45,996,020 11,566,260 -- Savings................................ 6,663,668 1,638,673 -- Time, $100,000 and over................ 22,503,522 12,600,418 -- Other time............................. 53,478,321 52,102,044 -- ------------ ----------- ---------- Total deposits....................... 153,931,027 85,491,058 -- Securities sold under repurchase agree- ments................................... 9,865,374 -- -- Federal Home loan Bank advances.......... 1,000,000 3,625,000 -- Other borrowings......................... 828,259 3,000,000 3,246,000 Other liabilities........................ 1,351,704 373,227 34,290 ------------ ----------- ---------- Total liabilities.................... 166,976,364 92,489,285 3,280,290 ------------ ----------- ---------- Minority interest in subsidiary.......... -- -- -- ------------ ----------- ---------- Stockholders' equity Common stock........................... 1,760,000 2,564,400 12,750 Capital surplus........................ 11,459,609 4,045,431 12,750 Retained earnings...................... 3,891,352 415,211 42,592 Unrealized loss on securities available-for-sale, net of tax........ (167,582) (1,134) -- ------------ ----------- ---------- Total stockholders' equity........... 16,943,379 7,023,908 68,092 ------------ ----------- ---------- Total liabilities and stockholders' equity.............................. $183,919,743 $99,513,193 $3,348,382 ============ =========== ==========
F-30 PREMIER BANCSHARES, INC. AND SUBSIDIARIES CONSOLIDATING BALANCE SHEET DECEMBER 31, 1996
PREMIER PREMIER ELIMINATIONS LENDING BANCSHARES, -------------------------------- CORP. INC. DEBIT CREDIT CONSOLIDATED ------- ----------- ----------- ----------- ------------ $ 1,309,496 $ 1,196,494 $ -- $ 2,688,905 $ 11,633,707 -- -- -- -- 1,447,173 1,422,058 -- -- 4,422,058 21,680,000 -- 27,074,523 -- 27,074,523 -- 79 -- -- -- 35,153,641 746,276 -- -- -- 24,408,287 5,709,717 -- -- -- 186,856,184 34,360 -- -- -- 2,404,189 - ----------- ----------- ----------- ----------- ------------ 5,675,357 -- -- -- 184,451,995 1,039,863 -- -- -- 6,634,633 302,574 -- -- -- 603,489 1,042,034 16,069 -- -- 2,276,728 1,514,947 403,254 -- 180,377 5,868,826 - ----------- ----------- ----------- ----------- ------------ $13,052,684 $28,690,340 $ -- $34,365,863 $294,158,479 =========== =========== =========== =========== ============ $ -- $ -- $ 2,688,905 $ -- $ 30,184,254 -- -- -- -- 57,562,280 -- -- -- -- 8,302,341 -- -- -- -- 35,103,940 -- -- -- -- 105,580,365 - ----------- ----------- ----------- ----------- ------------ -- -- 2,688,905 -- 236,733,180 -- -- 1,422,058 -- 8,443,316 -- -- -- -- 4,625,000 9,077,971 4,000,000 3,000,000 -- 17,152,230 935,569 1,401,672 180,377 -- 3,916,085 - ----------- ----------- ----------- ----------- ------------ 10,013,540 5,401,672 7,291,340 -- 270,869,811 - ----------- ----------- ----------- ----------- ------------ -- 13,618 -- -- 13,618 - ----------- ----------- ----------- ----------- ------------ 1,000,000 2,353,779 5,337,150 -- 2,353,779 1,800,253 20,449,502 17,318,043 -- 20,449,502 238,891 640,485 4,588,046 -- 640,485 -- (168,716) -- 168,716 (168,716) - ----------- ----------- ----------- ----------- ------------ 3,039,144 23,275,050 27,243,239 168,716 23,275,050 - ----------- ----------- ----------- ----------- ------------ $13,052,684 $28,690,340 $34,534,579 $ 168,716 $294,158,479 =========== =========== =========== =========== ============
F-31 PREMIER BANCSHARES, INC. AND SUBSIDIARIES CONSOLIDATING STATEMENT OF INCOME FOR THE YEAR ENDED DECEMBER 31, 1996
FIRST ALLIANCE PREMIER ALLIANCE BANK BANK FINANCE ----------- ---------- -------- INTEREST INCOME Loans........................................ $11,675,555 $5,745,611 $688,587 Taxable securities........................... 2,201,948 62,430 -- Nontaxable securities........................ 20,237 -- -- Deposits in banks............................ 36,905 343,646 -- Other short-term investments................. 545,198 57,937 -- ----------- ---------- -------- TOTAL INTEREST INCOME...................... 14,479,843 6,209,624 688,587 ----------- ---------- -------- INTEREST EXPENSE Deposits..................................... 5,495,578 3,171,063 -- Other borrowings............................. 518,353 306,824 197,377 ----------- ---------- -------- TOTAL INTEREST EXPENSE..................... 6,013,931 3,477,887 197,377 ----------- ---------- -------- NET INTEREST INCOME (LOSS)................. 8,465,912 2,731,737 491,210 PROVISION FOR POSSIBLE LOAN LOSSES............. 375,000 142,885 20,513 ----------- ---------- -------- NET INTEREST INCOME (LOSS) AFTER PROVISION FOR POSSIBLE LOAN LOSSES.................. 8,090,912 2,588,852 470,697 ----------- ---------- -------- NONINTEREST INCOME Service charges on deposit accounts.......... 783,926 171,316 5,153 Other service charges and fees............... 417,051 160,697 87,782 Gain on sale of mortgage loans held-for- sale........................................ -- -- -- Gain on sale of SBA loans.................... -- 279,061 -- Mortgage loan fees........................... 87,679 -- -- Net realized gains on securities available- for-sale.................................... 135,295 -- -- Other operating income....................... 16,232 19,556 2,630 ----------- ---------- -------- TOTAL NONINTEREST INCOME................... 1,440,183 630,630 95,565 =========== ========== ========
F-32 PREMIER BANCSHARES, INC. AND SUBSIDIARIES CONSOLIDATING STATEMENT OF INCOME FOR THE YEAR ENDED DECEMBER 31, 1996
PREMIER PREMIER ELIMINATIONS LENDING BANCSHARES, ---------------------------------- CORP. INC. DEBIT CREDIT CONSOLIDATED - ---------- ----------- ---------- -------- ------------ $1,717,683 $ -- $ 68,279 $ -- $19,759,157 -- -- -- -- 2,264,378 -- -- -- -- 20,237 -- 23,553 23,553 -- 380,551 25,961 -- 37,638 -- 591,458 - ---------- ---------- ---------- -------- ----------- 1,743,644 23,553 129,470 -- 23,015,781 - ---------- ---------- ---------- -------- ----------- -- -- -- -- 8,666,641 1,428,063 293,673 -- 129,470 2,614,820 - ---------- ---------- ---------- -------- ----------- 1,428,063 293,673 -- 129,470 11,281,461 - ---------- ---------- ---------- -------- ----------- 315,581 (270,120) 129,470 129,470 11,734,320 60,000 -- -- -- 598,398 - ---------- ---------- ---------- -------- ----------- 255,581 (270,120) 129,470 129,470 11,135,922 - ---------- ---------- ---------- -------- ----------- -- -- -- -- 960,395 947,319 -- 236,953 -- 1,375,896 4,720,267 -- -- -- 4,720,267 -- -- -- -- 279,061 4,093,069 -- -- -- 4,180,748 -- -- -- -- 135,295 165,155 3,140,481 3,140,481 -- 203,573 - ---------- ---------- ---------- -------- ----------- 9,925,810 3,140,481 3,377,434 -- 11,855,235 ========== ========== ========== ======== ===========
F-33 PREMIER BANCSHARES, INC. AND SUBSIDIARIES CONSOLIDATING STATEMENT OF INCOME FOR THE YEAR ENDED DECEMBER 31, 1996
FIRST ALLIANCE PREMIER ALLIANCE BANK BANK FINANCE ---------- ---------- -------- OTHER EXPENSES Salaries and employee benefits............... $3,195,343 $1,366,926 $282,770 Equipment expense............................ 489,047 196,668 23,830 Occupancy expense............................ 421,410 215,377 51,917 Advertising.................................. 131,092 38,818 6,512 Telephone.................................... 90,778 41,140 15,440 Merger related expenses...................... -- 559 -- Stationery and supplies...................... 130,363 102,995 7,151 Legal expenses............................... 24,074 36,610 2,362 Director expenses............................ 207,765 38,100 -- Deposit insurance............................ 2,000 325,708 -- Collection expenses.......................... 87,031 -- 4,422 Goodwill amortization expense................ 6,307 101,765 -- Other operating expenses..................... 876,329 659,509 76,351 ---------- ---------- -------- Total other expenses....................... 5,661,539 3,124,175 470,755 ---------- ---------- -------- Income before income taxes and minority inter- est in net income of subsidiary............... 3,869,556 95,307 95,507 Income tax provision (benefit)................. 1,268,911 34,853 36,255 ---------- ---------- -------- Net income before minority interest in net income of subsidiary........................ 2,600,645 60,454 59,252 Minority interest in net income of subsidiary.. -- -- -- ---------- ---------- -------- Net income................................... $2,600,645 $ 60,454 $ 59,252 ========== ========== ========
F-34
PREMIER PREMIER ELIMINATIONS LENDING BANCSHARES, ---------------------------------- CORP. INC. DEBIT CREDIT CONSOLIDATED - ---------- ----------- ---------- -------- ------------ $6,887,022 $ 55,742 $ 82,296 $ -- $11,870,099 400,180 643 -- -- 1,110,368 608,744 -- -- -- 1,297,448 72,632 -- -- -- 249,054 206,524 10 -- -- 353,892 29,548 468,449 -- -- 498,556 180,311 12,229 -- -- 433,049 96,985 42,212 -- -- 202,243 24,165 37,554 -- -- 307,584 -- -- -- -- 327,708 433 -- -- -- 91,886 59,593 23,148 -- -- 190,813 1,016,952 128,465 -- 319,249 2,438,357 - ---------- ---------- ---------- -------- ----------- 9,583,089 768,452 82,296 319,249 19,371,057 - ---------- ---------- ---------- -------- ----------- 598,302 2,101,909 3,589,200 448,719 3,620,100 178,172 (449,657) -- -- 1,068,534 - ---------- ---------- ---------- -------- ----------- 420,130 2,551,566 3,589,200 448,719 2,551,566 -- 11,850 -- -- 11,850 - ---------- ---------- ---------- -------- ----------- $ 420,130 $2,539,716 $3,589,200 $448,719 $ 2,539,716 ========== ========== ========== ======== ===========
F-35 PREMIER BANCSHARES, INC. AND SUBSIDIARIES NOTE TO CONSOLIDATING FINANCIAL STATEMENTS (A) The following eliminations have been made in the consolidating financial statements. (a) Elimination of intercompany cash (b) Elimination of investment in subsidiaries (c) Elimination of intercompany receivables and investments (d) Elimination of intercompany interest income and interest expense (e) Elimination of intercompany management fees (f) Elimination of equity in earnings of subsidiaries F-36 EX-21 20 LIST OF SUBSIDIARIES EXHIBIT 21 The following subsidiaries of Premier Bancshares, Inc. are all organized and existing under the laws of the state of Georgia: First Alliance Bank Premier Bank F.S.B. Premier Lending Corporation Alliance Finance Corporation EX-23 21 CONSENT OF MAULDIN & JENKINS EXHIBIT 23.2 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the use in this Annual Report of our report, dated January 31, 1997, relating to the consolidated financial statements of Premier Bancshares, Inc. and subsidiaries. MAULDIN & JENKINS, LLC Atlanta, Georgia March 31, 1997 EX-27 22 FINANCIAL DATA SCHEDULE
9 1,000 12-MOS DEC-31-1996 JAN-01-1996 DEC-31-1996 11,634 1,447 21,680 0 35,154 0 0 211,264 2,404 294,158 236,733 26,221 3,916 4,000 0 0 2,354 20,921 294,158 19,759 2,285 972 23,016 8,667 11,282 11,734 598 135 19,371 3,620 2,540 0 0 2,540 1.06 1.06 4.91 1,224 0 60 0 1,802 152 156 2,404 0 0 2,404
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